2021 holiday season predictions for user behavior continue to shift and evolve. As a result, marketers need to prepare to be nimble and fluid while working in lock step across their organizations – marketing, finance, merchandising, fulfillment – as well as with partners and vendors.  We believe that strong fundamentals combined with tools that provide transparency, enable decision making, and allow for quick pivots will be the key to taking advantage of the huge ecommerce opportunity with paid search campaigns in Q4.

Ecommerce as a driver

According to the NRF, retail sales for the full year are expected to grow between 10.5 and 13.5% YoY; however, non-store and retail sales will surpass that with an 18 to 23% YoY increase. Similarly, during the November/December timeframe, eMarketer predicts 11% growth for ecommerce vs. a moderate in-store revenue increase of 1%. While the growth will be slower than last year, ecommerce will make up the largest portion of total holiday retail sales since 2016, even larger than in 2020.

The Cyber Five to regain its importance for ecommerce

The Cyber Five, which runs from Thanksgiving through Cyber Monday, is going to get closer to 2019 levels as a share of total holiday season sales, coming in at 20%. Last year, those five days saw a decline in share of holiday revenue and only made up 18%. There were several reasons that made 2020 an outlier for holiday shopping, but primarily, spend and promotions were pulled forward due to shipping and inventory constraints for many advertisers. In 2021 more users are expected to shop in store; however, many large retailers have already announced store closures on Thanksgiving, which would shift more users to shop online and early. Having said that, advertisers should not overlook the discovery that happens earlier and earlier every year. It’s important to capture the shopper’s attention during that time period to ensure that their brand is taken into consideration during the key conversion days.

In paid search: As much as we can predict and plan budgets, leveraging automation will be critical to capture shifts in user behavior due to macro-level or client-specific factors.

• Auction-time bidding (ATB) will be crucial to ensure that advertisers capture the right competitive queries at appropriate spend levels.
• In combination with ATB, data-driven attribution is a must to appropriately value research queries.
• Inventory management, looser match types, and dynamic search ads will aid in capturing new, emerging search queries.

Competition will be fierce: Amazon isn’t the only force to look out for

Competition is likely to increase the cost of advertising. Combined with tough comps from 2020, paid search CPCs are expected to rise: as indicated in Merkle’s Digital Marketing report, in Q2 PLA CPCs were up 21% and text ads CPCs increased by 35%. Those numbers look pretty high because of how low CPCs dropped during Q2 in 2020. During Q4 of 2020, CPCs had started to recover in paid search but did not fully return to normal levels. As a result, Q4 CPCs are likely to register at least 10 – 15% higher YoY, somewhere between the steady growth rate pre-pandemic and the recent quarter’s results.

While many retailers already closely watch Amazon’s paid search strategy, competition is likely to come from other large retailers as well. 2021 Prime Day gave us an inclination of what holiday could look like: Walmart increased impression share on Merkle clients’ shopping auctions more than Amazon itself and is likely to be a strong force during Q4.

In paid search:

• Competitive monitoring and chasing competitor strategy can become expensive. However, the changes in auction dynamics can be incredibly important in explaining performance trends. Consider developing consistent reporting and dashboards to get near real-time insights into competitive shifts.
• For branded queries, decide on your approach and set up appropriate bid strategies targeting ROAS/CPA or impression share. Does brand ROAS take priority over visibility? Does that differ by customer segment?

Messaging will be key to meet user expectations

According to the NRF, during holiday shopping the majority of users expect promotions. However, there are other key considerations for promotions and messaging in your ads.

• Shipping cost can be a barrier for online shopping and could also be a concern for shoppers worried about a repeat of the inventory issues from last year.
• According to eMarketer, almost 40% of US consumers have used a Buy Now Pay Later solution, primarily as an alternative to a credit card to avoid fees.
• The holiday journey doesn’t stop at the purchase. Making sure you have return and exchange policies in place to make any alterations or additional transactions as seamless as possible is just as important.

In paid search: Different users might have different pain points – a smart creative strategy combined with Google’s machine learning and ad format adoption will be key to success.

• For text ads, rely more heavily on responsive search ads that can deliver unique messaging to different users.
• For shopping ads, take advantage of different extensions (fast and free shipping, curbside or in-store pickup) to meet shopper demands.

In summary:

A large opportunity exists for online retailers this Q4. Retail sales are expected to grow by double digits YoY, with the majority of the increase being driven by ecommerce growth. The Cyber Five will regain its share of holiday sales, especially for online shopping as major retailers already announced store closures on Thanksgiving. However, competitive pressures are expected to be high during top conversion days, so ensuring presence during research and consideration will be important for success during peak days.

Four Takeaways for Success in Paid Search:

1. Leverage automation across bidding, keywords, ad copy, audiences, and ad placements to react quickly to shifting consumer behavior.
2. Combine first-party data and engine solutions for bidding, targeting, and optimizations.
3. Ensure messaging is aligned with consumer expectations for promotions and matches their preferred way of shopping.
4. Near real-time insights are table stakes – for budgeting, inventory, promotions – and are necessary for quick pivoting when needed.