Retailer ad spend on Google Shopping is growing rapidly

Retailers are embracing Google Shopping at a pace so rapid that spend on Google Shopping ads is “leaving text ads in the dust” according to Sidecar’s 2018 Google Shopping Benchmarks Report.

Google Shopping ad spend grew 34% year-over-year between 2016 and 2017, eclipsing the 25% growth Sidecar observed in the prior year. That was significantly higher than the 2% year-over-year growth in text ads.

Sidecar says there are a number of reasons retailers have been devoting more of their AdWords budgets to Shopping ads than text ads since 2016. One of the biggest: text ads are “an established pillar” of search marketing and aren’t evolving very much. Shopping ads, on the other hand, are a younger channel and that means they have presented retailers with greater opportunities for growth.

Demonstrating Google Shopping’s rise is the fact that it drove 63% more revenue for retailers in 2017 than it did in 2016.

 

Challenges ahead

Of course, that growth comes with downsides and interest in Google Shopping is creating new challenges for retailers. Among them:

• There’s growing competition, which is driving up the costs of advertising. While this will obviously affect all retailers, it could be a game-changer for retailers that are less adept at optimizing their campaigns and cutting waste and unproductive ads.
• Amazon is increasingly active. The online retail behemoth can spend money like there’s no tomorrow and its share of impression in numerous categories is a reflection of that. According to Sidecar, in certain categories, Amazon’s share of impression leaped from 10% to over 50% during summer 2017 as it upped its Google Shopping efforts.
• Mobile experience is increasingly important to driving conversions. In prior years, a mobile to desktop conversion path was the most prevalent but that reversed last year and the most popular conversion path became desktop to mobile. While many retailers have improved their mobile experiences substantially, this trend has the potential to negatively impact retailers whose mobile sites aren’t as good at driving conversions.

Clearly, optimization will be increasingly critical for retailers and when it comes to optimization, Frederick Vallaeys, co-founder of AdWords tool company Optmyzr, recently detailed a number of specific techniques. These include:

 

Improving query matching

According to Vallaeys, “Over time, as advertisers have gotten more advanced with their shopping campaign structures and Google has gotten better at matching products to relevant queries, a more frequent issue we see is that the query is relevant to several products in a feed, but the ad serving system doesn’t pick the best one to show in the ad.”

By evaluating queries and estimating their respective values, retailers can identify higher performing ads and use negative keywords to boost the number of impressions they generate as compared to lower performing ads.

Along these lines, it’s worth noting that Sidecar has found high-intent, branded queries can deliver “massive revenue gains.” Specifically, it says that branded queries delivered 171% more ROI and 400% higher CTRs than non-branded queries.

 

Evaluating pricing

Retailers can use Google’s Product suggestions report to determine if their product pricing is competitive. According to Vallaeys, because many shoppers are price sensitive, particularly in certain categories, in some cases it can be more effective to change a product’s price than increase bids for ads, particularly if the product isn’t priced competitively.

 

Taking advantage of ad extensions that Google offers

Ad extensions, including special offers, product ratings and local inventory ads, can help retailers stand out.

 

Making it pay

Sidecar believes that “constant tracking, agility, and a holistic mindset” are key to Google Shopping success.

Retailers that embrace these could find that they are rewarded with the ability to capitalize on trends before they’re identified more broadly. For example, while the CPC for desktop ads more than doubled last year, mobile’s share of revenue is fast approaching that of desktop, highlighting a potential opportunity for retailers who have invested in mobile experience to profit by allocating more of their spend to mobile.