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Is Facebook ad personalisation driving Google's strategy?

Facebook's undisputed victory in ad personalisation is driving Google to make changes to its advertising business.

Is Facebook ad personalisation driving Google's strategy?

According to Adobe Digital Index’s (ADI) Q3 Digital Advertising & Social Intelligence Report, Google’s recent release of Customer Match – a new tool that helps advertisers personalise display ads based on historic search data – is a direct response to consumers’ finding Facebook ads (51%) more relevant than Google’s display ads, the majority of which run on YouTube (17%). Google+ (6%) and Pinterest (6%) were the next-best rated, so Google is undoubtedly feeling the heat.

"Facebook ad click-through rates rose 35% year over year (YoY), indicating that targeting efforts are paying off," says Tamara Gaffney, principal analyst at ADI. "Marketers are using the platform more, and impressions are rebounding."

ADI looked at consumer activity on branded sites from Q3 2014 to Q3 2015. It analysed more than 900 billion digital ad impressions from search and social platforms (Google, Facebook, Bing, Yahoo!, Baidu, and Yandex), and also looked at more than 23 billion referred social visits from Facebook, Twitter, Pinterest, Tumblr, Reddit, YouTube, and LinkedIn.

Google’s display click-through rates (CTRs) are up 25% YoY. Here again, Facebook outperforms in terms of display CTR, up 35% YoY. According to ADI, the Customer Match announcement suggests that Google is under pressure to better leverage targeting data in order to improve its performance.

"Google’s CTR continued growth amid declining costs is likely due to the influence of programmatic media buying," says Matt Roberts, senior analyst at ADI. "It demonstrates that display remains a compelling opportunity. We’ll watch to see what impact Customer Match has going forward."

Bing beats Google’s paid search spend growth worldwide

North America leads the world for growth in search marketing spend, likely due to the relative strength of the US economy. "It's likely that economic differences are the key driver for regional trends," Roberts says. Indeed, paid search spend increased 17% YoY, with click-through rates in North America on the rise and cost-per-click (CPC) flat for the same period.

Interestingly, Bing surpassed Google in paid search spend growth in all regions around the world except North America – though Google’s retains 71% market share of paid search spend in North America, according to ADI. Google also continues to dominate from an optimisation efficiency, with CTRs up 16%.

In comparing industries, retail – unsurprisingly – is still driving the highest paid search growth, Roberts says. He said he expects that number to continue to grow this quarter, when retailers double up on their efforts to drive holiday sales.

Also in Q4, an important time for many advertisers, ADI predicts the US auto and retail industries will drive the most dollars in the digital advertising marketplace. The automotive sector, in particular, is fuelling revenue with CPCs up 14% on better optimisation of spending, as demonstrated through a healthy rise in CTRs, up 32%.  

From a mobile perspective, the cost story has not improved much this year, with smartphone CPC growth relatively flat. CTR from mobile took an unexpected bounce up in the last quarter, a trend that retailers hope will continue during the Q4 holiday shopping period.

Facebook leads social

Revenue-per-visit (RPV) for traffic coming from social platforms is increasing across the board. It’s no surprise, however, that Facebook still leads the group with the highest referred RPV, followed by Pinterest. "What is interesting is how fast Reddit is closing the gap with the other social platforms, given the difficulties they have been facing of late," Roberts says. In fact, Reddit has almost caught up with Twitter by more than doubling its referred RPV.

Zeroing in on other social metrics, ADI found that although Facebook CTRs are up YoY, video, and image post interaction rates are down. "Changes made last summer to the Facebook algorithm were designed to favour the way in which links are displayed," Roberts says. "These changes are compelling marketers to allocate efforts to create engaging links while diverting attention away from images and videos."

Periscope, the belle of the social ball in Q1 2015, continues to grow in usage, but it is struggling to gain mainstream adoption, according to ADI. Social mentions spiked in September, largely driven by the live streaming of Messenger of God, a controversial movie banned in India. "This shows that adoption is still niche," Roberts says. "If a single event can cause this much volatility in usage, then this platform has yet to attain mass utilisation."

View the full report here.

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