Google Product Listing Ads Driving Up Revenue

Despite Google's desire to diversify revenue streams into mobile phones and home WiFi systems, paid-search advertising and Google Shopping Ads continue to drive the majority of revenue not only for the Mountain View, California company, but for advertisers.

Based on recent checks with leading search agencies, equity analyst firm Raymond James predicts continued strength from Google Shopping and product listing ads (PLAs), along with increased interest in new local ads. The uptick seen in the third quarter of 2016 should continue through the remainder of the year.

Paid search rose 14% in the third quarter of 2016 compared with a year ago, and up between 8% and 10% in the first half of 2016, according to estimates.

Retail drove most of the uptick, especially Google Shopping and PLAs. Some 60% of clicks are now mobile PLAs, versus about 40% a year ago, according to Raymond James.

On Monday, desktop searchers began seeing a change for PLAs. Google began displaying PLAs in a carousel of images rather than a block of images off to the site of the search results page. A quick search on for "snow boots" returns about 17 images with a option to "view all" at the end.

"For advertisers in the shopping ads, this gives their products the opportunity to show above the search results, even if they wouldn’t have normally been displayed in the old non-scrolling style," wrote Jennifer Slegg, founder of The SEM Post.

Raymond James' research note also shows strength rising in the B2B sector, with spend up about 40% year-over-year. Marketers are showing interest in new local inventory ads and promoted pins, though investment has been limited.

All data suggests another strong quarter for Google, per analysts at Raymond James. Advertisers could spend as much as 20% to 23% more in the quarter. The note specifically estimates "in the low 20% year over year, driven by retail strength, expanded text ads, and an earlier start to advertising in the four quarter.

In a September conference call with Merkle, Raymond James analysts learned that from July through early September, advertisers were spending about 20% more year-over-year on paid-search ads, with the "biggest spend vs. expectations was the addition of a fourth mobile ad slot (adding 1-2% of mobile growth) and new local ad formats."

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