Digital Marketing Reporte 2014 (US)

Q3 2014

04 PAID SEARCH

03 ExECutIvE SummARy

15 ORGANIC SEARCH & SOCIAL

20 COmPARISON SHOPPING ENGINES

23 DISPLAy ADvERtISING

26 ABOut RKG & mEtHODOLOGy

tABLE OF CONtENtS

ExECutIvE SummARy

PAID SEARCH

• Q3paidsearchspendingonGoogleincreased27%Y/Y,aslightaccelerationfromQ2.Thiswasdrivenmostlybyan18%Y/Yincreaseinclickvolume,thoughcost-per-click(CPC)alsoincreasedby8%Y/Y.

• Search spending for BingAds rose 24%Y/Y, driven entirely by an increase in click volume as therewas nomovementinaverageCPC.AriseinmobiletraffichelpedtobothdrivetheincreaseinvolumeaswellaskeepCPCstagnant.

• GoogleProductListingAds(PLAs)andBingProductAdsspendroseacombined73%Y/Y,justaboveQ2Y/Ygrowthrate.27%ofallGooglesearchclickscamefromPLAs.

• Smartphonesandtabletscombinedtoaccountfor38%ofpaidsearchtraffic,upfrom30%inQ32013.Spendshareforsmartphoneandtabletdeviceswas28%.

• Cross-device conversion estimates generated by Google conversion tracking attribute 17%more orders tosmartphonedevicesthanwouldbeattributedusingonlysingle-deviceconversionmeasures.Desktopandtabletcomputersseeliftsof6%and8%,respectively.

ORGANIC SEARCH & SOCIAL

• 32%ofallQ32014sitevisitscamefromorganicsearch,downfrom34%inQ32013.Optimizationsbysearchenginestomakepaidadsmoreappealingcontinuetodrivemoretrafficawayfromorganicresults.

• Organicsearchclicksharefromsmartphonesandtabletsroseto38%inQ3,upfrom27%ayearearlier.iPhone,iPadandAndroiddeviceorganictrafficshareallroseY/Y.

• Theshareofall sitevisitsgeneratedbysocialmediasites increasedslightlyY/Y from2%to2.2%.Facebookproduced53%ofallsocialmedia-drivensitevisits,whilePinterestgenerated18%.

• 42%ofsocialmedia-drivensitevisitscameonmobiledevices,thesamefigureasQ2buta13pointincreaseY/Y.Thisremainshigherthanmobile’sshareofpaidororganictraffic.

COmPARISON SHOPPING ENGINES

• AmazonProductAds’CSEspendsharedropped10pointsY/YontheheelsoftheirpushingsomeadvertisersoutoftheproductinQ2.

• FollowingtwoquartersofdeclinerelativetoGooglePLAs,AmazonProductAdsdelivered11%asmuchrevenueasPLAsinQ3foradvertisersonbothplatforms,areturntoQ42013levels.

DISPLAy ADvERtISING

• GoogleDisplayNetwork (GDN) shareof totalGoogle investment increased from6% inQ2 to8% inQ3 foradvertisersactivelyadvertisingontheGDN.

• FBXspendwasup30%Y/YinQ3,whileaverageCPCincreased10%.ThelargerrighthandrailformatintroducedinQ2hasresultedinincreasedcompetitionduetofeweradunitsandmoreplayersinthespace.

PAID SEARCH

PAID SEARCH 5

Paid Search Spending Growth Rises to 26% y/yPaid search spending across allengines rose 26% Y/Y in Q3, drivenprimarilybyvolumegainsasY/Yclickgrowth improved to 19%. Averagecost-per-click was up 6% Y/Y, aslight deceleration from Q2 levels.Sequentially, ad spend was down6% from Q2 levels due to normalseasonalityamongoursitesample.

Overall U.S. Paid Search TrendsRelativetoQ32013+70%

+60%

+10%

–10%

ClicksAdSpend CPC

2014-Q22013-Q2 2013-Q3 2013-Q4 2014-Q1 2014-Q3

+6%

+19%

+26%

+50%

+20%

+30%

+40%

0%

Google Spending Growth Bolstered by mobileSpending growth on Google paidsearchadsacceleratedto27%Y/Y inQ3 from 24% Y/Y in Q2. Paid clicksrose 18% Y/Y and CPCs rose 8%.SmartphonesprovidedalargerboosttogrowththaninrecentquartersduetoadvertiserspassingtheanniversaryoftheEnhancedCampaignstransition,a time when many sites pulled backheavilyonsmartphonebidstoimprovereturnoninvestment(ROI).

Google Overall U.S. Paid Search TrendsRelativetoQ32013

+70%

+60%

+10%

–10%

ClicksAdSpend CPC

2014-Q22013-Q2 2013-Q3 2013-Q4 2014-Q1 2014-Q3

+50%

+20%

+30%

+40%

0%

+8%

+18%

+27%

Bing Ads Posts Solid 24% y/y Growth in Ad SpendThoughnolongerexhibitingthesamemeteoricgrowth levels itdid in2013,BingAds generated a solid 24% Y/Yincrease in search spend inQ32014.Click volume was 24% higher onaverage,whileCPCswereflat.Asharpincrease in mobile traffic share overthe last two quarters has depressedCPCgrowthonBingAds,buthelpedvolumegrowth.

