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RKG Digital Marketing Report: Q2 2012 Released

RKG Report: Google Search Spend Growth Slows as it Moves to Cash in on Comparison Shopping

RKG released our Q2 2012 Digital Marketing Report today.  Across our client base, which includes over 30 of the top 500 internet retailers, we found Google search spend growth slipping from Q1 levels, but remaining robust at 32%.

Lower average cost-per-click (CPC), down 10%, continued to temper the impact of booming Google paid click growth rates, which remained near five year highs.  While Google controlled 77% of organic search traffic, it was better able to monetize its user base than rivals Bing and Yahoo, generating 84% of paid clicks and taking 84% of search ad spend.

For their part, Bing and Yahoo improved upon their first quarter spend growth in Q2, taking in 16% more revenue than the same period a year ago.  Although click growth for these Microsoft adCenter-powered listings remained tepid at 3%, advertisers increased their spending per click by 12%.

For the second quarter in a row, tablets were a bigger traffic driver than smartphones for the RKG client base.  Largely due to the success of the iPad, tablets contributed 57% of mobile paid clicks in the second quarter, up from 54% in Q1.  As Google preps the release of their own Nexus 7 tablet, Amazon’s Kindle Fire remained Apple’s nearest competitor in the space, but at a distant second with just 4% of tablet clicks to the iPad’s 86%.

While mobile traffic more than doubled year-over-year, the segment has made little progress in closing the cost-per-click gap with desktop — mobile CPCs were 28% cheaper than desktop in Q2.  Even so, mobile has had only a minor impact on Google’s continued CPC declines.  Falling click costs for branded keywords and a shift in traffic to the Product Listing Ads (PLAs) format have had a bigger combined impact in this area.

On the topic of PLAs, Google’s move to power their previously free comparison shopping product with the ad format by this fall is probably the biggest development of the quarter for pay-per-click advertising and Google likely stands to generate hundreds of millions, if not over a billion dollars in new annual revenue from this transition.

PLAs, a feed-based ad unit featuring a product image and pricing information, accounted for 15% of Google non-branded clicks and over 9% of total paid clicks across all search engines in Q2, but at a 23% lower CPC than comparable text ads.  Meanwhile, Google Shopping held a 50% share of comparison shopping clicks.  As the transition ramps up, PLA traffic will only increase, while higher competition should drive up CPCs for the format.

The full RKG report offers over 40 charts with additional insights and analysis on paid search, search engine optimization (SEO), social media advertising, comparison shopping engines, multi-channel attribution and more.

Among our other published results, we found:

  • Total paid search spending grew at a 29% year over year rate in Q2 2012.  That was down slightly from a 32% growth rate for Q1.  Ad clicks increased 37%.
  • Google paid search spending grew 32% Y/Y in Q2, down from 36% in Q1.  Google click growth was on par with Q1 at 46%, but CPCs fell by a larger amount.  CPCs were 10% lower Y/Y in Q2, but up 4% Q/Q.
  • Paid search spending on Bing and Yahoo combined grew 16% Y/Y in Q2, up from 10% growth in Q1.  Click growth was weak at 4% Y/Y, while CPCs increased 12%.
  • Google improved its share of organic search traffic, which rose from 76% in Q1 to 77% in Q2.  Bing and Yahoo each held a share of 10%.

  • Facebook increased its share of referral traffic to just under 6%.  Pinterest accounted for a little over 1% of referrals on average, although that figure was highly variable from client to client.
  • Mobile accounted for over 15% of organic search visits in Q2, up from 13% in Q1.  Mobile share of paid search was lower than organic at 13% as advertisers limited their spending on poorly converting smartphone traffic.

  • Tablets accounted for 57% of mobile paid search clicks, at a CPC 9% lower than desktop.  Smartphone CPCs were 53% lower than desktop.
  • RKG attribution data shows that only 25% of Q2 orders involved touches from multiple channels, but also that moving from a last touch model to a first touch model can shift revenue credit for individual channels by nearly 40%.

While marketers and financial analysts await the official earnings releases from Google, Yahoo! and Microsoft, they can get an early read on all of the details in the full RKG Q2 2012 report.

  • Mark Ballard
    Mark Ballard is Director of Research at RKG.
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