Product Listing Ads – An Evaluation

The end of product listing ads as we know them makes this a perfect time to evaluate their effectiveness and impact on the industry.

Date published
August 21, 2014 Categories

By the end of this month product listing ads (PLAs) will transition to “Google Shopping Campaigns,” featuring different campaign functionality for advertisers but the same essential end product for consumers using Google to shop: a box with images and prices for various products.

Whether that means the industry starts referring to PLAs as “Shopping Campaigns” remains to be seen. Yet PLAs by any other name are one of the most exciting innovations to come out of Google in a long time, and the current version’s impending end makes this a perfect time to evaluate its effectiveness and impact on the industry.

Simply put, since Google began charging for the new PPC ad format in May 2012, PLAs have quite literally reshaped the search landscape, in more ways than one.

Perhaps most obvious is the fact that the search engine results page itself has changed. Now, when a shopper searches for a product on Google, he or she is presented with an array of colorful product pictures rather than just plain text ads in blue-colored font. Considering the advertising world has long been dominated by pictures and video, this innovation seems like a natural fit that was long overdue.

Consumers seem to agree, and are clicking on those pictures and prices more often than traditional text ads. AdGooroo found this to be true in a recent study where we looked at paid search activity by the top 20 advertisers ranked by spend on the top 60,000 shopping-related keywords on Google desktop during the second quarter of 2014. Specifically, we found that while PLAs accounted for just 37 percent of the 8 billion total paid search impressions generated on those keywords during Q2, half of all clicks were on PLAs. Helping to explain why, the study showed that PLAs had an average click-through rate (CTR) of 5.96 percent versus a 4.91 percent CTR for text ads on product-related queries.

Although this boon for advertisers does not come cheap — PLAs averaged a $1.63 cost per click vs. $1.07 for text ads — advertisers clearly recognize the benefits of PLAs and have shifted budget to take advantage.

Overall, the top 20 advertisers in our study spent $283 million on PLAs for the 60,000 keywords studied, compared to $176 million on traditional text ads during Q2 2014.

However, examining the percent of budget devoted to PLAs may be more revealing. On average the top 20 advertisers allocated 63 percent of their desktop paid search budget to PLAs and only 37 percent to traditional text ads.

Looking at individual advertisers, the breakdown in their percentage of spend varied significantly.

At the extreme ends are two online mass retail rivals,, the former, which spent 99.9 percent of its paid search budget on PLAs, and Amazon, which reportedly does not sponsor PLAs and spent 100 percent of its desktop search budget on traditional text ads. While perhaps not quite a household name (yet), Rakuten is a major player in paid search, ranking second in overall spend among all advertisers based on its huge PLA spend. Amazon on the other hand ranked third based solely on its text ad spend.

In the top position was Walmart, which devoted 71 percent of its desktop search budget to PLAs and 29 percent to text ads. Other advertisers spending most of their budget on PLAs included Best Buy (79 percent), Staples (85 percent), eBay (93 percent), and The Vitamin Shoppe (98 percent), as well as business-oriented retailers (77 percent) and (90 percent).

On the lower end were Home Depot with 45 percent of its budget allocated to PLAs, Lowes (38 percent), Zappos (36 percent) and JCPenney (24 percent), although all advertisers in the top 20 may also be sponsoring PLAs for keywords not found in the 60,000 we studied.

Should You Use PLAs?

One advertiser that sticks out in the top 20 is AT&T simply because it’s a telecommunications provider in a list dominated by retailers. Although AT&T does sell smartphones (as part of a larger service contract) as well as other products, the company’s 50-50 spend on PLAs and text ads does bring up the question — who should use PLAs?

PLAs are a retail play, no doubt about it. If you’re selling financial services, business services, pharmaceuticals, or anything else that falls outside of retail, you can pretty much ignore them.

However, if you are a retailer, you should definitely consider PLAs. In addition to being highly effective (see click and CTR data above), PLAs offer other advantages as well. For instance, unlike text ads, PLAs give advertisers the opportunity to include multiple products in a PLA grouping, increasing your chance of getting clicked and sometimes even allowing your offers to dominate the SERP. You also don’t have to worry about copy.

In addition, PLAs can give lesser-known advertisers the ability to capture consumer attention on the SERP in categories where there’s an absence of bigger brands participating. In a notable and perhaps controversial example, we recently studied the luxury goods market in paid search and found that only three of 10 major luxury brands examined were sponsoring their own brand terms in PLAs: Coach, Gucci, and Burberry. Since the luxury market as a whole shies away from price promotion and discounting, the lack of luxury brands using PLAs may be because of the ad format’s focus on product price alone. Yet in the absence of most luxury brands in PLAs, a host of smaller (and likely unauthorized) resellers and discounters of their goods are heavily investing in PLAs and appearing prominently for the luxury brands’ branded keywords.

As a final thought, the new move to Google Shopping Campaigns will likely address some of the functionality and campaign management issues that dogged PLAs, so this may be a great time for more retailers to get in on the action.

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