DIGITAL MARKETING REPORT

Q3 2020
MERK L E D IG ITA L M A R K E T I N G R EPO RT Q3 2020 TABLE OF C O NT E NTS 2

table of contents

3 Executive Summary

 5 Paid Search

1 4 Organic Search

1  7 Amazon Ads

2  0 Display & Paid Social

MERK L E D IG ITA L M A R K E T I N G R EPO RT Q3 2020 E XE CUT I V E S UM M A RY 3

executive summary
As they have been for most of the year, digital marketing trends in Q3 2020 were inextricably linked to
the course of the ongoing COVID-19 pandemic and the response to it. Across channels, some of the
more extreme reverberations of the crisis lessened in Q3, but most of the numbers continue to show an
industry that is not back to normal, nor necessarily settled upon a consistent “new normal.”

For Google, spending growth for its search ads improved in Q3, but relatively strong results for retail
and ecommerce were countered by a 40% Y/Y decline in spending among travel brands. As was seen
across other channels, while search click growth was not as strong in Q3, average CPC declines were
also not as severe, a result of increased competition and advertisers overcoming some of the logistical
challenges of the pandemic.

Although search ad clicks to retail sites remained 25% higher in Q3 than prior to the pandemic, the brick-
and-mortar store visits they produced were still 30% lower, according to Google estimates, even after
a sharp increase over June and July. Retailers have noted better in-store conversion rates, however, as
shoppers are more intent on making specific purchases rather than just window shopping.

Google advertisers once again faced Amazon as a competitor in search auctions in Q3, after the
ecommerce giant had paused its Google campaigns for most of the second quarter. Amazon’s approach
appears to have changed though, as its presence is back to pre-pandemic levels for Shopping ads, but
remains diminished for Google text ads.

As for its own ad offerings, Amazon again outpaced other major platforms in advertiser spending growth,
even with Prime Day pushed back to Q4. Amazon had struggled with fulfillment challenges into April, but
Amazon ad click volume began to rise significantly over late Q2 and into early Q3. Amazon Sponsored
Product ad spend growth accelerated from 22% Y/Y in Q2 to 50% in Q3.

Spending on Facebook ads rebounded in Q3, coming in 12% higher Y/Y, excluding Instagram. Any
impacts from US election spending on Q3 CPMs appeared to be small as Facebook CPMs fell 10% Y/Y,
just a moderate improvement from the pandemic-driven decline of 17% in Q2. Other digital channels with
less competition from election ads saw similar improvements in pricing trends between Q2 and Q3.

Instagram saw a smaller decline in spending growth than most other digital ad platforms in Q2, and with
some acceleration in Q3, it is nearly back to its Q1 spending growth rate. The trajectory for Instagram
Stories ads remained strong in Q3 as the format generated 29% of total Instagram ad spend, among
participating brands, and 35% of impressions.

Finally, Google organic search visits to brand sites increased 28% Y/Y in Q3 2020, down somewhat from
Q2 growth, but still well above the pre-pandemic historical trend. Prior to the surge in digital commerce
brought about by the COVID-19 crisis, organic search visits had been declining by double digits Y/Y.

Both insurance and financial services brands saw weaker organic search growth between Q2 and Q3,
but financial services saw a much larger deceleration with visits up just 10% Y/Y in Q3, compared to
36% in Q2.
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paid search
· Google search ad spending rose 11% Y/Y in Q3 2020, up from 9% in Q2. Average CPC declines improved from a 22%
drop in Q2 to a 10% decline in Q3. With consumers shifting some of their activities back offline, Google click growth
slowed from 39% Y/Y in Q2 to 24% in Q3.
· Spending on Microsoft search ads fell 1% Y/Y in Q3 2020, down from 12% growth in Q2 2020. Click growth
decelerated from 28% Y/Y in Q2 to 16% Y/Y in Q3. Average CPC fell 15% in the third quarter, down from a 12% decline
in Q2.
· Since July, Local Inventory Ad (LIA) share of total Google Shopping ad clicks has been relatively steady at less than half
of its pre-pandemic level. In early Q1 2020, LIAs generated 25% of Shopping clicks, compared to just 10% in Q3.
· Spending on Google Shopping ads grew 12% Y/Y in Q3 2020, up from 7% in Q2. Google text ad spending was up 9%
in Q3, compared to 10% a quarter earlier.

organic search
· Retailers and consumer goods brands have seen the strongest growth rates for organic search over the past two
quarters with visits up 42% Y/Y in both Q2 and Q3. Travel organic search visits were down 37% Y/Y in Q3 2020, but
that was an improvement from a 50% decline in Q2.
· On average, apparel brands saw an 11% decline in organic search visits in Q3, although more casual apparel brands
are still seeing growth. Visits for other non-essential goods brands were up 54% Y/Y in Q3.
· On mobile devices, Google organic search visits were up 33% Y/Y in Q3, down from 35% growth in Q2. Phones and
tablets combined to generate 64% of Google organic search visits to brand sites in Q3 2020.

