Amazon's Ad Platform Needs To Mature, As Search Spend Growth Slows In Q1

The slowdown in paid-search advertising spend has nothing to do with Amazon's nascent ad platform, which some experts believe will need to mature before it can be effective for large company campaigns. Some of Merkle RKG's clients are testing the Amazon ad platform, but apparently the platform is too simplistic and needs to improve its functionality and ease of use before it can gain traction.

Merkle RKG and iProspect saw a larger-than-expected "slowdown" in the amount that marketers spent on paid-search advertising in 1Q 2015 compared with the prior quarter, and attributed this to retailers shifting more budgets from the first quarter to the fourth.

The two companies told investors during a call will Raymond James Equity Research analysts that they saw clients spend less on paid-search advertising in Q1 2015, compared with the year-ago quarter.

Overall, search spend growth fell sequentially 17% in 1Q, from 21% in 4$ 2014. iProspect noted spend growth fell to 11% year over year in 1Q, compared with 24% sequentially. Merkle RKG noted click growth fell to 7% compared with the year-ago quarter and 14% sequentially.

As for clicks, Merkle RKG said the cost per click for the quarter came in flat compared with the prior quarter. iProspect noted that clicks fell 11% year-on-year -- although CPC rose 25%, driven by strength in larger ad units. Both companies noted the deceleration in amount of money that marketers were willing to spend on search in the first quarter of 2015 compared with the prior quarter. The downslide is attributable to retail advertisers spending more aggressively during the holidays.

Merkle RKG saw a harder hit in the Google slowdown, with Google paid-search spend decelerating 13% year-on-year in 1Q, and clicks fell 1%, compared with the prior year. The CPC growth rose to 13%, compared with the prior-year quarter. As a result, Google spend share in the U.S. fell to 82% vs. 85%, compared with a year ago, and click share fell to 79% vs. 84% a year ago.

Merkle RKG believes that 2% of the share loss is due to Google losing the default engine on Mozilla Firefox to Yahoo in November 2014, though both agencies admit to seeing Firefox users switch the default engine back to Google.

Both companies have also seen stronger growth in smartphones vs. tablets. Smartphones share rose to 24% from 18% in the year-ago quarter. Merkle RKG notes smartphones represented 11% share vs. 21% for tablets, while smartphone CPCs remain 60% below the rate for desktop. iProspect saw smartphone spend growth of 88% year-on-year, representing 25% share vs. tablet share of 15%.

Finally, Amazon's nascent ad platform will need to mature. Some of Merkle RKG's clients are testing the Amazon ad platform, but company experts believe the platform is too simplistic and will need to develop scale, functionality, and ease of use to gain significant traction.

1 comment about "Amazon's Ad Platform Needs To Mature, As Search Spend Growth Slows In Q1 ".
Check to receive email when comments are posted.
  1. Jon Swallen from Kantar Media, April 3, 2015 at 10:06 a.m.

    A very deceiving and poorly written headline, as it implies a decline in the amount of money spent on search. But according to the article, YoY spend was UP +11% in Q1. That's not a "decline", that's growth. The headline's reference to a 'decline' turns out to be a slowdown in the rate of YoY growth - not a lesser amount of spending.

Next story loading loading..