Bing Ads Overall U.S. Paid Search TrendsRelativetoQ32013

+70%

+60%

+10%

–10%

ClicksAdSpend CPC

2014-Q22013-Q2 2013-Q3 2013-Q4 2014-Q1 2014-Q3

+50%

+20%

+30%

+40%

0%

+24%+24%

+0%

PAID SEARCH 6

Better Click-through and Conversion Rates Help Drive Google Non-Brand Spending HigherClick-through rates (CTR) on Googlenon-brand ads were up 8% Y/Y inQ3, helping push click volume up13%. Improved ad conversion rateshave also allowed advertisers to bidmore aggressively, as CPCs rose15%. Altogether, non-brand Googlespending rose 30%Y/Y inQ3. TrafficshiftingtomobileandPLAshashelpedimprove Google CTR, and Google’schangetouseayellowadiconratherthan a shaded ad background haslikelyhelpedaswell.

Google Non-Brand U.S. Paid Search TrendsRelativetoQ32013+70%

+60%

+10%

–10%

ClicksAdSpend CPC

2014-Q22013-Q2 2013-Q3 2013-Q4 2014-Q1 2014-Q3

+13%

+50%

+20%

+30%

+40%

0%

+30%

+15%

Bing Non-Brand Clicks up 33%, But CPCs Down 3%Paid search spending on non-brandBingAds rose29%Y/Y inQ3,drivenbya33% increase inclicks.CPCs fell3%Y/Yasrapidmobiletrafficgrowthled to small overall declines in adconversion rates. The contribution ofBingProductAds isgrowing,butdidnothavemuchimpactontheseoverallnumbers.

Bing Non-Brand U.S. Paid Search TrendsRelativetoQ32013+70%

+60%

+10%

–10%

ClicksAdSpend CPC

2014-Q22013-Q2 2013-Q3 2013-Q4 2014-Q1 2014-Q3

+33%

+50%

+20%

+30%

+40%

0%

+29%

–3%

text Ad Growth Improves, But Still Far Outpaced by Product Listing Ads Text ad spending growth improvedto 15% Y/Y in Q3 from 11% in Q2.CombinedgrowthforGoogle’sProductListingAdsandBing’sProductAdswas73%,slightlyaboveQ2growth.Productad CPCs rose nearly 20%, while textadCPCswereflat.DecliningCPCsforbrandedtextadsoffsetgainsfornon-brandtextads.

Overall U.S. Paid Search Growth by FormatQ3 2014

AdSpend Clicks CPC

TextAdsPLAs/ProductAds60%

40%

20%

80%

0%

73%

15% 14%

44%

0%

20%

PAID SEARCH 7

PLAs Contribute 27% of Google Paid Search Clicks OverallAmong retailers, PLAsmade up 27%of all Google clicks in Q3, and 52%of non-brand clicks. For this sampleof sites,PLAclick sharespiked inQ42013, but has failed to eclipse thosehighs yet in 2014.Oneof thebiggerquestions going into the holidayshopping season is whether we willseeanotherlargeshiftfromtextadstoPLAsthisyear.

PLA Share of Google Paid Search ClicksAggregateResults-U.S.Retail60%

40%

20%

0%

27%

52%Non-Brand

Overall

30%

50%

10%

2014-Q22013-Q2 2013-Q3 2013-Q4 2014-Q1 2014-Q3

PLA ROI Still Compares Favorably to Non-Brand text AdsAdvertiser ROI from PLAs was 11%higher thanthat forcomparable,non-brand text ads inQ3. PLAs also heldlarge advantages in click-through andconversionrates,butgenerateda16%loweraverageordervalue (AOV) thannon-brand textads.BecausebrandedtextadCPCs tend to runmuch lowerthannon-brandCPCs,PLAshada50%higherCPCthantextadsoverall.

PLA Performance vs Text AdsMedianSiteResults-U.S.Retail

CPC CTR ROI Conv.Rate AOV

+150%

+50%

TextAds

–100%

+100%

–50%

BASELINE

Non-BrandAdsOverall

50%

–6% 19%

141%

–66%

11%–25%

37%

–21% –16%

38%

PLAs Once Again Cheaper than Non-Brand text AdsThe typical retail advertiser saw PLACPCsrunning6%lowerthannon-brandtextadCPCsinQ32014.InQ4oflastyear,PLACPCswere12%higher,likelybecause of increased competitionwithinthespacefortheholidayseason.Because of the ROI advantage PLAshold over text ads though, there isroomforPLAstogainbackthegroundthattheyhavelostonCPCsthisQ4anditislikelythattheywill.