amazon ads
· With more retail sales moving back offline in Q3, click and sales growth for Amazon Sponsored Products ad both
slowed compared to Q2, but continued to outpace other major digital ad products.
· Amazon Sponsored Brands ad spending was up 74% Y/Y in Q3 2020, up from 58% growth in Q2. Click growth was
weaker than in Q2, but average CPC for the format increased 16% Y/Y in Q3 after falling 19% in Q2.
· Amazon Sponsored Product ads continued to generate a higher average sales per click than other Amazon ad
formats in Q3 2020, but the gap between Sponsored Products and Sponsored Brands ads has nearly closed.

display & paid social

· Across all platforms, paid social ad investment was up 19% Y/Y in Q3 2020, up from 11% growth in Q2 2020. Spending
on more traditional display ad platforms fell 3% Y/Y in Q3, an improvement from an 11% decline in Q2.
· Spending on Facebook ads, excluding Instagram, grew 12% Y/Y in Q3 2020, up from 4% growth in Q2. Spending on
Instagram ads was up 34% Y/Y in Q3 2020, up from 30% growth a quarter earlier.
· Pinterest and Snapchat received 17% of total social budgets each among their advertisers in Q3 2020. Twitter
accounted for 11% of social media ad budgets among its advertisers, while that rate was 6% for LinkedIn.
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paid search
· Google search ad spending rose 11% Y/Y in Q3 2020, up from 9% in Q2. Average CPC declines
improved from a 22% drop in Q2 to a 10% decline in Q3. With consumers shifting some of their
activities back offline, Google click growth slowed from 39% Y/Y in Q2 to 24% in Q3.
· Spending on Microsoft search ads fell 1% Y/Y in Q3 2020, down from 12% growth in Q2 2020.
Click growth decelerated from 28% Y/Y in Q2 to 16% Y/Y in Q3. Average CPC fell 15% in the third
quarter, down from a 12% decline in Q2.
· Since July, Local Inventory Ad (LIA) share of total Google Shopping ad clicks has been relatively
steady at less than half of its pre-pandemic level. In early Q1 2020, LIAs generated 25% of
Shopping clicks, compared to just 10% in Q3.
· Spending on Google Shopping ads grew 12% Y/Y in Q3 2020, up from 7% in Q2. Google text ad
spending was up 9% in Q3, compared to 10% a quarter earlier.
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Search Ad Click Growth Cools, But Pricing Declines Improve

Overall US Paid Search Spending on search ads grew nearly 10%
Y/Y Growth Y/Y in Q3 2020, up from 9% growth in
Ad Spend Clicks CPC Q2, but still well below late 2019 growth
+50%
rates in the mid-teens. Paid click growth
+40%
remained elevated in Q3 2020 as a result
of the pandemic driving economic activity
+30% 23%
+20%
online, but it cooled compared to Q2 as
+10%
10% offline commerce continued to rebound.
0%
At the same time, CPC declines improved
-10%
from a 21% decline in Q2 2020 to an 11%
-20%
-11% decline in Q3.

Q1 Q2 Q3 Q4 Q1 Q2 Q3
2019 2020

Google Search Ad Spending Growth Rises to 11% Y/Y

Google Overall US Paid Search Google search ad spending rose 11% Y/Y
Y/Y Growth in Q3 2020, up from 9% in Q2. Average
Ad Spend Clicks CPC CPC declines improved from a 22% drop in
+50%
Q2 to a 10% decline in Q3 as competition
+40%
increased and advertisers were better able
to manage the logistical challenges of the
+30% 24%
+20%
pandemic. With consumers shifting some
+10%
11% of their activities back offline, Google click
0%
growth slowed from 39% Y/Y in Q2 to 24%
-10%
in Q3.
-10%
-20%

Q1 Q2 Q3 Q4 Q1 Q2 Q3
2019 2020

Google Spending Growth Improved Over the Course of Q3

Google Overall Monthly US Paid Search Spend Growth After spiking over late April and early May
+16% Y/Y Growth as stimulus payments rolled out in the
US, Google search ad spending growth
15%
14% decelerated a bit before rising again over
+12%
12% the course of the third quarter. Google
11% 11% search budgets were up 10% in July, 11%
10%
+8%
9% in August, and 12% in September. Those
growth rates were notably still below the
+4%
6% 14% Y/Y growth observed in February, as
4% the larger economic challenges of the
pandemic offset some of the impact of the
JAN FEB MAR APR MAY JUN JUL AUG SEPT
shift to digital.
2020 2020 2020 2020 2020 2020 2020 2020 2020
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Travel Advertisers Cut Google Search Spending 40% Y/Y

Google Overall Paid Search Growth by Industry
Google search spending by travel
Q3 2020
advertisers fell 40% Y/Y in Q3 2020,
up from a 47% decline a quarter earlier.
+20%
+22% Retail search spending growth improved
+12%
slightly from 11% Y/Y in Q2 to nearly
+10%
+7% 12% in Q3. Results were mixed for other
major industries, with financial services
-3%
-8% -8%
-5% -5%
-9%
companies and nonprofits seeing slightly
-11% -11%
weaker spending growth in Q3, while B2B
–28%
advertisers saw stronger growth. Travel
-33% and B2B were the only major industries to
Retail &
Financial Consumer -40% see stronger click growth in Q3 than in Q2.
B2B Nonprofit Services Goods Travel
Ad Spend Clicks CPC

