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Google Shopping Ads Score Big With Retailers

This article is more than 9 years old.

Google's shopping ads, once derided as an example of Google turning evil, saw huge growth in the fourth quarter as retailers replaced some of their text ads with the more image-friendly ad format.

According to a study out this morning from Adobe's Digital Index of online advertising, retailers spent 47% more on Google's shopping ads than they did a year ago. As a result, they spent 6% less on text ads, making it abundantly clear that they think ads with product images in them result in more clicks and sales.

Although Google faces other challenges in its core advertising business, such as persistently lower mobile ad prices, the success of the shopping ads may bolster results that it will report Thursday afternoon.

The popularity of shopping ads, formally known as product listing ads, isn't a big surprise by now. They've been taking off almost since they were introduced in late 2012, marking the first time Google replaced a search service with free listings with a paid-only service. Plus, of course, the holiday quarter is a natural for shopping ads as retailers battle to make their profit for the year.

But the scale of the growth more than two years in is pretty stunning--all the more so because that's not just a holiday bump but a year-over-year quarterly rise. Tamara Gaffney, principal analyst for the Adobe Digital Index, wonders if retailers will continue to increase their spending on these ads in such a big way going forward.

But shopping ads still constitute only 20% of retail paid-search clicks, so it's not as if they're saturated yet. Gaffney predicts they could constitute 30% of paid clicks in the fourth quarter of this year. Nor are direct rivals even close;  Yahoo  Bing recently added similar ads but they accounted for less than 1% of retail clicks.

What's more, Google may be only getting started. It hasn't announced plans to extend the more image-heavy ads to other industries, but Gaffney thinks they could work well in travel, hotels, and similar industries. That suggests these ads could be poised for additional growth.

Facebook also fared well with retailers, suggesting that Google can't rest on its laurels. Retailers logged 53% more paid impressions on Facebook in the fourth quarter than in the third quarter, though year over year, the increase was only 13%. And even that's in no small part because Facebook has tweaked its algorithm to reduce unpaid impressions from retailers' posts on Facebook. But Gaffney says marketers are getting faster at keeping pace with those changes, adjusting to them in two months, vs. as much as nine months a year ago.

Overall, marketers continue to get more for the ad spend on Google than Yahoo Bing, according to Adobe, whose data is drawn from 500 billion Google and Yahoo Bing ad impression and 400 billion Facebook post impressions tracked in Adobe's Media Optimizer and Social services. Google's worldwide rate of clicks rose 19% from a year ago even though cost per click ad prices were up only 8%. By contrast, Yahoo Bing had flat click-through rates despite a 7% rise in ad prices.

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