Retailers, attracted by lower costs-per-click (CPCs) and higher click-through rates (CTRs), are diverting more paid search dollars from text ads to product listing ads (PLAs), says Marin Software [download page] in a new report. The study, which focuses on advertisers and agencies spending more than $100,000 per month on paid search (and is thus skewed towards larger retailers), finds that PLA CTRs have been steadily rising for several months, having increased by 19% year-over-year in July. CTRs have been higher for PLAs than for standard text ads since November 2012, according to the study, with the 21% gap in June and July the highest yet.
After showing a marked increase in the latter stages of 2012, the share of PLA impressions compared to text ads leveled off early this year before dropping again in June and July. Despite that, Marin believes that the indexed share of PLA impressions versus text ads will increase again now that Google has expanded the ads to mobile devices.
The share of PLA clicks to standard text ads has shown a similar pattern in recent months, and ought to also increase.
Meanwhile, PLA CPCs are rising, having climbed 53% year-over-year in July, which the researchers attribute to growing competition. Nevertheless, CPCs continue to be lower for PLAs than for standard text ads.
Given that PLAs are cheaper and more effective (from a CTR standpoint), it’s no surprise that retailers have been re-allocating their paid search dollars: the share of PLA dollars to text ad dollars had more than doubled year-over-year in July. In fact, retailers spent as much on PLAs in June of this year as they did in November 2012, during the holiday period.
About the Data: Marin’s research focused on a representative set of advertisers who leverage Google’s standard text ads and PLAs. Marin indexed all monthly key performance indicators to January 2012 ”” instead of exposing absolute values ”” to more clearly highlight overall trends.