Travel Google Search Ad Clicks Plateau 25% Below Pre-Pandemic Levels

Daily Google Search Ad Clicks Compared to January Average While travel Google search ad click
volume rebounded into early July, it has
100% Retail Travel
since plateaued at about 25% below pre-
80%
pandemic levels. Some travel industry
60%
organizations expect lower-than-normal
40% +36%
travel interest to perpetuate for several
20%
years. Retail Google search ad click
volume was also largely steady throughout
-20% -23%
Q3, but ran nearly 25% above pre-
-40%
pandemic levels. Retail volume had spiked
-60%
in late April when stimulus deposits began
-80%
making their way to US consumers.
-100%
JAN 1 FEB 1 MAR 1 APR 1 MAY 1 JUN 1 JUL 1 AUG 1 SEPT 1 OCT 1
2020 2020 2020 2020 2020 2020 2020 2020 2020 2020

Retailer Sales Produced by Google Search Ads Remain Up 44% Y/Y

Daily Retailer Google Search Metrics Retailer CPCs for Google search ads were
+200% Y/Y Growth still down in Q3, but the gap compared to
a year ago decreased over June and July.
+150%
While online sales per click growth dipped
+100% compared to Q2, the recovery in offline
commerce has allowed retailers to push
+50%
their CPCs back up. Online sales produced
+26%
–4%
by Google search ads were up 44% Y/Y in
–12% Q3, down from an 87% increase in Q2.
–50%
CPC Online Sales Sales Per Click
JAN 1 FEB 1 MAR 1 APR 1 MAY 1 JUN 1 JUL 1 AUG 1 SEPT 1 OCT 1
2020 2020 2020 2020 2020 2020 2020 2020 2020 2020
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After Q1 Drop, Phone Share of Google Clicks Back to Steady Rise

Google US Search Ad Click Share by Device and Day While some shifts in consumer behavior
80% Phone Desktop driven by the pandemic will be long-
lasting, others have already proven to be
68% fleeting. Over late March through the first
60%
half of April, desktop share of US Google
ad clicks increased by 4-5 points, as US
40% consumers were spending more time at
29% home. Phones largely took those clicks
back by May, and in the months since,
20%
phone click share has continued to rise at
a slow, but steady, rate.

JAN 1 FEB 1 MAR 1 APR 1 MAY 1 JUN 1 JUL 1 AUG 1 SEPT 1

2020 2020 2020 2020 2020 2020 2020 2020 2020

Phone Google Search Spending Growth Recovers to 26% Y/Y

Google Search Spending Growth by Device Type Spending on phone Google search ads
Y/Y Growth was up 26% in Q3 2020, up from 16% a
+50% Phone Desktop Tablet quarter earlier. During the initial phases
of pandemic restrictions in the US, phone
traffic share took a hit, but phone spend
+25% 26%
growth is now back closer in line to the
prior historical trend. Desktop Google
4% search spending rose 4% Y/Y in Q3, down
from 7% in Q2, while tablet spending fell
45% Y/Y in Q3, compared to 42% in Q2.
–25%

-45%
–50%
Q1 Q2 Q3 Q4 Q1 Q2 Q3
2019 2020

Google Shopping Ad Spending Growth Accelerating Again

Google Spending Growth by Ad Format Spending on Google Shopping ads grew
+45% Y/Y Growth 12% Y/Y in Q3 2020, up from 7% in Q2.
Google Shopping Google text ad spending was up 9% in Q3,
Text Ads compared to 10% a quarter earlier. Even
+30%
though retail has been a relative bright
spot in recent quarters, spending growth
+15% for the retail-friendly Shopping format had
12%
9% lagged text growth in the first half of the
year. Shopping ads had particularly strong
year-ago comps in Q1 and Q2, while text
Q1 Q2 Q3 Q4 Q1 Q2 Q3
2019 2020 ads had particularly weak ones.
–15%
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Amazon's Share of Google Text Ad Impressions Still Well Below Normal in Q3

Amazon Google Text Ad Impression Share vs Retailers After pausing its Google search ads in
50% early March, Amazon remained out of
Google auctions until late June, when
it returned with a diminished presence.
For Google text ads, Amazon's share
of impressions was about a quarter of
its pre-pandemic level throughout most
25%
of Q3. Toward the end of September,
17% Amazon appeared to push the gas a bit
on its Google ads, but its share of text ad
impressions was still well below normal.

DEC JUN DEC JUN DEC JUNE DEC JUN

2017 2018 2019 2020

Amazon Now Prioritizing Google Shopping Over Google Text Ads

Amazon Google Shopping Ad Impression Share vs Retailers Although down somewhat from late 2019,
70% Amazon's share of Google Shopping
impressions had jumped back to its
60%
January level by the end of Q3. As with
50%
its Google text ads, Amazon had paused
its Google Shopping ads entirely in March
43%
40% as the pandemic hampered its ability to
30%
fulfill orders. While Amazon has long been
most retailers' single largest competitor
20% for Google ad text impressions, it only
began running Shopping ads at the tail
10%
end of 2016.
0%
DEC JUN DEC JUN DEC JUNE DEC JUN
2017 2018 2019 2020

Shopping Share of Retail Google Search Ad Clicks Stuck Around 60%

Google Shopping Share of Google Paid Search Clicks Among retailers, Google Shopping
Aggregate Results - US Retail generated 60% of total Google search
60% ad clicks in Q3 2020. Shopping's click
60%
share has been stuck around 60%
since Q4 2018. While there may be a
natural ceiling to Shopping's share of
40%
total Google search ad clicks, Shopping
advertisers have also faced a more
20%
aggressive competitor in Amazon, which
significantly ramped up its presence in
Shopping auctions in late 2018.