Google PLA CPC vs Non-Brand Text AdsMedianSiteResults-U.S.Retail+15%

Non-BrandTextAds

-25%

BASELINE

+5%

-5%

-10%

-15%

-20%

–6%

Q1 Q22013

Q3 Q4Q22012

Q3 Q4 Q12014

Q2 Q3

+10%

PAID SEARCH 8

PLAs traffic Share varies Significantly Across Retail CategoriesThe PLA format is a natural fit withqueries for a specific product orevenproduct SKUormodel number.As a result, those sites and retailsubindustrieswithofferingsmostlikelyto match those types of queries seethe highest share of traffic producedby the format. In Q3, consumerelectronics sites generated 73% oftheir non-brand Google paid searchclicksfromPLAs,comparedto35%forapparelretailers.

PLA Share of Non-Brand Google Paid Search ClicksQ3 2014

MedianSiteResults-U.S.Retail

Flowers&Gifts

Cars&Auto

Health&Beauty

Apparel SportingGoods

Books Home&Garden

ConsumerElectronics

25%

0%

50%

75%

28% 29%35%

38%

48%

55%

68%73%

Bing Product Ads Now Over 10% of Non-Brand Bing Ads SpendingAmongsitesrunningProductAdsandtext ads through Bing Ads, ProductAds commandeda littleover 10%ofnon-brand ad spend. Advertisers arepayinghigherCPCs forProductAds,buttheyarealsogettingabetterROIastheformatcontributed13%ofnon-brandrevenuesforthetypicalretailer.

Bing Ads: Product Ads Share of Non-BrandMedianSiteResults

AdSpend Clicks Revenue

2014-Q32014-Q22014-Q1

0%

5%

10%

15%

2013-Q4

6%7%

8%

10%

6%

7% 7% 8% 8%

12%

10%

13%

TextAdsBASELINE

Non-Brand

Bing Product Ads Outpace text Ads on Key metricsBing Product Ads generated a 74%higher CTR than comparable non-brand text ads on the Bing Adsplatform in Q3 2014. Revenue-per-clickwas 31%higher andCPCswere8% higher. Product Ad CPCs gainedgroundfromtheirpositioninQ2,whentheyran8%lowerthantextadCPCs.

Bing Ads: Product Ads vs Non-Brand Text AdsQ3 2014

MedianSiteResults

CPC RPC CTR

31%

8%

74%

+40%

+60%

+80%

+20%

PAID SEARCH 9

Google’s u.S. Paid Search Share Generally Stable from year to yearGoogle’s share of both paid searchadspendandclicksmovedlessthanapercentagepointfromQ32013toQ3 2014. Its take of ad spend roseslightlyto82.7%,whileitsshareofadclicksslippedto80.4%.BingAdshasshownrelativestrengthinproducingclick growth, particularly in mobilewhereCPCsrunlower.

Google Share of U.S. Paid Search2014-Q32013-Q3

80%

85%

AdSpend Clicks

75%

70%

82.4% 82.7%

81.2%80.4%

Non-Brand CPCs 40% Higher on Google than Bing AdsAswe’ve seen in earlier quarters aswell, Google is able to commandmuch higher non-brand CPCs thanBing Ads, due to its search adsproducing 51% higher conversionrates for the typical site that isadvertising on both. Average ordersize isroughlyatparitybetweenthetwoengines,whileGoogle’sadshavea45%higherclick-throughrate.

Non-Brand: Google Metrics vs Bing AdsQ3 2014

MedianSiteResults

+20%

+40%

+60%

–10%

+30%

+50%

CPC CTR ROI Conv.Rate AOVNon-Brand

BASELINE

BingAds

40%

+10%

45%

16%

51%

–1%

Brand CPCs 31% Lower on Google, Click-through Rate 3x as High as Bing AdsOver the years, we’ve consistentlyfound that CPCs for an advertiser’sbrand terms run much lower onGooglethanBing,andtheyremained31%lowerinQ3.Thegaphasclosed,butmanyprogramsreportthatBingAdsismoreaggressiveinhowitservescompetitiveadsagainstbrandtermsand how it broad matches brandterms to other queries. The latterissue requires careful considerationofadmatchtypesandnegatives.

Brand: Google Metrics vs Bing AdsQ3 2014

MedianSiteResults

BASELINE

+50%

+100%

+200%

+150%

—50%

CPC CTR ROI Conv.Rate AOV

–31%

217%

64%11%

2%Non-BrandBingAds

+250%

PAID SEARCH 10

Search Partners Now Contribute Just 13% of Google ClicksOverthepasttwoyears,theshareofGooglepaidsearchclicksproducedby their search partners has fallenfrom 21% to 13%. The shift intraffic to both mobile and PLAshas contributed to search partnerdeclinesoverthelong-term,butthetrendispresentnomatterhowoneslicesthedata.

Google Search Partner Click Share Overall

0%

5%

10%

15%

20%

25%

13%

Q1 Q22013

Q3 Q4Q3 Q4 Q12014

Q2 Q3

Google Search Partners a Small and Declining Factor on mobileGooglesearchpartnershaveneverbeen large contributors to trafficfrom smartphones and tablets andtheir share of this traffic has fallenover time. At the end ofQ3 2014,8% of Google tablet clicks camefrom search partner sites and just3%ofsmartphoneclicks.

