November 26, 2013, 1:18 PM

Top 500 retailers increase paid search spending 25%

New Google ad formats are driving some of the new spending.

Thad Rueter

Senior Editor

Lead Photo

More shoppers are arriving at North America’s largest e-commerce sites from search engines, as paid search spending increases for Internet Retailer Top 500 merchants, an analysis of Top500Guide.com data reveals.

The total monthly paid search spending for Top 500 retailers in 2012 stood at $93.1 million, up 24.5% from $74.8 million in the previous year, according to data available at Top500Guide.com. The median monthly paid search spend was $80,000 in 2012, up 48.1% from 2011.

The total paid search spending for the top 10 retailers increased 8.3% in 2012 to $13.1 million from $12.1 million, according to Top500Guide.com.

This growth in search advertising continues this year for companies of all kinds. In the United States, search spending in the first half of 2013 grew 7% to $8.7 billion, according to the Interactive Advertising Bureau. That amounts to about 43% of online ad spending in the first half of the year, giving search the largest single share of that spend.

That spending growth is taking place as retailers adjust to the latest changes in search—most of them all but mandated by Google Inc. through product or search formula changes. Among the major trends is the ongoing shift of retailer marketing dollars to Product Listing Ads, the image-heavy, product-centric search ads introduced by Google last year that appear high in the section of Google search results pages previously reserved for natural search results.

“The paid search competitive landscape is heating up. Newer ad formats like PLAs are getting full adoption from merchants of all sizes,” says Aaron Goldman, chief marketing officer at digital marketing technology company Kenshoo Ltd.

“And Enhanced Campaigns are making it the default for search marketers to buy ads across all device types,” he says. Enhanced Campaigns refers to a relatively new Google ad format that enables marketers to manage all their Google paid search campaigns for any device from one central location. “This means two things—more available inventory and higher costs. As a result, retailers have to spend more to capture real estate on search engine results pages and drive customers to their websites.”

Web-only mass merchant Overstock.com Inc., No. 31 in the Top 500, is among the retailers spending more on search this year. In the third quarter, its spending on marketing and sales increased 51% year over year to $22.5 million. At least some the growth is attributable to more spending on natural search in response to Google Inc.’s ongoing search algorithm changes, according to the retailer’s third quarter financial report.

The retailer spent an average of $643,000 per month on search advertising last year, up 47.5% from $436,000 in 2011, according to Top500Guide.com. Overstock in 2012 gained 38% of its e-commerce traffic from search engines, up from 30% in the previous year

Overstock isn’t the only online merchant that is getting more of its traffic from search engines. For the Top 500 e-retailers on average, shoppers originating from search engines accounted for 37% of web site traffic in 2012. That compares with 30% in 2011.

For the top 10 largest merchants in terms of online sales—a group that includes Amazon.com Inc., Staples Inc., Apple Inc. and Wal-Mart Stores Inc.—the traffic trend is similar, with 37% coming from search engines in 2012 and 30% in 2011, Top500Guide.com data show.

Among that group of e-retail heavy hitters, two retail chains in particular—Wal-Mart and Sears Holdings Corp.—relied heavily on attracting shoppers through search, with each recording an increase of nine percentage points over the prior year. Sears drew 41% of its visitors from search engines in 2012, up from 32% in 2011; search engines accounted for 39% of traffic to Walmart.com in 2012, up from 30% in 2011.

By comparison, web-only merchant Netflix Inc. increased its search traffic to 36% from 27%—another increase of nine percentage points—while Amazon.com—the top retailer in the rankings—went to 37% from 33%. That growth occurred despite Amazon reducing its monthly paid search spend 5.8% in 2012 to $3.91 million from $4.15 million in 2011. That suggests Amazon drew additional traffic from high rankings in natural search results, rather than from heavy spending on search results page ads.

Amazon did not respond to a request for comment on its paid search strategy.

Online marketing firm ROI Revolution Inc. supplies paid search spending figures to Internet Retailer. Data on the percentage of retailers’ traffic from search engines comes from Experian Marketing Services.

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