Q3 Q3 Q3 Q3 Q3 Q3 Q3
2014 2015 2016 2017 2018 2019 2020
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Google-Produced Store Visits Still Down 30% Compared to January

Daily Store Visits Produced by Google Search Ads According to Google estimates, retailer
120% Compared to January Average brick-and-mortar store visits produced by
US Retail - Participating Brands Google search ads were still 30% below
100% January levels over the course of Q3
2020. In September, visits were down
80%
23% compared to January 2020. Although
store foot traffic remains down, retailers
60% 65%
have noted better in-store conversion
40%
rates, as shoppers are more intent on
making specific purchases rather than just
20% window shopping.

JAN 1 MAR 1 MAY 1 JUL 1 SEPT 1

2020 2020 2020 2020 2020

Google Local Inventory Ad Click Share Stalls Over Q3

LIA Share of Google Shopping Clicks by Day After traffic to Google Local Inventory Ads
40% US Retail - Participating Brands (LIAs) effectively fell to zero in late-March,
the format began to recover over the back
half of May and into June for participating
30%
brands. Since July, however, LIA share of
total Google Shopping ad clicks has been
20% relatively steady at less than half of its pre-
pandemic level. In January and February
2020, LIAs generated 25% of Shopping
10%
8% clicks, compared to 10% in Q3.

JAN 1 MAR 1 MAY 1 JUL 1 SEPT 1

2020 2020 2020 2020 2020

Ad Click Share for Google Maps Still Well Below Q1 Level

Get Location Details Share of Phone Text Ad Traffic by Quarter Primarily reflecting traffic generated by
8% Brick-and-Mortar Advertisers Google Maps, Google's Get Location
Details click type generated 2.3% of
Google phone text ad traffic among
advertisers with a brick-and-mortar
presence. As with Local Inventory Ads,
4%
Google Maps ad volume fell sharply in Q2,
and although it picked up again in Q3, it
remained well below early Q1 levels. Maps
2%
click share had been on the decline from
a late-2018 peak, but it was still over 6%
going into 2020.
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2018 2019 2020
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Showcase Shopping Ad Click Share Continues to Hover Around 8%

Showcase Shopping Ad Share of Google Shopping Clicks Among participating brands, Showcase
12% US Retail - Participating Brands Shopping ads produced 8% of all Google
Shopping clicks in Q3 2020, a slight
decrease from a quarter earlier. The
Showcase format gained share rapidly
8%
8% beginning in late 2017 as it helped fill
a niche of serving for more general
searches that may have previously only
4% triggered text ads. Over the past year and
a half, though, Showcase click share has
bounced between 8% and 10%.

Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2018 2019 2020

Similar Audience Share of Google Search Ad Clicks Doubles in Past Year

Share of Google Search Ad Clicks by Audience Type Traffic to ads targeted to Google Similar
30% Audiences now rivals that of RLSA
RLSAs (remarketing lists for search ads) traffic,
Customer Match
accounting for nearly 18% of Google
Similar Audiences
20% search ad clicks in Q3 2020. RLSA
20%
targeting produced 20% of Google
18%
clicks in Q3. A year earlier, Similar
Audience click share was just 9%.
10% Similar Audiences have let brands use
sophisticated targeting strategies even
as cookie-dependent approaches like
5%
RLSAs have been hampered by tracking
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 prevention measures.
2017 2018 2019 2020

Google Partner Share of Google Search Ad Clicks Reaches New Lows

Search Partner Share of Google Search Ad Clicks Google search partners produced 1.1% of
Text Ads Shopping Google text ad clicks and 0.3% of Google
8% Shopping ad clicks in Q3 2020. Both
rates were down from a quarter earlier
6% and hit new lows. Years ago, some of the
largest individual Google search partners
4% likely produced a larger share of clicks
than all of Google's current partners
2% combined, but Google has gotten bigger
1.1% and some of those large partners now
0.3% run Microsoft ads or have stopped
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 running search ads entirely.
2018 2019 2020
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Spending on Microsoft Search Ads Down 1% Y/Y

Microsoft Advertising Overall US Paid Search Spending on Microsoft search ads fell 1%
Y/Y Growth Y/Y in Q3 2020, down from 12% growth in
+40%
Q2 2020. Click growth decelerated from
Ad Spend Clicks CPC
28% Y/Y in Q2 to 16% Y/Y in Q3. Average
CPC fell 15% in the third quarter, down
+20%
from a 12% decline in Q2. While spending
16% growth for Google search ads accelerated
between Q2 and Q3, Microsoft saw growth
continue to slow, in large part due to
Q1 Q2 Q3 Q4 Q1 Q2 Q3-1.3%
relatively strong year-ago comps.
2019 2020
-15%
–20%