Google Search Partner Click Share by Device

0%

10%

20%

30%

Q1 Q22013

Q3 Q4Q3 Q4 Q12014

Q2 Q3

SmartphoneDesktop Tablet

8%

21%

3%

Google Partners Not Producing many PLA Clicks, But Share Could IncreaseWith the AdSense for Shoppingproduct that Google announced thisSeptember, more Google searchpartner sites will be displaying PLAsin the months ahead, specificallyretailerslikeWalmart.com.Thisshouldhelp rampuptheshare thatpartnerscontribute to PLA clicks and PLAvolume overall. At the end of Q3,partnerswerecontributing just3%ofPLAclicks.

Google Search Partner Click Share by Ad Format

0%

10%

20%

30%

Q1 Q22013

Q3 Q4Q3 Q4 Q12014

Q2 Q3

TextAdsPLAs

3%

16%

PAID SEARCH 11

tablet traffic Share Flat in 2014, Smartphones upAfter a twopoint jump following theQ4 2013 holiday season, tablet paidsearch click share has remained flatat 18% for the last three quarters.Smartphone traffic share also got anicebumpfromQ4toQ1,but ithascontinuedtoriseatasteadypaceandnowstandsat20%.Between the twodevice groups, mobile traffic shareincreased from 30% to 38% fromQ32013toQ32014.

Mobile Share of Paid Search ClicksTablet Smartphone

0%

10%

20%

40%

30%

20%

18%

2014-Q22013-Q3 2013-Q4 2014-Q12013-Q1 2013-Q2 2014-Q3

mobile Share of Paid Search Spending up Nearly 5% From year to yearSmartphonesandtabletscombinedtocapture 28.4% of advertiser spendingonpaidsearchadsinQ32014,upfrom23.9%ayearearlier.DuetohavingloweraverageCPCs,smartphonesaccountedfor9.4%ofspendingcomparedto19%fortablets.

0%

10%

20%

30%

19%

9%

2014-Q22013-Q3 2013-Q4 2014-Q12013-Q1 2013-Q2 2014-Q3

Mobile Share of Paid Search Ad SpendTablet Smartphone

Bing Ads Nearly matches Google in Share of Clicks from mobile DevicesBingAdsismakingstridesingrowingtheshareofitstrafficthatisproducedbymobiledevices.InQ3,36%ofBingAds paid clicks took place on eithersmartphonesortablets,upfroma25%ratejusttwoquartersearlier.Mobile’sshareofGooglepaidsearchtraffichasgrownatasteadierpaceandstoodat38%inQ3.

Mobile Click Share by Engine

0%

10%

20%

40%

30%

Google BingAds

Combined Smartphone Tablet

38%36%

20% 20%18%

16%

PAID SEARCH 12

Smartphone Ad Spend Grows 117% y/y, Desktop Click Growth ImprovesDuetobidpullbacksadvertisersmadein2013toimprovesmartphoneROI,Y/Yspending growth has been somewhatartificiallylowforseveralquarters,butitpickedbackupsharplyinQ3to117%.ThesurgeinmobiletrafficonBinghasalso bolstered growth. Meanwhile,desktopclickvolumerose5%Y/YinQ3,the best rate we have seen since Q42012.

Year-Over-Year Growthby Device Class

AdSpend Clicks CPC

Smartphone

Desktop

Tablet

60%

30%

0%

90%

120%117%

40%

17%

71%

34%

5%

27%

11%4%

Smartphone CPCs Still 59% Lower than DesktopAlthoughthegapbetweensmartphoneanddesktopCPCshasnarrowedinthelast two quarters, smartphone clicksare still 59% cheaper on average.This is primarily a reflection of thelargedifferences inonlineconversionperformance that most advertiserscontinue to see across smartphones,desktopandtablets.

Google Mobile CPC vs Desktop120%

60%

40%

20%

80%

100%

0%

91%

41%

Desktop

TabletSmartphone

2014-Q22013-Q3 2013-Q4 2014-Q12013-Q1 2013-Q2 2014-Q3

Smartphone Revenue-Per-Click Steady vs Desktop, but 66% LowerSmartphonerevenue-per-clickimprovedmarkedly following the transition toEnhancedCampaignsinQ32013,butithasnotimprovedcomparedtodesktopduring 2014. At the same time, tabletrevenue-per-click continues to slidecomparedtodesktopandnowstandsat73%ofdesktoplevels.

Non-Brand: Revenue-Per-Click vs DesktopTabletSmartphone

60%

40%

20%

80%

100%

0%2014-Q22013-Q3 2013-Q4 2014-Q12013-Q1 2013-Q2 2014-Q3

Desktop

73%

34%

PAID SEARCH 13

Windows tablets Continue to Chip Away at the iPad’s tablet DominanceAlthoughitmaynotbeafair,apples-to-apples comparison, Windowscomputers with tablet functionalitycontinue to gain tablet click shareat theexpenseof the iPad.Aswe’vepointed out before, our definitionof Windows tablets here includesMicrosoft’sSurface,butalsoabroadergroupingoftouch-compatibledevicesthatmaybebetterdefinedaslaptops.

