What Retailers Can Expect This Holiday Season
Q4 2016 will be the first holiday season since Google eliminated paid search text ads from the right rail of its results pages in late February of this year.
To evaluate the effect this change has had on the retail category to date, as well as give insight into what retail advertisers may expect this holiday season, we compared key PPC metrics for the top 2500 retail keywords (based on paid search spend) during the post-right rail period of March through August 2016 with the same metrics from March through August 2015.
The Number of Advertisers Drops, But Does Competition?
The most obvious change in the post-right rail period is fewer ads on the search results page, since there is now far less ad space than before—just the top and bottom of the page.
As can be expected, the result of less ad space is fewer advertisers in the post-right rail months compared to prior. We found the total number of advertisers bidding on the top 2500 retail keywords dropped 64% in the post-right rail period, from 67,000 in March-August 2015 to 43,000 in March-August this year.
However, fewer total advertisers does not necessarily indicate competition will be any easier this holiday season. Rather, fewer ad opportunities may actually mean increased competition to appear on the first search results page.
In any case, retailers should expect a surge of advertisers in the fourth quarter this year compared to the preceding months of the year. AdGooroo found the number of advertisers on the top 2500 keywords increased by 10% in Q4 2015 compared to Q1-Q3 2015, while popular holiday categories such as Apparel and Consumer Electronics saw increases of 62% and 41%, respectively.
Cost Per Click Increases
The elimination of right rail text ads sparked worry among some search marketers that their cost per click was going to increase as advertisers competed for fewer opportunities to appear on the search results page.
Based on desktop text ad activity since March, retail marketers may indeed pay a higher cost per click this holiday season than they did last year. Overall, we found that the average cost per click across all 2500 keywords increased in the post-right rail months, rising 8% from $1.37 in March-August 2015 to $1.48 during the same period of 2016.
However, to what extent advertisers can expect to pay more per click this holiday season depends on which keywords you are sponsoring, as changes in average cost per click varied greatly by keyword in the post-right rail months.
For example, the average cost per click for the keyword ‘engagement rings’ increased 28%, from $4.68 in March-August 2015 to $6.00 in March-August 2016, while the average cost per click for the term ‘laptop’ increased 120% in the post-right rail months, rising from $1.24 in March-August 2015 to $2.74 during the same period this year.
At the same time, some popular retail keywords saw a drop in cost per click after right rail ads were eliminated. For example, the average cost per click for the term ‘ipad’ decreased 22%, from $2.53 in March-August 2015 to $1.98 during the same months of 2016.
Clickthrough Rates Increase
If there is a silver lining to the elimination of right rail ads, it’s that those advertisers that prevail over intense competition for limited space on the first search results page may likely receive a higher average clickthrough rate than before.
Traditionally, so-called premium ads at the top of the search engine results page generated a higher clickthrough rate than ads appearing on the right rail. It only follows that the elimination of right rail ads would mean an increase in the overall average clickthrough rate for desktop text ads, especially since consumers will not have other ad choices on the page to distract them. Across the top 2500 retail keywords, we found a 15% increase in the average clickthrough rate in the post-right rail months of March-August 2016 compared to the same months in 2015.
Total Spend & Clicks Decrease
There were 19% fewer clicks on desktop text ads in the post-right rail months compared to the same months in 2015, contributing to a 13% year-over-year drop in total ad spend on the top 2500 retail keywords, from $493 million in 2015 to $431 million in post-right rail 2016.
These results can be expected since, again, there are fewer text ads on the page. However, they don’t necessarily mean the retail category is decreasing its paid search spend on the whole. For instance, we found a 15% year-over-year increase in Google mobile text ad spend on the top 2500 retail keywords for the same time period (March-August), which suggests that retailers aren’t necessarily spending less on paid search advertising but redistributing their budget to other paid search ad mediums.
For additional Q4 retail insights, download AdGooroo’s new paid search report Preparing for Holiday 2016.
View the original article from Adgooroo