Microsoft Product Ad Spending Growth Improves to 22%

Microsoft Advertising Spending Growth by Ad Format Spending on Microsoft Product Ads grew
Y/Y Growth 22% Y/Y in Q3 2020, up from 11% in Q2,
+60% Product Ads Text Ads but just under Q1 growth of 23%. Trends
were weaker for Microsoft text ads, with
spend falling 8% Y/Y in Q3, compared to
+40%
a 13% increase in Q2. There was a sizable
increase in spending on Microsoft text ads
22% between Q2 and Q3 2019, primarily due
+20%

to a jump in average CPC. This made for a

tougher comp for text ads in Q3 2020 than
Q1 Q2 Q3 Q4 Q1 Q2 Q3 in the first half of the year.
2019 2020 -8%

–20%

Product Ad Share of Microsoft Search Ad Clicks Passes 40%

Microsoft Product Ad Share of Microsoft Advertising Among retailers, Microsoft Product Ads
Paid Search Clicks generated a little over 40% of overall
Aggregate Results - US Retail Microsoft search ad clicks in Q3 2020,
40% 40% a new all-time high. While Google
Overall Shopping's share of Google search ad
30%
clicks has hovered around 60% since
Q4 2018, Microsoft has seen Product Ad
click share increase by 12 points over
20%
the same period. Shopping ads have
produced over 40% of Google clicks
10% since early 2016, however.

Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3
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Phone Share of Total Search Ad Clicks Passes 66%

Phone and Tablet Share of Paid Search Clicks Phones produced two-thirds of total search
75% Phone Tablet Combined ad clicks across Google and Microsoft
69% combined in Q3 2020. Phone click share
66%
rose one point from Q2 to Q3 2020, but
was nearly three points higher compared
50%
to Q3 2019. Tablet share of search ad
clicks continued to fall, dropping slightly
below 3% in Q3 2020. Desktop produced
25% the remaining 31% of search ad clicks in
the quarter.

3%
Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3
2013 2014 2015 2016 2017 2018 2019 2020

Phones and Tablets Combine for 49% of Search Ad Spending

Phone and Tablet Share of Paid Search Ad Spend Phones and tablets combined to produce
50% Phone Tablet Combined 49% of search ad spending in Q3 2020,
49%
46% a slight decline from a quarter earlier.
Tablets, which once accounted for as
much as 21% of all search spending,
generated just under 3% of spend in Q3
2020. Phone share of search spending
25%
dipped between Q2 and Q3 2020, but
was up over nine points compared to Q3
2019. Phones continue to command lower
CPCs than desktop, resulting in their
3% lower share of spend than clicks across
Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3 most industries.
2013 2014 2015 2016 2017 2018 2019 2020

Phones Account for Over 70% of Google Search Ad Clicks

Device Share of Paid Search Clicks by Platform Phones produced just over 70% of
Q3 2020 Google search ad clicks in Q3 2020, while
desktop produced 27%. In Q1, phones
Google
68%
70% accounted for 67% of Google clicks,
Microsoft Advertising
while desktop generated 29%. Microsoft
also saw phones produce a larger share
of clicks in Q3 than to start the year, but
phones still only accounted for 26% of
Microsoft search ad clicks in Q3 2020,
27% 26% while desktop generated 68%.

3% 6%

Desktop Phone Tablet

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organic search
· Retailers and consumer goods brands have seen the strongest growth rates for organic search
over the past two quarters with visits up 42% Y/Y in both Q2 and Q3. Travel organic search visits
were down 37% Y/Y in Q3 2020, but that was an improvement from a 50% decline in Q2.
· On average, apparel brands saw an 11% decline in organic search visits in Q3, although more
casual apparel brands are still seeing growth. Visits for other non-essential goods brands were up
54% Y/Y in Q3.
· On mobile devices, Google organic search visits were up 33% Y/Y in Q3, down from 35% growth
in Q2. Phones and tablets combined to generate 64% of Google organic search visits to brand
sites in Q3 2020.
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Organic Search Visit Growth Remains Well Above Historical Trend

Y/Y Growth in Google US Organic Search Visits Google organic search visits to brand
sites increased 28% Y/Y in Q3 2020,
+40%
down somewhat from 33% growth in Q2,
Overall Mobile 33%
but still well above the pre-pandemic
28%
historical trend. On mobile devices,
+20%
Google organic search visits were up
33% in Q3, down from 35% growth in Q2.
Prior to the surge in digital commerce
brought about by the COVID-19 crisis,
Q1 Q2 Q3 Q4 Q1 Q2 Q3
organic search visits had been declining
2019 2020 by double digits Y/Y.

–20%

Organic Search Growth Steady for Retail, Improving for Travel

Y/Y Growth in Google US Organic Search Visits by Vertical Retailers and consumer goods brands
have seen the strongest growth rates
+40%
42% for organic search over the past two
quarters with visits up 42% Y/Y in both
Q2 and Q3. Travel organic search visits
20%
were down 37% Y/Y in Q3 2020, but that
Travel 10% was an improvement from a 50% decline
Retail and Financial Insurance
in Q2. Both insurance and financial
Consumer Services services brands saw weaker organic
Goods search growth between Q2 and Q3,
but financial services saw a much larger
–37% deceleration with visits up just 10% Y/Y in
–40%
Q3, compared to 36% in Q2.