Share of Tablet Paid Search ClicksOtherTablets

75%

50%

25%

0%

100%

iPad OtherTablets

4%

2%

0%WindowsTablet

OtherAndroid

Kindle GalaxyTablet

NexusTablet

6%

8% 2014-Q32014-Q2

2013-Q42013-Q32013-Q2

2014-Q1

iPhones Produce 63% of Smartphone Paid Search ClicksItisatwo-horseracebetweeniPhonesand Android phones when it comesto generating paid search clicks onsmartphones. Phones running otheroperating systems produced just alittleover1%of smartphoneclicks inQ3,comparedto63%foriOSand36%forAndroid.

Share of Smartphone Paid Search Clicks by OS

36%

1%

iOS Android Other

63%60%

40%

20%

0%

80%

2014-Q22013-Q2 2013-Q3 2013-Q4 2014-Q1 2014-Q3

KindleFire

iPhone Revenue Per Click Edges up, Android tablets WeakerFrom Q2 to Q3, the average revenue-per-clickforiPhonesimprovedjustslightlycompared to our desktopRPCbaseline,however itwillbe interesting toseehowthosenumbers compareonce the largeriPhone6modelsmaketheirwayintothehandsofmoreconsumers.Androidtabletscontinued to weigh down the tabletsegment inQ3,withmostmajordevicesshowingweakerrelativeperformance.

Revenue-Per-Click by Device vs Desktop

100%

80%

60%

20%

0%

40%

120%

Desktop

WindowsTablet

Desktop iPad NexusTablet

OtherAndroidTablets

iPhone AndroidPhone

114%

100%91% 91%

44%39% 38%

33% 31%

PAID SEARCH 14

iPhone 6 Conversion Performance Outpacing Earlier modelsInthefirstweeksfollowingthereleaseofthetwonewlarger iPhonemodels,wesee iPhone 6 conversion rates running32%higherthanthoseforearlieriPhonemodels.FortheiPhone6Plus,revenueper visit has been 67% above earlieriPhonemodels. As adoption increasesandthedatabecomesmorerobust,wewillseeifthisissimplyanearlyadoptereffectorifconsumerswillcontinuetobemore inclined tomakepurchases fromthelargeriPhones.

iPhone 6 Conversion Performance vs Earlier Models

ConversionRate Revenue-Per-Visit

iPhone6Plus iPhone6 iPhone5s&Earlier

150%

75%

25%

0%

175%

125%

100%

50%

Cross-Device Conversions Shift Smartphone Share of Conversions Less than 1%Despite the relatively large lift inconversionssmartphonesreceivefromincluding cross-device estimates, theshare of conversions attributed tosmartphonesonlyincreasedby0.7%inQ3whenmovingfromasingle-devicetrackingviewtoonethatincludesthecross-deviceestimates.

Share of totalConversions

Share of Single-Device Conversions

Desktop

74.1%

Tablet

17.4%

Smartphone

8.5%Desktop

73.3%

Tablet

17.5%

Smartphone

9.2%

Smartphones Get 17% Lift in Conversions from Including Cross-Device EstimatesGoogle’s cross-device conversionestimates suggest that smartphonesshould have received credit for 17%more conversions than the totalcaptured by single-device tracking.This rate is nearly three times higherthan the lift desktop computersreceive from including cross-deviceconversionsandaboutdoublethelifttabletsreceive.

Lift in Conversions from Including Cross-Device

8%6%

17%

2014-Q22013-Q3 2013-Q4 2014-Q1 2014-Q3

Smartphone DesktopTablet

15%

10%

5%

0%

20%

ORGANIC SEARCH & SOCIAL

ORGANIC SEARCH & SOCIAL 16

Organic Search traffic Share Edges up from Q2, But Down Four Points from 2013The share of overall site trafficproduced by organic search roseabout a point from Q2 to Q3, butorganic search share was still downabout fourpoints froma yearearlier.Organic search results have beensqueezed out by the engines’ bettermonetization of search results withformatslikeproductads,aswellastheshifttomobilewhereSERPrealestateismorelimitedandpaidclick-throughratesrunhigherthanondesktop.

Organic SearchShare of All U.S. Site Visits

2014-Q22013-Q2 2013-Q3 2013-Q4 2014-Q1 2014-Q3

32%30%

20%

10%

40%

50%

0%

Google’s Share of Organic Search visits Rises to 83%Havingmadegains throughout2013,Bing appears to be giving backsome ground in organic search visitshare with Google being the mainbeneficiary of those losses. Googlesaw its share rise to83% inQ32014,comparedtoBing’s8%share.Yahoo’sshareoforganicsearchvisitshasbeenstableataround7%,whilesecond-tiersearch engines continue to make asmallercontributiontosearchtraffic.

U.S. Organic Search Visit Share by EngineOtherEngines

Google OtherEngines

Bing Yahoo Other

10%

8%

6%

12%

0%

4%

2%

60%

40%

20%

80%

100%

0%

2014-Q32014-Q2

2013-Q42013-Q32013-Q2

2014-Q1

yahoo and Google Continue to Show Relative Strength in mobile SearchWhile Google has long enjoyed anevenmoredominantshareofmobilesearch than it holds on desktop,Yahoohasalsobeenpunchingaboveits weight class inmobile for severalquarters now. In Q3 2014, Yahooproduced 8.4% of mobile organicsearch visits, compared to 86% forGoogleandjust5.6%forBing.

