Given the end of 2012 and talks of eco­nomic uncer­tainty being averted in early 2013 with the res­o­lu­tion of the fis­cal cliff, we thought it would be a good time to review the 2012 retail sea­son from a paid search per­spec­tive and pre­dict what 2013 has in store for online mar­keters and adver­tis­ers. As we exam­ined the data for online paid search, three dis­tinct trends emerged.

1. Paid Search spend in retail grew 16% Year over Year

Com­pared with Q4 2011, online retail spend was up by a healthy 16%. By com­par­i­son, paid search retail spend was up 13% in Q4 last year.

In terms of mar­ket share, Google increased its share in retail paid search to 86.5% per­cent, up from 85.9% in Q4 2011.

There were two chief cat­a­lysts for this growth – mobile traf­fic and the tran­si­tion of Google Shop­ping from a free model to a paid model with Prod­uct List­ing Ads (PLAs).

2. Mobile traf­fic dou­bles in a year as mobile now accounts for 1 in 5 clicks in retail

In a recent post, I found that mobile traf­fic was grow­ing faster than many of us had expected. This trend con­tin­ued in Q4 2012, with smart­phone and tablet traf­fic account­ing for 20% of all spend and impres­sions. Thus, in one year, the per­cent­age of mobile traf­fic as a per­cent­age of the over­all paid search traf­fic has doubled.

While tablet retail cam­paigns have his­tor­i­cally enjoyed higher con­ver­sion rates than desk­tops, they have had 30% lower Cost per Clicks (CPCs) than desk­tops. As a result, they enjoyed a 73% higher ROI than com­pa­ra­ble desk­top cam­paigns. Adver­tis­ers appear to have under­stood this oppor­tu­nity as tablet CPCs rose sig­nif­i­cantly last quar­ter. Tablet CPCs are now 16% lower than desk­tops. Still, the lower CPCs on tablets rep­re­sent an oppor­tu­nity for savvy retailers.


3. Trend in sea­son­al­ity dri­ven by device unboxing

We noticed an inter­est­ing trend in the data this year. As we all know, the vol­ume of iPhones, iPads and Android devices that are gifted each year dur­ing the hol­i­day sea­son drive MAJOR adver­tis­ing shifts and retail dol­lars. Tablet impres­sions share has shown con­sis­tent year-over-year growth start­ing imme­di­ately after Christ­mas. This net addi­tion of share then becomes the new “nor­mal” or share base­line. Below is some U.S. data we pulled.

We found sim­i­lar trends in the UK, too.

Prod­uct List­ing Ads (PLAs) played a big part in shap­ing the retail season

Google’s Shopping’s tran­si­tion from a free to a paid, Prod­uct List­ing Ad (PLA) model had a major impact on over­all retail. While Google increased its mar­ket share of retail spend by 0.6% in a year to 86.5%, almost all its growth came from PLAs. In Q4, PLAs accounted for 10.7% of OVERALL spend. It is inter­est­ing to note that Google’s PLA pro­gram is about the same size as Bing, which is 13.8% of total retail ad spend.

The growth of PLA spend was grad­ual. As Google tran­si­tioned its Google Shop­ping pro­gram to the paid model in early Octo­ber, PLA spend and impres­sion share increased with the onset of the hol­i­day shop­ping sea­son. By mid-December, PLA spend accounted for 17% of all adver­tiser spend on Google. As the hol­i­day sea­son ramped down, PLA spend dropped too. Thus, it remains to be seen at which final level PLA spend stabilizes.

PLA vs. Non-PLA performance

Com­par­ing PLA ver­sus stan­dard text ads pro­vides us with some inter­est­ing insights. First, PLAs have a 34% higher Click Through Rate (CTR) than non-PLA ads, which is not sur­pris­ing given the ads pic­to­r­ial for­mat (com­pared to stan­dard Google text ads). Sec­ond, the aver­age order value (AOV) for PLAs is 12% lower than stan­dard ads. Again, this is not sur­pris­ing given that prices are shown on PLAs. We sur­mise PLAs attract more bargain-conscious shop­pers who choose retail­ers offer­ing the low­est price for a prod­uct of inter­est. Third, ROI and CPCs on PLAs are com­pa­ra­ble to stan­dard ads, too. Thus, the mar­ket has seam­lessly ratio­nal­ized the price of PLAs so their per­for­mance is com­pa­ra­ble to the stan­dard ad ROI.

Clos­ing Thoughts

1. It would be ben­e­fi­cial to retail­ers to note that PLAs played a sig­nif­i­cant role in the past retail sea­son. As they gear up their cam­paigns for the com­ing year, online retail­ers should con­sider opti­miz­ing their PLA cam­paigns both from a bid and a feed man­age­ment perspective.

2. Traf­fic pat­terns on mobile devices are dif­fer­ent from desk­top usage. With the hol­i­day sea­son, we saw a big bump in tablet traf­fic and expect it to be 1 in 4 paid clicks by the end of 2013. Com­bin­ing smart­phones and tablets, we expect the share to be 30% of all traf­fic in retail.

3. As adver­tis­ers catch up to the rapid increase in tablet usage, savvy mar­keters are pre­sented with an oppor­tu­nity as tablet CPCs remain 16% lower than desk­top cam­paigns despite a much higher con­ver­sion rate than desk­tops. Any mar­keter with a size­able search cam­paign and sig­nif­i­cant mobile traf­fic would do well to cre­ate, man­age, and opti­mize tablet and mobile-specific paid search campaigns.



This analy­sis was com­pleted based on aggre­gate, anony­mous data from Adobe Media Opti­mizer search engine mar­ket­ing cus­tomers. The dataset rep­re­sents a sub­set of clients who have spend data for six con­sec­u­tive quar­ters or more whose result­ing SEM met­rics are then nor­mal­ized to aver­age indus­try cat­e­gory con­tri­bu­tions estab­lished by mul­ti­ple third-party data providers.