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Product ads transform search marketing but mobile potential is unfulfilled

While the growth in image-based product ads is transforming paid search marketing as Google gives them greater prominence in search rankings, the experience of several brands suggests significant untapped potential exists here for mobile marketers.

Overall, product ads ? including Google?s Product Listing Ads and Bing's Product Ads ? saw a 69 percent increase in ad spend and a 51 percent increase in click traffic in the past year compared to text ads? much smaller 6 percent increase in ad spend and 4 percent increase in clicks, according to a report from RKG about first-quarter 2014 results. The growth in PLAs may be having a positive impact on Google?s monetization strategy; although the company reported yesterday that the overall average cost-per-click dropped 9 percent from a year ago, it remained constant from the fourth quarter of 2013.

?We are seeing great momentum in Product Listing Ads as well with the new Shopping Campaign system,? said Nikesh Arora, senior vice president and chief business officer at Google, Mountain View, CA, during a conference call with analysts to discuss the company?s quarterly financial results.

?International retailer Farfetch upgraded their Shopping Campaigns and increased their conversion rate by 30 percent while reducing their cost per acquisition by 20 percent,? he said.

Shopping campaign
Shopping campaign is a new campaign type introduced by Google that enables brands to browse their product inventory directly in AdWords and create product groups for the items they want to bid on.

Regular Product Listing Ads campaigns will be retired in late August in favor of Shopping campaigns. The ads themselves will appear the same - what is changing is how marketers manage the campaigns.

Google?s Product Listing Ads are commanding 8 percent higher cost-per-click rates and 50 percent higher conversion rates, leading the search giant to give them greater prominence in search rankings, per RKG.

?We find that Product Listing Ads are a major contributor to mobile paid search traffic volume, but that there is also some room for growth compared to mobile's impact on traditional text ad volume,? said Mark Ballard, director of research at RKG, Charlottesville, VA.

?In the first quarter of 2014, smartphones and tablets combined to produce 30 percent of PLA clicks compared to 42 percent of Google text ad clicks,? he said.

?Somewhat surprisingly, we find that the share of PLA traffic from tablets is particularly low. Again in Q1, tablets accounted for 22 percent of Google text ad clicks, but only 13 percent of PLA clicks.?

Mobile search
Product-based search ads are finding favor with smartphone users because they are more compact than traditional text ads, making them well suited to small screens. Showing the image, price and retailer information upfront reduces the number of clicks to purchase, ideal for on-the-go mobile shoppers with shorter attention spans.

For the most part, marketers are still trying to figure out how best to leverage this relatively new paid search format.

However, where marketers are diving in and fully embracing product-based search ads for mobile, they are seeing promising results.

?We saw some sites generating 40-50 percent of their PLA traffic from mobile in Q1 2014,? Mr. Ballard said.

?Demographics seem to play a pretty substantial role here as these sites are also seeing mobile as a larger contributor to text ad volume as well,? he said. ?RKG clients like Express and Venus both seem to have a relatively high share of PLA traffic from mobile. ?

Aggregate clicks
If PLAs were to take off in a bigger way on mobile, this could help Google with its ongoing mobile problem ? that mobile paid search ads typically command a lower average cost-per-click than ads on desktop. This is problematic for Google as search traffic on mobile continues to grow.

While Google?s cost of clicks may be flattening out as opposed to dropping further, the number of paid clicks continues to grow at a healthy rate. Google reported that aggregate paid clicks, grew 26 percent from a year ago and decreased approximately 1 percent over the fourth quarter of 2013.

Overall, Google reported consolidated revenues of $15.42 billion for the quarter ending March 31, 2014, an increase of 19 percent compared to the first quarter of 2013.

The 19 increase fell short of Wall Street expectations, causing Google's stock to drop nearly 6 percent after the market closed yesterday.

Key findings from the RKG report include that PLAs on Google had a 14 percent stronger ROI than text ads in the first quarter, and PLAs now account for 29 percent of all paid clicks on Google and 50 percent of non-brand clicks.

Product ads are also performing well for Bing, whose product ad format came out of beta at the beginning of the first quarter, with revenue per click for these ads 79 percent higher than for text ads.

Mobile continues to be an important success story in search, both organic and paid.

RKG reports that desktop visits for organic search are declining while mobile clicks in the first quarter grew by 29 percent.

Similarly, smartphones and tablets each account for 18 percent of paid clicks, up 64 percent and 56 percent, respectively, while desktop traffic declined 3 percent.

?Just as we see a fairly wide range in the share of traffic attributed to PLAs from site to site, and across retail sub-industries, a number of the brands we work with see mobile as a much larger driver of PLA traffic,? Mr. Ballard said.

Final Take
Chantal Tode is associate editor on Mobile Marketer, New York