Holiday Retail Season Was Very Merry for Google

New Product Listings Ads buoy search giant, per Adobe study, though mobile still undervalued

Google will report its fourth-quarter earnings next Tuesday, but Adobe has just released a report suggesting that the search giant had a very merry holiday season, with retailers stuffing Google’s stocking in exchange for mobile and product listing ads.

Not only did overall Q4 online retail spend grow by 16 percent year over year, but Google extended its paid search market share among U.S. retailers to 86.5 percent, per Adobe. Sid Shah, director of business analytics for ad solutions at Adobe, attributed Google’s gain to retailers’ growing interest in mobile ads and the Product Listing Ads (PLAs), with the latter product being the primary reason for Google’s market share advances. Google announced last May that it would transition product listings to a paid model and rolled PLAs out during Q3.

Google’s Product Listings Ads attracted 10.7 percent of U.S. retailers share of paid search spend during the fourth quarter, according to Adobe. By comparison, Microsoft’s Bing search barely notched more spend, garnering 13.8 percent of overall spend. By mid-December PLAs represented 17 percent of all Google’s paid search spend from U.S. retailers, Shah said. That number decreased as the retail season wound down. Shah said it would be hard to predict what share PLAs would settle at but pegged it in the range of 10 percent to 15 percent.

Aiding the adoption of PLAs is the units’ performance. Adobe found that PLAs generated a 34 percent higher clickthrough rate (CTR) than standard Google text ads, with cost-per-click and ROI about even with those standard ads. Shah chalked up PLA’s better performance to the fact that those units feature images and prices.

PLAs aren’t likely the only bright spot in Google’s Q4. Remember right before the company’s Q3 earnings call when a few doubters criticized its inability to monetize mobile? Google offered its own refutation at the time, saying that its mobile business was on $8 billion run rate. Adobe’s findings suggests Google’s should be able to find even more money in mobile, though we’ll have to wait until next week’s earnings report to confirm that. While not limited to Google, Adobe saw that smartphone and tablet traffic accounted for 20 percent of all spend as well as all impressions for Adobe Media Optimizer search engine marketing customers. Mobile’s share was half that in Q4 2011.

Conceivably those mobile growth numbers should correlate with a rise in revenue, but “the marketplace has mispriced the value of tablet and smartphone clicks,” Shah said. Between 2009 and 2011 Google’s average cost-per-click had increased annually by 10 percent to 11 percent, he said, but last year for the first time he saw Google’s CPCs drop between 5 percent and 10 percent, with that decline influenced by a growing share of traffic coming from mobile. That led to the speculation that Google couldn’t monetize mobile.

However in the fourth quarter, “CPCs bounced back and the drop flattened out,” Shah said. Smartphone clicks continue to be undervalued, priced 30 percent to 50 percent lower than desktop clicks, but tablet clicks have improved from being 30 percent lower than desktop clicks to being only 15 percent lower, he said.

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