Google Shopping has been growing massively over the last two years. For some retailers, Google shopping represents over 90% of their PPC revenues already. Some advertisers have almost entirely opted out of text ads. So the questions are:
Why is Shopping growing so strongly?
Are text ads going to disappear?
To give some context, let’s have a look at a data sample from our advertiser network. This includes international retailers from fashion, sports, outdoor and luxury industries with more than 20m combined clicks per month.
2015 was the turning point of budget investment in favour of Google shopping. The reasons for this development are threefold: Mobile performance, strong conversion rates and Google’s own updates. We will go into these in more detail below.
Mobile finally performing
The surge of mobile traffic we have seen in 2014/2015 is largely down to Google Shopping; with 74% of Mobile spend being invested in Shopping.
Nominal conversion rates, not counting cross-device attribution, have always been poor on Text Ads. With Shopping, we are finally seeing mobile conversions pick up and naturally advertisers and Google are delighted by this.
The two charts below show ad conversion rates (CR) as a comparison based on text ads in desktop being 100% (this is so as not to reveal client data). From the information we can make the following observations:
- Mobile conversion rates are considerably higher in Shopping than in Text Ads. Specifically, 61% more in the UK, and 55% more in the US.
- Shopping CR far outperform Text Ads in both Mobile and Desktop
- The exception being that Text Ads/Desktop performance is very similar to that of Shopping/Mobile
- Overall, Desktop has a higher conversion rate than Mobile
- Shopping/Desktop has a CR of more than double that of Text Ads/Desktop in both UK and US markets
For advertisers, this means that left-over budget that has been freed up from the stagnating desktop Text Ads has a place to be reinvested. As a result we will see accelerated expansion of overall PPC budgets: mobile has become a viable option. For years, Google has tried to convince advertisers to spend more on mobile (cross-device) and now with Google shopping, they have a good reason to listen.
Google is pushing shopping, not the user
Some believe that the increase in demand for shopping is due to the shift in how consumers use search. However, behind the scenes we can see that Google is pushing more and more generic, unspecific queries into the shopping channel. Inversely, products are getting more exposure to less related, navigational queries. This is not related to user behaviour – as previously the user was only exposed to text ads. This is easily uncovered through search query reports on shopping.
For instance, recently we have seen many more head-term queries coming in. The relation between queries being exactly “dresses” in comparison to all queries containing “dress” or “dresses” is growing. In H2 2015 (see below chart) 21% of queries for dresses were made using the core term (“dresses”).
Some analysts have also found that this occurred first on mobile.
Back in 2014 the image on the left was more common with Shopping today having increased prominence for generic terms.
With Google shopping having higher conversion rates and Google pushing it actively, will we see text ads disappear?
When we look at some UK advertisers through auction insight reports, we see quite different strategies…
Marks & Spencer is struggling in text ads with a declining impression share; they probably welcome the Shopping product to compensate for lost revenues.
Amazon is consistently saying no to shopping. They are experimenting with their own product ad solutions and don’t want to support Google in becoming the traffic dispenser for anyone buying on the internet. Interestingly, they have no problem in paying a very high price on text ads – peaks in impression share are clearly visible in expensive Q4.
Zalando, as a late mover entering the UK market, are betting on shopping – their presence on text ads is so low that we barely see them in the auction insights reports.
Is the Zalando example the one to follow? Do we recommend to use Shopping over Text Ads?
Our advice comes in three parts:
- Try to double-serve on best performing queries
- Monitor conversion attribution closely
- Be aware that Google shopping will become more expensive
Double-serve your best queries
There is no reason why you shouldn’t cover as much ad space as possible for your most valuable search queries and your most valuable audiences. When you are only visible through product ads, you miss the chance to draw additional attention through top-page text ads. The same is true for top audiences; try to win a customer back who has shown interest to buy but has not completed the purchase. With double the coverage you can make sure to serve the ad space instead of making room for a competitor.
Use conversion attribution to put shopping into perspective
When we look at purchase funnels, we see that Shopping, on average comes in at a later stage. In a last click attribution, shopping overwrites text ads introducers, and ignores the contribution that search has made further up the funnel. Basically, text ads brings in new customers and Shopping converts them. That is good interplay between both channels. Instead of turning them off, rather re-value introducer keywords through attribution.
Shopping will always be more efficient in terms of ROAS (return on ad spend) but text ads come up tops in the first stage of the consumer shopping journey. As the chart below shows, instead of 28% of Non-brand revenue, they now add 39% of revenue!
Enjoy shopping while it’s still economical
Although conversion rates are a lot stronger on shopping, CPCs are only slightly higher than on text ads. We expect that advertisers will try to maximise the better converting channel through higher CPCs – the gap will close and Google Shopping CPCs will increase by up to 43%.
Let’s face it, advertisers are lucky at the moment; they are enjoying undeservedly low CPCs. With revenue per click from Google Shopping being 74% higher than text ads, advertisers are only paying 22% more per click. With Google allowing more advertisers into the same auction (through GTIN, regardless of product description) and advertisers trying to get more of the best converting traffic share, Google Shopping will become more expensive. Advertisers may just move some budget back to text ads.
Advertisers are opportunistic and will continue to maximise Shopping. Still, it is beneficial to run both segments, Shopping and text ads to cover all best converting queries and cover ad space for your brand. Enjoy the relatively low CPCs on shopping while you can.
With fierce competition and the growing complexity that we will soon face, it is essential to develop smart ways to optimise your campaigns. A big challenge for advertisers will be the difference between very generic queries and product-related queries. Today, Google only offers a single bid per product regardless of query intent. This problem has been largely discussed already. Google shopping is like bidding on broad match all the time. The challenge will get bigger with more generic queries occurring in the shopping results.
- A smart splitting strategy of queries by conversion probability, one of the key features of our Product Ads software, camato.
- In time Google might solve that itself, for example through eCPC that takes into account not only user or location but also query intent.
In the meantime, we might see a small rebound of text ads, when advertisers realise that shopping is less profitable than before.
With Google announcing the change to expanded text ads, we see that this format is not dead, yet.
Google will make sure that ad spacte is filled in a way that generates enough clicks at strong CTR and not too low CPCs. The reworked ad format and stricter rules to show ad extensions on only top positions ensure profitability of text ads for Google. At least for desktop, text ads still are important.
Will Google Shopping kill text ads? It’s not looking likely any time soon.