Share of U.S. Mobile Organic Search by EngineQ3 2014

Google

Yahoo

Bing

Other

85.6%

8.4%

5.6%

0.3%

ORGANIC SEARCH & SOCIAL 17

mobile Now 38% of Organic Search visits; Android Catches iPad Mobile Share of U.S. Organic Search Visits

Smartphonesandtabletscombinedtoproduce38%oforganicsearchvisitsinQ3 2014, up from27%a year earlier.TrafficacrossallAndroidsmartphonesandtabletsmatchedthatfromtheiPadforthefirsttime,butincludingiPhoneshare, iOSdevices still accounted forover twice as much organic searchtraffic asAndroidand65%ofmobilesearchvisitsoverall.

2014-Q22013-Q3 2013-Q4 2014-Q1 2014-Q3

Android iPhoneiPad Other40%

20%

10%

0%

30%

13%

11%

12%

2%

Despite Jump in mobile Search visits, Bing Still Lagging Behind Google and yahoo

Share of Each Engine’s Traffic from MobileEven with a surprising nine pointquarter-to-quarterjumpintheshareofBingsearchvisitsproducedonmobiledevices,Bingstill trailedGoogleandYahoointhisareabyalargemargin.InQ32014,a remarkable44%ofYahoosearch visits were mobile, comparedto39%forGoogleand27%forBing.

2014-Q22013-Q2 2013-Q3 2013-Q4 2014-Q1 2014-Q3

30%

20%

10%

40%

0%

50%GoogleYahooBing

13%15% 14% 15%

17%

27%27%

31% 30%

36% 37%

44%

28% 29%31%

33%36%

39%

mobile Drives Overall Organic Search Growth into Positive territory

Y/Y Growth in Organic Search VisitsQ3 2014Despite the pressure from increasing

SERPmonetizationandevenGoogle’sswitchfromashadedbackgroundforadstoayellowadicon,organicsearchvisits increased 3.2% year-over-yeardue to thestrengthofmobile searchgrowth. Mobile organic search visitsrose 45% Y/Y in Q3, up from 18%growthinQ2.

30%

20%

10%

40%

0%

50%

Mobile Overall

45%

3%

ORGANIC SEARCH & SOCIAL 18

Some Google Organic Queries Still Being Passed, but Not Provided Share Hits 92%With such a small, and likelyunrepresentative, percentage ofGoogleorganicsearchespassinguserqueries to site owners, tracking thecontinuedriseofNotProvidedqueriesisprimarilyjustacuriositythesedays.Still,by theendofQ3,NotProvidedsharehadhit92%.

Not Provided Share ofGoogle Organic Search Traffic

Q1 Q2

2013Q3 Q4

Q1 Q2

2012Q3 Q4 Q1

2014Q2

75%

50%

25%

0%

100%

Q3

92%

Over Half of yahoo Search Queries Now Not ProvidedAfter hovering around 40% for mostof Q2 and Q3, Not Provided shareonYahoospikedto54%attheendofSeptember.

Not Provided Share ofYahoo Organic Search Traffic

30%

0%

60%

40%

20%

10%

50%54%

Mar30

Jul6

Apr13

Jul20

Apr27

Aug3

May11

Aug17

May25

Aug31

Jun8

Sep14

Jun22

Sep28

2014

iOS 8 Adoption Rate Lagging Behind Its PredecessorUseradoptionofApple’slatestversionof iOS has not been as brisk as thatforpastupgrades.Aftertwoweeksofavailability,iOS8accountedfor37%oforganicsearchvisitsfromiOSdevices.After the same timeperiod last year,iOS 7 accounted for 64% of iOSorganic searches.By all accounts theiPhone6hassoldbetterthanthenewmodels introduced last year, so thisdiscrepancy is likely due to a slowerpace of software upgrades amongusersofolderiOSdevices.

iOS 8 vs iOS 7 Initial Adoption Rates

DAYSLAUNCH +2 +4 +6 +8 +10 +12 +14 +16

64%

40%

iOS8iOS7

30%

0%

60%

40%

20%

10%

50%

70%

ORGANIC SEARCH & SOCIAL 19

Social media Sites Contribute 2.2% of All Site visitsAlthough Facebook continues toreport very impressive year-over-yearadrevenuegrowth,theshareoftrafficsiteownersproducefromsocialmediadoes not appear to be growing asrapidly. InQ32014,2.2%ofsitevisitsoriginated fromsocialmediasitesonaverage, up from 2% a year earlier.Declining organic reach is likelyhamperingsocialreferralgrowth,andsocialgrowthratesoveralltendtobehighly variable from site to site and,naturally,tiedheavilytotheamountofinvestmentbeingmadeinthechannel.