Essential Goods Sees 56% Increase in Organic Search, Apparel Down 11%
Y/Y Growth in Google US Organic Search Visits by In the early days of the pandemic, organic
Retail Category search traffic to some essential goods
+60%
retailers more than doubled. Across the
56%
54% category, Google organic search visits were
up 70% Y/Y in Q2, but that rate slowed to
+40%
56% Y/Y in Q3. On average, apparel brands
saw an 11% decline in organic search
+20% visits in Q3, although more casual apparel
brands are still seeing growth. Visits for
Apparel other non-essential goods brands were up
54% Y/Y in Q3.
Essential –11%
Other Non-
–10% Goods Essential Retail
MERK LE D IG ITA L M A R K E T I N G R EPO RT Q3 2020 PAI D SE ARCH ORGANIC SEARCH AM AZON ADS DI SPLAY & PA ID S O C IA L 16

Travel Organic Search Visits Remain 25-30% Below Pre-Pandemic Levels

Daily Google US Organic Search Visits
After dipping in late June, organic
Compared to January Average
search visits to travel sites rose
Overall Retail Travel Essential Retail
throughout most of the third quarter,
150%
but still came in about 25-30% below
100%
January levels over the month of
September. While the increase in
50% organic search traffic for essential
+35%
retailers cooled over Q3, traffic for the
+20%
0 entire retail category remained robust.
-25% September retail organic search
–50%
volume was up about 20% compared
to January.
JAN FEB MAR APR MAY JUN JUL AUG SEPT
2020 2020 2020 2020 2020 2020 2020 2020 2020

Retailer Organic Search Visit Growth Strong Through September

Retailers' Daily Year-Over-Year Growth In year-over-year terms, growth in
for Google US Organic Search organic search visits to retailer sites
80%
Clicks CTR peaked in late April into early May,
following the rollout of stimulus
60% payments in the US. In the months
since, organic search visit growth has
40%
been up and down, trending between
30-50% Y/Y. Organic click-through
28% rate weakened over July and August,
20% hurting visit volume, but CTR and visit
growth improved toward the back half
5% of September.
APR MAY JUN JUL AUG SEPT
2020 2020 2020 2020 2020 2020

Mobile Share of Google Organic Trails Share of Paid Clicks by Nine Points
Mobile Share of Google Organic Search Visits Phones and tablets combined to
80%
generate 64% of Google organic search
visits to brand sites in Q3 2020, similar to
Q2 2020 results, and up one point from
64%
60% Q3 2019. With more limited above-the-
fold real estate for organic listings, mobile
40%
continues to generate a considerably
smaller share of organic search visits than
paid search clicks. For Google, phones
20% and tablets generated 73% of search ad
clicks in Q3 2020.

Q1 Q2 Q3 Q4 Q1 Q2 Q3
2019 2020
MERK LE D IG ITA L M A R K E T I N G R EPO RT Q3 2020 PAI D SE ARCH ORGAN I C SE ARCH AMAZON ADS DI SPLAY & PA ID S O C IA L 17

amazon ads
· With more retail sales moving back offline in Q3, click and sales growth for Amazon
Sponsored Products ad both slowed compared to Q2, but continued to outpace other major
digital ad products.
· Amazon Sponsored Brands ad spending was up 74% Y/Y in Q3 2020, up from 58% growth in
Q2. Click growth was weaker than in Q2, but average CPC for the format increased 16% Y/Y in
Q3 after falling 19% in Q2.
· Amazon Sponsored Product ads continued to generate a higher average sales per click
than other Amazon ad formats in Q3 2020, but the gap between Sponsored Products and
Sponsored Brands ads has nearly closed.
MERK LE D IG ITA L M A R K E T I N G R EPO RT Q3 2020 PAI D SE ARCH ORGAN I C SE ARCH AMAZON ADS DI SPLAY & PA ID S O C IA L 18

Spending on Amazon Sponsored Products Up 50% Y/Y, Sales Up 67%

Amazon Sponsored Products Y/Y Growth Even with Prime Day pushed back to Q4,
+120% Ad Spend Clicks CPC Sales
spending growth for Amazon Sponsored
Product ads accelerated to 50% Y/Y in
+100%
Q3 2020, up from 22% growth in Q2. The
+80%
67% average CPC for Sponsored Products
64%
+60%
50% was down more than 8% Y/Y in Q3, but
+40% that was a significant improvement from
+20% a 41% drop in Q2. With more retail sales
moving back offline in Q3, click and sales
-8.5%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 growth for Sponsored Products both
-20% 2019 2020
slowed compared to Q2, but continued to
-40%
outpace other major digital ad products.
-60%

Sales Produced by Amazon Sponsored Brands Ads Up 113% Y/Y

Amazon Sponsored Brands Y/Y Growth Amazon Sponsored Brands ad spending
+250% Ad Spend Clicks CPC Sales increased 74% Y/Y in Q3 2020, up
from 58% growth in Q2. Although click
+200%
growth for the format was weaker than in
+150% Q2, at 50% Y/Y, it outpaced the growth
113% rates of the previous four quarters. After
+100%
74%
falling 19% Y/Y in Q2, average CPC for
+50% 50% the format increased 16% in Q3, making
16% Sponsored Brands one of the few digital
Q1 Q2 Q3 Q4 Q1 Q2 Q3 formats to see positive pricing growth.
2019 2020
-50% Sales produced by Sponsored Brands
ads rose 113% Y/Y in Q3.

