[April 25, 2017]

Merkle Releases its Q1 2017 Digital Marketing Report

Merkle (www.merkleinc.com), a leading technology-enabled, data-driven performance marketing agency, announced the release of its Q1 2017 Digital Marketing Report today. The report analyzes trends across paid search, social media, display, and organic search, while providing highly regarded insights into the performance of major industry players like Google, Facebook, Microsoft (News - Alert), and Yahoo. In support of the research findings, Merkle is hosting a complimentary webinar on Wednesday, April 26 at 12:00 p.m. ET. To download the full report or to register for the webinar, visit www.merkleinc.com.

The Digital Marketing Report (DMR) explores the impact of several key market developments, such as recent changes to Google Shopping; Local Inventory Ads; the rise of Amazon's Sponsored Product Ads; and the transition to Google Expanded Text Ads. In Q1 2017, the data shows that Google AdWords spend increased 21 percent Y/Y in Q1 2017, a slight acceleration from Q4 2016. As has been the case in recent years, Google Shopping ad spend grew much faster year-over-year (Y/Y) than spend on text ads.

The Product Listing Ad (PLA) format that powers Google Shopping faced strong year-ago comparisons this quarter as Google had significantly ramped up the number of PLA impressions it was serving on google.com in January of last year. However, both Gogle Shopping and text ad spend growth benefited from the uncoupling of desktop and tablet bids, which Google started to roll out in Q3 2016. By Q4, search programs had adjusted their bidding to account for the higher value of desktop traffic compared to tablets. Advertisers could spend more overall with the same return on investment than they would have had if desktop and tablet were still grouped for bidding. Ads on Google Maps and Local Inventory Ads (LIAs), a variation of Google Shopping units which include information for when a product can be picked up in-store, are having a growing impact as well.

Early Q1 brought the sunset of Google's long-standing text ad format in favor of Expanded Text Ads, which were officially launched last July and have run alongside traditional text ads since testing began in early 2016. To date, there has been no consistent difference in performance between Expanded Text Ads and legacy text ads, despite the newer format containing significantly more characters. In the display and paid social world, advertisers are increasingly investing in Amazon, particularly Sponsored Product Ads. Facebook spend growth continues to far outpace that of paid search, increasing 71 percent Y/Y in Q1 2017. A much greater share of Facebook ad spend comes from mobile devices than paid search, both for its display advertising units and video ads.

Notable Q1 2017 highlights include:

Paid (News - Alert) Search

• Google search ad spending rose 21% Y/Y in Q1 2017, up from 19% growth in Q4. Clicks increased 20%, while cost per click (CPC (News - Alert)) rose 1%.
• Google Shopping spending grew 32% Y/Y, while Google text ad spending rose 12%. Across formats and engines, phone and desktop spend increased 51% and 12%, respectively, while tablet spend declined 23%.
• Bing Ads and Yahoo Gemini combined search ad spending fell 14% Y/Y in Q1 2017, compared to a 13% decline in Q4. Bing Product Ad spending held flat Y/Y, while Bing text ad spend declined 16% with a 19% decline in clicks.
• Google's share of phone paid search traffic rose to 97% in Q1. Bing Ads and Gemini traffic share is greatest on desktop computers, where the two platforms combine to account for 19% of clicks.

Organic Search & Social

• Total organic search visits fell 4% in Q1 2017 as a slight Y/Y increase for Google was offset by a small decline for Bing and a 28% decline for Yahoo. Phone (News - Alert) organic search visits grew 15% across engines.
• Phones produced 43% of all organic search visits, while tablets produced 10%. For Google, the two devices generated 56% of organic search visits, up from 54% in Q4, but below the 62% of paid Google clicks produced by mobile devices.
• Social media sites produced 3.3% of all site visits and 3.8% of mobile site visits in Q1, as mobile accounted for 66% of site visits produced by the social channel. Facebook accounted for over 70% of social site visit volume.

Comparison Shopping Engines

• The eBay (News - Alert) Commerce Network accounted for 68% of all CSE spend in Q1, with 28% of spend going to Connexity.
• Amazon Sponsored Products spend fell 25% Q/Q, which was similar to the 29% Q/Q decline observed with Google Shopping spend.

Display and Paid Social

• Facebook ad spend increased 71% Y/Y, while CPC declined 4% and CPM increased 13%. Phones and tablets accounted for 76% of all Facebook spend in Q1.
• Paid social spend was 39% less than that of traditional display advertising in Q1 2017, compared to 68% less a year earlier.

About Merkle

Merkle is a leading data-driven, technology-enabled, global performance marketing agency that specializes in the delivery of unique, personalized customer experiences across platforms and devices. For more than 25 years, Fortune 1000 companies and leading nonprofit organizations have partnered with Merkle to maximize the value of their customer portfolios. The agency's heritage in data, technology, and analytics forms the foundation for its unmatched skills in understanding consumer insights that drive people-based marketing strategies. When combined with its strength in performance creative and media, Merkle creates customer experiences that drive improved marketing results and shareholder value. M1, Merkle's end-to-end, people-based insights, planning, and activation platform, enables clients to target known individuals and reach them across media and channels, throughout the customer life cycle. With more than 4,100 employees, Merkle is headquartered in Columbia, Maryland with 16 additional offices in the US and 8 offices in Europe and Asia. In 2016, the agency joined the Dentsu Aegis Network. For more information, contact Merkle at 1-877-9-Merkle or visit www.merkleinc.com.

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