Social Media Share of All Site Visits

2.0%

1.0%

0%

3.0%

2014-Q22013-Q2 2013-Q3 2013-Q4 2014-Q1 2014-Q3

2.2%

Facebook Still Producing a majority of Social media visitsWhile Facebook remains the largestsocial media traffic driver by far,producing 53% of social visits onaverage, a number of retail sitesare generating more referrals fromPinterest than Facebook.Amongoursample, Pinterest produced 18% ofsocialvisitsinQ3onaverage,buttherearestillmanysitesproducingnowherenearthatlevel,speakingtotheimpactthat demographics and industry canhaveonthesefigures.

Share of Social Media Visits Produced2014-Q32013-Q3

Facebook Pinterest RedditTwitter YouTube Google+ LinkedIn

40%

20%

0%

60%60%

3%

53%

15%18%

4%2% 3% 2% 1% 1% 1% 0.5% 0.4%

mobile Share of Social media visits Steady at 42%After a sharp rise throughout 2013,wefindmobile’sshareofsocialmediavisitsrunningflatin2014atabout42%.That still outpaces mobile’s share ofpaidandorganicsearch.

Mobile Share of Social Media Visits

42%

30%

0%

50%

40%

20%

10%

2014-Q22013-Q2 2013-Q3 2013-Q4 2014-Q1 2014-Q3

COMPARISON SHOPPING ENGINES

COMPARISON SHOPPING ENGINES 21

Amazon Product Ad CPC Remains 20% Below Google PLAThere was no movement Q/Q asaverage CPC for Amazon ProductAdsonceagaincameinat20%belowthat of PLAs for advertisers on bothplatforms. Both platforms have seenyear-over-yearincreasesinCPC.

Amazon Product Ads vs Google PLA CPC

60%

80%

40%

20%

100%

120%

0%GooglePLA

AmazonProductAds

GooglePLAs

−20%

Nextag Spend Share Remains Significantly Down y/yWhile Nextag once again saw Y/YspendsharedeclinesforQ3,theCSEisnowofferingmodifiedfeestructurestoadvertiserswhohavedeactivatedtheiradsinthepastyear.AmazonProductAds also saw significant Y/Y spendshare decline as some advertiserswerepushedoutof theproduct,andShopzilla-Bizrate fell from top spendsharein2013tothirdthisyearastheirrigid single rate card system fails togiveadvertisersflexibilityinbidding.

Ad Spend Share by Engine2014-Q32013-Q3

AmazonProductAds

NexTag eBayCommerceNetwork

Shopzilla-Bizrate

PriceGrabber

15%

0%

35%

20%

10%

5%

25%

30%

Other

23%

10%

3%

15%

23%

26%

13%

2%

9%

25%

31%

21%

PLAs Provide About 10x more Revenue than Amazon Product AdsPLAscontinuetofaroutpaceAmazonProductAdsinrevenuegenerationforthoseadvertisingwithboth.However,after two quarters of decline relativetoPLAs,AmazonProductAdsarenowback to Q4 2013 levels of revenuerelativetoPLAs.

Amazon Product Ads vs Google PLA Revenue

2013-Q4

6%

8%

4%

2%

10%

12%

2014-Q1 2014-Q2 2014-Q3

11%

9%

7%

11%

0%

COMPARISON SHOPPING ENGINES 22

eBay Once Again Provides Biggest y/y Revenue GrowthContinuing a trend seen everyquarter so far this year, the eBayCommerce Network produced thelargestyear-over-yearrevenuegrowthfor advertisers. Only Nextag sawsignificantdeclineY/YinQ3.

Same-Site Revenue GrowthY/Y Q340%

20%

0%

–80%

–40%

AmazonProductAds

NexTageBayCommerceNetwork

Shopzilla-Bizrate

PriceGrabber

35%

9%

−71%

15%–2%

–20%

–60%

Amazon Product Ads Only CSE to See Significant CPC movement y/yMost major CSEs saw little changeyear-over-year in terms of CPC inQ3 except for Amazon Product Ads,which posted a 26% increase as aresult of higher rate cards in 2014.Thiscontinuesa trendwe’veseenallyearinwhichAmazon’sCPCincreasesoutpaceallotherCSEs.

CPC by Engine2014-Q32013-Q3

AmazonProductAds

NexTag eBayCommerceNetwork

Shopzilla-Bizrate

PriceGrabber

$0.30

$0

$0.70

$0.40

$0.20

$0.10

$0.50

$0.60

Other

$0.50

$0.64

$0.43

$0.28$0.32

$0.39

$0.49$0.46

$0.32 $0.31

$0.40

$0.50

CSEs Continue to Provide Higher ROI than PLAsWhile ROI for PLAs lags behind thatofCSEsonthewhole, this ispartiallythe result of rate card minimums forsome CSEs which force advertisersto excludeproducts from their feedsratherthanbidthemtovalue,aswellasotherinherentdifferencesbetweenCSEandpaidsearchauctions.