Amazon Ad Clicks Ramped Up Sharply Over June and July

Daily Amazon Ad Clicks Compared to January Average Even though it still fares favorably
100%
compared to other channels in year-
80%
over-year growth terms, Amazon ad
60%
click volume didn't see the same jump
40%
in late April that other digital ad formats
33%
20%
like Google Shopping did. Amazon had
0
struggled with fulfillment challenges into
-20%
April, but Amazon ad click volume began
-40%
to rise significantly over late Q2 and into
-60%
early Q3, even with Prime Day pushed
-80%
back to October. In September, Amazon
-100%
ad clicks were 31% higher than in January.
JAN 1 FEB 1 MAR 1 APR 1 MAY 1 JUN 1 JUL 1 AUG 1 SEPT 1 OCT 1
2020 2020 2020 2020 2020 2020 2020 2020 2020 2020
MERK LE D IG ITA L M A R K E T I N G R EPO RT Q3 2020 PAI D SE ARCH ORGAN I C SE ARCH AMAZON ADS DI SPLAY & PA ID S O C IA L 19

Improved Sales Per Click Leads to Higher Spend Share for Sponsored Brands Ads

Amazon Spend Share by Ad Format Sponsored Brands ads accounted for

Q3 2020 just under 18% of Amazon Sponsored
1% Ads spend in Q3 2020, a slight
Sponsored Products
Sponsored Brands decline from a quarter earlier, but a
Sponsored Display significant increase from Q3 2019.
18% Amazon advertisers have been able to
generate a higher average sales per
click for the Sponsored Brands format
in recent quarters, leading to increased
81% investment. Sponsored Products still
generate most Amazon ad traffic,
accounting for 81% of spend in Q3 2020.

Sponsored Products Hold Small Sales-Per-Click Advantage Over Sponsored Brands Ads

Amazon Ad Formats - Relative Sales Per Click Amazon Sponsored Product ads
Q3 2020 continued to generate a higher average
sales per click than other Amazon ad
formats in Q3 2020, but the gap between
100% 98%
Sponsored Products and Sponsored
Brands ads has nearly closed. In Q3
2020, sales per click for Sponsored
Brands ads was just 2% lower than that
46%
for Sponsored Product ads. In Q3 2019,
Sponsored Brands sales per click was
26% lower, but Amazon has provided
more control in screening out poorly
performing traffic over time.
Sponsored Products Sponsored Brands Sponsored Display

Amazon Ad Conversion Rates Far Exceed Google's, But Gap Narrows

Google Shopping vs. Amazon - Relative Conversion Rate With Google users more likely to shop
Q3 2020 online, but complete a purchase in a
brick-and-mortar store than Amazon users,
Google Shopping ads have historically
100% had far lower online conversion rates than
92%
Amazon ads. With the pandemic driving a
larger share of commerce online, Google
Shopping conversion rates have improved
compared to Amazon conversion rates. In
Q3 2020, Google Shopping conversion
26% rates were 26% as high as Sponsored
Products conversion rates, a six-point
increase from Q1 2020.
Amazon Sponsored Amazon Sponsored Google Shopping Ads
Products Brands
MERK LE D IG ITA L M A R K E T I N G R EPO RT Q3 2020 PAI D SE ARCH ORGAN I C SE ARCH AM AZON ADS DISPLAY & PAID SOCIAL 20

display
& paid social
· Across all platforms, paid social ad investment was up 19% Y/Y in Q3 2020, up from 11%
growth in Q2 2020. Spending on more traditional display ad platforms fell 3% Y/Y in Q3, an
improvement from an 11% decline in Q2.
· Spending on Facebook ads, excluding Instagram, grew 12% Y/Y in Q3 2020, up from 4%
growth in Q2. Spending on Instagram ads was up 34% Y/Y in Q3 2020, up from 30% growth a
quarter earlier.
· Pinterest and Snapchat received 17% of total social budgets each among their advertisers in Q3
2020. Twitter accounted for 11% of social media ad budgets among its advertisers, while that
rate was 6% for LinkedIn.
MERK LE D IG ITA L M A R K E T I N G R EPO RT Q3 2020 PAI D SE ARCH ORGAN I C SE ARCH AM AZON ADS DISPLAY & PAID SOCIAL 21

Spending Growth for Facebook Ads Rebounds to 12% Y/Y

Facebook Ads Spending on Facebook ads, excluding
+40% Y/Y Growth Instagram, grew 12% Y/Y in Q3 2020, up
from 4% growth in Q2, but still down from
+30%
19% growth in Q1. Facebook impression
25% growth remained elevated at 25% Y/Y.
+20%
Any impacts from US election spending
+10%
+20%
12% on Q3 CPMs appeared to be small
as CPMs fell 10% Y/Y, just a moderate
Q2 Q3 Q4 Q1 Q2 Q3
improvement from the pandemic-driven
2019 2020 decline of 17% in Q2. Other digital
–10% -10%
channels with less competition from
–20%
election ads saw similar improvements in
pricing trends between Q2 and Q3.
Spend Impressions CPM

