Since Yahoo announced in October 2015 that it had struck a new search ad deal with Google, advertisers and analysts have been left to wonder if or when the agreement would lead to any meaningful changes in the search advertising landscape.
Keen-eyed marketers had spotted Google ads serving on Yahoo even in the months before the official announcement, but until recently, these tests (including a new Product Listing Ad (PLA) format) appeared to have remained very limited.
Merkle data now suggests that Yahoo began significantly ramping up its use of Google Shopping Ads (aka PLAs) as early as the end of March.
Google Desktop PLA Search Partner Share on the Rise
In the Merkle Q1 Digital Marketing Report we showed search partner share of desktop PLAs rebounding in March after a drop earlier in the year. Looking more closely at those numbers and the daily trends since, we have seen two major spikes in desktop PLA partner share over the last month and a half.
The first spike occurred around March 18th and 19th, with partner share of desktop PLAs rising from about 4% to between 6-7%. On April 27th, partner share rose sharply again to between 8-9%.
In short, search partner share of desktop Google Shopping Ad clicks has more than doubled over the last two months.
Importantly, the same trend is not apparent for mobile devices, but desktop partner growth has led to a spike in overall year-over-year PLA click growth.
Why is this Probably Yahoo and Not Something Else?
Unfortunately, advertisers have little, if any insight left into the specific Google search partners that are producing traffic for them, so we can’t directly confirm that the data above is tied to Yahoo.
That said, there are several lines of evidence that provide a compelling case that Yahoo has indeed significantly ramped up its use of Google Shopping Ads.
The Sheer Scale of the Partner Share Increase
A lot has happened to drive more PLA search partner traffic in just the last nine months, but this recent partner share spike is unrivaled.
First, we believe Google picked up several major retailers as partners in its AdSense for Shopping program in August 2015. This led to a big increase in partner PLA share on mobile devices (where PLA partner traffic was close to zero before), but a more modest increase on desktop of about two percentage points.
Similarly, in December 2015 Google began serving PLAs on its own image search results (which it classifies as search partner traffic). Again we saw big spikes on mobile, but partner share of desktop rose only another percentage point or so.
Again, partner share of desktop PLA clicks has increased by 4-5 points in the last month and a half, more than the increases from the earlier factors noted above combined. Very few properties, Yahoo being one, have the kind of search volume that could produce such a result on their own.
Historically, we’ve found that Yahoo produces around 10% of US desktop search ad clicks. StatCounter data shows Yahoo controls a little over 7% of US desktop search. Similar ballpark, and if Yahoo were giving Google the ability to serve PLAs on half of its desktop traffic (Yahoo’s deal with Microsoft requires Yahoo to serve Bing ads for a majority of Yahoo’s desktop search results*) you would expect to see numbers like we have above.
*It’s not clear to me exactly what this means. Does Yahoo serving Bing text ads at the same time as Google PLAs still count towards that majority? I don’t know, but the point remains that we probably shouldn’t expect PLAs to serve for 100% of relevant desktop queries on Yahoo.
Click-through Rates Have Largely Held Up
If Yahoo isn’t causing the rise in PLA search partner share, it would probably take at least several very large sites to produce the kind of click volume we are seeing. That’s because even huge sites like Amazon and eBay, which have a great deal of search volume, have not historically produced a large share of search partner ad clicks (in these two cases from text ad clicks).
Partners that aren’t primarily search engines, like Amazon and other retail sites, produce very low search ad click-through rates. This keeps their share of clicks fairly low, but also drives down overall click-through rates.
When Google added a few large retailer search partners in August 2015 (we believe), overall desktop PLA click-through rates fell by about 25%. And remember, this change only increased partner share by about two points.
With partner share jumping 4-5 points now, desktop PLA click-through rates have declined a bit, but nowhere near that previous drop. In the past, we have found that Google produces a higher CTR than Bing and Yahoo, so a modest decline from bringing Yahoo on board wouldn’t be surprising.
Yahoo.com Share of Bing Product Ads Has Dropped
Probably the most direct and compelling data indicating that Yahoo has made a major change around product ads is the sharp decline in the share of Bing Product Ads clicks that Yahoo is producing.
With timing very similar to the rise in partner share of desktop Google PLA clicks, we see that Yahoo’s share of Bing Product Ads clicks fell from around 40% in early March to as low as 25% in April and May. We are not seeing this with Bing text ads, where Yahoo’s share has declined, but more slowly and steadily.
Signals from Q1 Results
When Alphabet/Google released its Q1 earnings report last month, its results were considered a disappointment by stock analysts, particularly on the profit side, even as revenues rose 17%. Alphabet shares fell 6% in after-hours trading that night.
One factor that cut into Alphabet profits, was a relatively large increase in traffic acquisition costs (TAC) paid to distribution partners. TAC to partners rose 33% Y/Y in Q1, up from 23% growth in Q4 and just 8% growth in Q1 2015.
For its part, Google blamed the TAC increase on the shift to mobile, where TAC rates are higher. Presumably, Apple commands a pretty penny to use Google as the default search provider for Safari on iOS devices, but Yahoo is also known to command a very high TAC rate.
According to SEC filings, Yahoo keeps 93% of the search ad revenue produced by Bing ads on Yahoo properties. If Yahoo has a similar arrangement with Google, it would push Google’s TAC rates higher. At least for Q1, the shift to mobile (and Apple devices) is likely still the dominant factor, as Google pointed out, but Yahoo could be a significant piece as well, and will be more so if it continues to ramp up its use of Google ads.
It Seems a lot Easier to Trigger PLAs on Yahoo
Last, but not least, go conduct a product-related search on Yahoo. If your experience is like mine, there’s a very good chance that you will see Google PLAs. While the plural of “anecdote” may not be “data,” if it were not so easy to trigger PLAs on Yahoo, it would be a lot harder to take the real data above seriously.
Why Should Advertisers Care?
While the business dealings between Google, Yahoo and Microsoft may be of more interest to their stockholders than they are to day-to-day marketers (particularly with a potential Yahoo sale looming), this type of development can have meaningful ramifications for search practitioners.
It’s always important to understand the major external factors that are shaping our search programs so that we can better assess performance and more intelligently prioritize our work. Often a major change, announced or not, requires timely action just to avoid a negative outcome.
If Yahoo is indeed in the process of significantly ramping up its use of Google Shopping Ads, some marketers may need to reassess their budget allocations, particularly if those budgets are platform or ad format-specific.
A large influx of Yahoo traffic to Google PLAs could also negatively impact overall PLA conversion rates (this appears to be happening), requiring a reassessment of bidding and/or campaign segmentation strategies.
Finally, we can’t rule out text ads as being in play here, which would up the stakes, but the data is not as clear. It does make sense, however, for Yahoo to make a big move with PLAs first as it is the newer of the two major search ad formats and Bing has had less time to catch up with Google on the monetization front in the product ad space.
