Merkle (www.merkle.com), a leading technology-enabled, data-driven customer experience management (CXM) company, released its Q4 2020 Digital Marketing Report (DMR), a quarterly research report that analyzes and highlights trends within paid and organic search, Amazon ads, paid social, and display ad spend. The report provides insights into digital marketing trends in Q4 2020 that were heavily influenced by pandemic-related changes to the holiday season, but ultimately began to highlight a “return to normalcy” in activity across Google, Amazon, Facebook, Instagram, and more.
Overall, spend growth continued to improve in Q4, anchored by an exceptionally strong month for retail in November. Shoppers started to show some indication of a willingness to visit stores, with Google estimating that October 2020 daily store visits were on par with January 2020 visitation levels. However, Q4 store visits were still down 22% Y/Y, not quite reestablishing normal levels for the holidays. Retail and consumer goods saw strong organic search figures in Q4 (40% Y/Y growth), and travel saw ad spend improvement from Q3 despite still being down 20% Y/Y.
Google paid search clicks grew 12% Y/Y, continuing on a path of deceleration back toward Q1 2020 growth levels. Concurrently, CPC growth continued to reverse its trend and climbed to positive Y/Y growth for the first time since Q1. Higher CPC growth and lower click growth combined to generate 12% ad spend growth, one percentage point higher than Q3's growth figure.
Phones dropped to 64% of total paid search clicks in Q4, returning to pre-pandemic levels, and desktop traffic increased as consumers spent more time at home, whether it was due to the holidays or stay-at-home orders. Tablet traffic share grew to 4% Y/Y, up from 3% in Q3, benefiting from the same consumer trends that increased desktop share. Local Inventory Ad (LIA) share of total Google Shopping ad clicks remained below pre-pandemic levels but showed improvements compared to Q3. In October and November, LIA click share averaged 15%, compared to 25% in early Q1.
Amazon was able to capitalize on its delayed Prime Day in Q4 2020, with Sponsored Product ad spend growth continuing to accelerate to 57% Y/Y, compared to 50% in Q3. Average CPC also reversed its trend and rose 8% Y/Y in Q4 after three quarters of declines. However, increased competition, coupled with inventory constraints, decelerated sales growth to 55% Y/Y in Q4.
Amazon released several new Sponsored Brands formats and placements in 2020, shifting ad spend away from the traditional top-of-search-results spot for Sponsored Brands. However, Sponsored Products remained the strongest ad format from a sales per click perspective, while Sponsored Brands’ relative sales-per-click fell to 96%. Sponsored Display ads remained far below Sponsored Products ads and Sponsored Brands ads at 69%, improving Q/Q but down Y/Y.
Spending growth on Facebook remained similar to Q3 levels, mainly driven by CPM seeing Y/Y increases for the first time since Q1 2020, exhibiting 10% Y/Y growth. This is largely due to advertisers who pulled back earlier in the pandemic starting to reenter the space, as well as an increase in presidential election ads.
Instagram followed a similar pattern to Facebook’s growth in Q4, and Stories continued to gain spend share, making up 33% of spend for participating advertisers. While spending on Instagram ads was up 30% Y/Y in Q4 2020, it did decrease slightly from Q3. Similar to 2019, impression growth also slowed in Q4 compared to Q2 and Q3. CPM increased Y/Y for the first time since Q4 2019.
Smaller social platforms, such as Pinterest, Snapchat, and Twitter, continued to receive solid investment from advertisers participating in them. All three platforms received a similar portion of budget from advertisers, with Pinterest, at 14% share, edging out Snapchat and Twitter, which both received 12% of paid social budget share.
“While the fourth quarter was still not immune to the ongoing economic pressures, it did show promising signs of a pre-pandemic performance, especially for retail and travel industries, heading into the New Year,” said Melissa Reilly, performance media and marketing communications, associate director at Merkle. “Channels are still trying to adjust to ever-changing consumer behavior trends, but we are seeing trends emerge that highlight a steady return toward levels of previous years.”