Instagram Ad Spending Growth Back Up to 34% as CPM Trend Improves

Instagram Ads Spending on Instagram ads was up 34%
+250% Y/Y Growth Y/Y in Q3 2020, up from 30% growth a
quarter earlier. Instagram saw a smaller
+200% decline in spending growth than most
+150%
other digital ad platforms in Q2, and with
the acceleration in Q3, it is nearly back
+100%
to its Q1 spending growth rate. Instagram
+50% 38%
impression growth did slow a bit to 38% in
34% Q3, but average CPM declined just 3% in
Q2 Q3 Q4 Q1 Q2 Q3 -3% Q3, compared to a 10% decline in Q2.
–50%
2019 2020

–100%

Spend Impressions CPM

Instagram Getting a Third of Total Facebook Budgets Among Brands on Both Platforms

Instagram Share of Total Facebook As it continues to grow faster than

Brands on Both Instagram and Facebook Facebook itself, Instagram continues to
command an increasing share of overall
40%
Facebook budgets and impressions. In
35%
36% Q3 2020, Instagram accounted for 33%
30%
33% of total Facebook ad spend and 36% of
25%
impressions, among brands running on
20% both platforms. Most large advertisers are
15% approaching Facebook and Instagram
10% as part of one larger ecosystem, and it is
5% now uncommon for advertisers to run ads
on one, but not the other.
Spend Impressions
MERK LE D IG ITA L M A R K E T I N G R EPO RT Q3 2020 PAI D SE ARCH ORGAN I C SE ARCH AM AZON ADS DISPLAY & PAID SOCIAL 22

Instagram Stories Ad Spend Share Up Significantly Over 2020

The trajectory for Instagram Stories ads
Instagram Stories Ads Share of Instagram
remained strong in Q3 as the format
Q3 2020
generated 29% of total Instagram ad
40%
spend and 35% of impressions among
35% participating brands. In Q1 2020, Stories
35%
30% ads generated 22% of Instagram spend
25%
29% and 28% of Instagram impressions.
20% Although demand for the format
15% continues to growth, Stories ads continue
10%
to carry lower than average CPMs,
providing a cost-effective tool for driving
5%
brand engagement.
Impressions Spend

Spending Growth Trends Improve for Both Social and Traditional Display
Display and Paid Social Y/Y Spend Growth Across all platforms, paid social ad
20% Q3 2020 investment was up 19% Y/Y in Q3
19% 2020, up from 11% growth in Q2 2020.
15%
Spending on more traditional display
ad platforms fell 3% Y/Y in Q3, an
10%
improvement from an 11% decline in Q2.
5% While negative effects from the COVID-19
pandemic persist, brands have been
Display
able to overcome many of the logistical
-3% Paid Social
and other challenges that more severely
-5%
depressed budgets in Q2 2020.
-10%

-15%

Pinterest and Snapchat Receive 17% of Social Budgets Each Among Participating Brands

Average Share of Paid Social Ad Spend Among Although their adoption by advertisers
20% Participating Brands - Q3 2020 is not as universal as that for Facebook
18% and Instagram, smaller social platforms
16% 17% 17% like Pinterest, Snapchat, Twitter, and
14%
LinkedIn often command a large share
12%
of social budgets for the brands that do
engage with them. In Q3 2020, Pinterest
10% 11%
8%
and Snapchat received 17% of total social
6%
budgets among their advertisers. That
6% rate was 11% for Twitter in Q3 2020 and
4%
6% for LinkedIn.
2%

Pinterest Snapchat Twitter LinkedIn

MERK LE D IG ITA L M A R K E T I N G R EPO RT Q3 2020 PAI D SE ARCH ORGAN I C SE ARCH AM AZON ADS DI SPLAY & PA ID S O C IA L 23

about merkle
Merkle is a leading data-driven customer experience management company that specializes in the
delivery of unique, personalized customer experiences across platforms and devices. For more than
30 years, Fortune 1000 companies and leading nonprofit organizations have partnered with Merkle
to maximize the value of their customer portfolios. The company’s heritage in data, technology, and
analytics forms the foundation for its unmatched skills in understanding consumer insights that drive
hyper-personalized marketing strategies. Its combined strengths in performance media, customer
experience, customer relationship management, loyalty, and enterprise marketing technology
drive improved marketing results and competitive advantage. With 9,600+ employees, Merkle is
headquartered in Columbia, Maryland, with 50+ additional offices throughout the US, EMEA, and
APAC. Merkle is a dentsu company. For more information, contact Merkle at 1-877-9-Merkle or
visit www.merkleinc.com.

contact us
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report methodology
Figures are derived from samples of Merkle clients who have worked with Merkle for each marketing
channel. Where applicable, these samples are restricted to those clients who 1) have maintained
active programs with Merkle for at least 19 months, 2) have not significantly changed their strategic
objectives or product offerings, and 3) meet a minimum ad-spend threshold. All trended figures
presented in this report represent same-site changes over the given time period. Unless otherwise
specified, the data points in this report are derived from the North American market region.