The adage “a picture is worth a thousand words” takes on new meaning in search advertising: Analysis of 6.87 billion paid clicks by Adobe Digital Index shows that cost-per-click (CPC) increased across search and social paid advertising in Q4, but CPCs for Google’s new product listing ads (PLAs) saw the largest spike—up 70% in Q4 (80% year over year).
Talk about the power of a picture—or, in this case, an image-based ad format. According to Google, PLAs are “search ads that include richer product information, such as product image, price, and merchant name, without requiring additional keywords or ad text.” For example:
In comparison, the average CPC for Google’s standard search ads increased only 4% in Q4 (11% year over year). The big takeaway: Growth of PLAs represents a transformation in paid search advertising from single-format text ads to a more varied, diverse marketplace filled with multiple ad formats that include many paid social options for digital advertisers.
Bigger Than Bing
Overall, advertisers that use both Google PLAs and standard text ads are now seeing about 22% of clicks from PLAs. In comparison, Bing/Yahoo captures about a fifth of search. PLA growth has come on top of a growing market, with total paid search clicks up 16% since 2012. The success of PLAs is a very positive sign for Google. It signifies both increased revenue potential—advertisers are willing to pay more for ad formats that work better—and better diversification—greater diversity in ad formats equals better hedging of advertising revenue.
ROI Roughly Flat
Retailers should expect even more competition for the “product image plus price” ad format. Even as costs skyrocketed in Q4, the return on investment from PLAs stayed relatively flat since last year. As the paid search space becomes increasingly complex, the need for marketers to employ scalable, algorithmic solutions that can handle that complexity and compute the optimal allocation of advertising budgets will be greater than ever.
Predictions And Recommendations For '14
1. Despite the strong Q4 results, PLA CPCs are expected to fall this quarter as retailers regroup and evaluate budget allocations. Q1 traditionally sees the lowest search CPCs, and in 2014 retailers will need some time to prove the lifetime customer value of new PLA traffic.
2. Expect more vertical-specific ad formats as PLA success signals a shift from text-only to more informative image-based search ads. The product images used by PLAs are more informative to shoppers looking to quickly determine which retailers have the items they are ready to buy. Advertisers should expect that search engines will look for similar solutions to serve the needs of searches with other goals in mind.
3. For retailers, success with PLAs will depend on deeper cross-functional collaboration. PLA advertising enables marketers to drive placement to move inventory or maximize margins, whereas traditional text advertising is more copy-based. PLAs pricing levels determine not just orders, but whether ads are even served or clicked on in the first place. This strengthens the link between marketing performance and all other aspects of business. Organizations that streamline data communication between departments will stand to reap the greatest benefits.
4. Fragmentation will continue. Decisions about multiple ad platforms and channels have always existed. More recently, digital advertisers have needed to add multiple devices types to their buying decisions—and now PLAs ad a new dimension to consider in that decision. Marketers will need to find more sophisticated ways to scale digital marketing across so many emerging ad formats and platforms.