CSE vs Search Engine Product Ad ROI

0%

160%

60%

PLA CSE

PLAs

+41%

100%

80%

20%

40%

120%

140%

DISPLAY ADVERTISING

DISPLAY ADVERTISING 24

FBx Spend and CPC Both up y/yFBXspendwasup30%Y/YinQ3,whileaverageCPCincreased10%.ThelargerrighthandrailformatintroducedinQ2has resulted in increased competitionduetofeweradunitsandmoreplayersinthespace.

FBX Spend & CPC2013-Q3 2014-Q3

2013-Q3

AdSpend CPC

140%

100%

120%

0%

40%

60%

20%

80%

+30%

+10%

FBx Clicks more Expensive than GDN, Less than Other NetworksWhileclicksontheGDNnetworkwere26% lower than those for FBX inQ3,FBXclicksremainavaluecomparedtoallotherdisplaynetworks,whichhada 14%higher averageCPC than thatofFBX.

Display Average CPC120%

80%

100%

0%

60%

40%

20%

FBX GDN Other

FBX

−26%

+14%

Conversion Rate on GDN Significantly Lower than FBx, Other Display NetworksWhile the GDN offers significantlylower average CPC, conversion rateisalsosignificantly lower than thatofFBXandotherdisplaynetworks.AOVwas very similar across all Displayplatforms.

Display Performance

ConversionRate AOV

120%

80%

100%

0%

60%

40%

20%

FBX

FBX GDN Other

−34%

+9%

–3%

+6%

DISPLAY ADVERTISING 25

GDN Share of Google Spend Climbs to 8%While still a small portion of overallGoogle investment, spendingon theGDNhasincreasedfrom6%ofGooglespend in Q2 to 8% in Q3. Of thoseGDNdollars, themajority go towardretargetingandplacementcampaignsformostadvertisers.

Share of Total Google Spend

GoogleTextAd&PLASpend GDNSpend

100%

50%

75%

0%

25%

92%

8%

Contextual Spend, CPCs Remain Below Placements & RetargetingSite placements and retargetinggarneredmorethantentimesasmuchspendfromadvertisers’GDNbudgetsas contextual ads in Q3. ContextualCPCs were also significantly lowerthanthatofretargetingandplacementcampaigns,withlowerexpectedvaluefromtheseclicks.

GDN Placements & Retargeting vs ContextualPlacements&Retargeting Contextual

Placements&Retargeting

Spend CPC

60%

0%

80%

40%

20%

100%

120%

−91%

−69%

All Display Advertisers Now using RetargetingThe percentage of advertiserspursuing a prospecting-only displaystrategy has consistently gone downsince Q4 of last year, and is now at0% as all display advertisers are nowretargeting. A mixed strategy ofprospecting and retargeting is stillpreferredby80%ofadvertisers.

Percentage of RKG Clients’ Display Goals

Prospect&Retargeting

RetargetingOnly

80%

20%

Foundedin2003,RKGisasearchanddigitalmarketingagencythatcombinessuperiormarketingtalentwithworld-classdigitalmediacapabilities tocreatethe industry’smosteffectivedata-drivendigitalmarketingsolutions.RKGdrivesbusinesstoclientsbymaximizingafullrangeofopportunitiesincludingpaidsearch,SEO,product listingads, socialmedia,displayadvertising,andcomparisonshoppingenginemanagementservices.In2014,RKGbecameapartofMerkle(www.merkleinc.com),thelargestprivately-heldcustomerrelationshipmarketingagency.RKGisheadquartered inCharlottesville,VAwithofficesinBend,ORandBoston,MA.Formoreinformation,visitwww.rimmkaufman.comorfollowthecompanyonTwitter@rimmkaufman.

ABOut RKG, A mERKLE COmPANy

[email protected]

@rimmkaufman

rimmkaufman.com

rkgblog.com

mEtHODOLOGyFigures are derived from samples of RKG clients who have workedwith RKG for each respectivemarketing channel. Where applicable, these samples are restricted to those clients who 1) havemaintainedactiveprogramswithRKGforatleast19months,2)havenotsignificantlychangedtheirstrategicobjectivesorproductofferings,and3)meetaminimumadspendthreshold.Alltrendedfigurespresentedinthisreportrepresentsame-sitechangesoverthegiventimeperiod.Unlessotherwisespecified,thedatapointsinthisreportarederivedfromtheNorthAmericanmarketregion.

Merkle,atechnology-enabled,data-drivencustomerrelationshipmarketing(CRM)firm,isthenation’slargestprivatelyheldagency.Formorethan25years,Fortune1000companiesandleadingnonprofitorganizations have partnered with Merkle to maximize the value of their customer portfolios. Bycombining a complete range of marketing, technical, analytical, and creative disciplines, Merkleworks with clients to design, execute, and evaluate connected CRM programs. With more than2,400employees,theprivatelyheldcorporationisheadquarteredinColumbia,Md.withadditionaloffices in Bend, Or.; Boston; Charlottesville, Va.; Chicago; Denver; Hagerstown, Md.; Little Rock;London;Minneapolis;Montvale, N.J.; Nanjing; New York; Philadelphia; Pittsburgh; San Francisco;andShanghai.Formore information,contactMerkleat1-877-9-Merkleorvisitwww.merkleinc.com.

ABOut mERKLE