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The Q3 2014 Performance Marketer’sBenchmark Report:

Vital Search, Social & Display Performance Data by Device

WH

ITE PAPER

Copyright © 2014 Marin Software Inc. All rights reserved. 2

The Q3 2014 Performance Marketer’s Benchmark Report:Vital Search, Social & Display Performance Data by Device

TABLE OF CONTENTS

Introduction 03

Methodology 03

Key Takeaways 03

Shifting Landscape of Device Usage Amongst Consumers 03

Advertiser Response to Changing Consumer Trends 04

Performance Across Search, Social and Display by Device 07

Conclusions 09

About Marin Software 10

3


INTRODUCTION

Historically, Q3 has been a critical quarter for advertisers across all key verticals. Manymarketers use Q3 as a way to get ready for Q4, which is frequently their most importantquarter. But how should advertisers plan their spending to get the most bang for theirbuck? To answer this question, we took a look at the Marin Global Online AdvertisingIndex to try and understand how device and platform performance have shaped up overthe past quarter.

METHODOLOGY

To understand device and platform performance for Q3 2014, we sampled the MarinGlobal Online Advertising Index, which looks at over $6 billion worth of advertisingspend in the Marin platform. The Index consists of enterprise-class marketers: largeradvertisers and agencies who spend in excess of $1 million annually on paid-search,social, and display advertising channels. As such, our data sample and findings skewtowards the behavior of larger organizations and more sophisticated advertisers.

We examined this data longitudinally year-to-date, and measured key performanceindicators (KPIs) on a quarter-over-quarter (QoQ) basis. Wherever possible, we usedmedians and indexed values to more clearly highlight overall trends instead of overallvalues. This allowed us to mitigate the effects of outliers, and make the findings morerepresentative of the performance of the typical Marin client. We focused our findingson device and platform data. Please note that for the social channel, it was onlypossible to break out the data on the desktop and mobile device level. Mobile device isan aggregate of both smartphone and tablet.

KEY TAKEAWAYS:

1. Mobile devices are taking up more and more consumer attention and advertiser budgetthan ever before.

2. Consumers are still converting on desktops over mobile devices, although advertisersare getting better at optimizing towards mobile conversions.

3. Differences in click-through rates, cost-per-click, and conversion rates across channelsrequire a more holistic approach to spending.

SHIFTING LANDSCAPE OF DEVICE USAGE AMONGST CONSUMERS

Over the past several years, we have come to live in an increasingly multi-device world.The explosive growth and spread of smartphones and tablets have fundamentallychanged how people communicate, socialize, and purchase products. QoQ smartphoneusage has risen across all channels. Consumers are now using mobile devices morethan ever, driving over 50% of all social sharing.1 According to ComScore, consumersare spending one out of every three minutes of all online browsing time on mobiledevices2 and that activity is only expected to increase. By the end of 2014, there will

1 http://www.iab.net/media/file/ShareThis_CSTR_July2014.pdf2 http://www.comscore.com/Insights/Presentations-and-Whitepapers/2013/2013-Mobile-Future-in-Focus

4


be 1.2 billion smartphones sold, 23.8% greater than last year.3 From Q1 to Q2 2014,mobile browsing activity grew 19%, with online browsing activity on smartphonesgrowing by 27.8%. Conversely, desktop browsing activity dropped 5.5%.4 Thisincreased mobile browsing activity signals a shift in consumer behavior from desktops,to smartphones and tablets.

ADVERTISER RESPONSE TO CHANGING CONSUMER TRENDS

As a result of the apparent shifts in consumer device usage towards smartphones andtablets, advertisers are also beginning to adapt their strategies to focus more on thesedevices. We took a look at search, social, and display advertisers in the Marin GlobalOnline Advertising Index to understand just how consumer behavior has changedadvertiser spend across the globe. Unsurprisingly, there have been large shifts awayfrom desktop over the last few years, with mobile devices taking up more and more ofadvertiser budgets and time.

Across search, we’ve seen mobile device (smartphones and tablets) share increasesignificantly in the past year, with smartphones capturing the lion’s share of the growth.Year-over-year (YoY), desktops have lost 8.5% click share, with smartphones snappingup 6.1%. While advertisers devote just over 42% of all spend on mobile devices,mobile conversions only make up about 30% of search conversions. What this means is twofold: 1. That advertisers still have issues with correctly attributing mobileconversions as well as converting a mobile search click to a mobile conversion, and 2. That consumers are still not as comfortable on converting on mobile as they are ondesktops. As many customers use mobile devices for initial research on products, thegap between mobile click share and conversion share may be explained by consumersusing mobile advertising to initiate the purchase cycle, which they complete in store. Infact, according to Google, mobile clicks may convert into in-store purchases,5 or savedas a reference for a later at-home purchase on a desktop due to the relative ease ofdesktop form-fills. Interestingly, while smartphone spend outpaces smartphone clicksand conversions, we see an opposite trend with tablet devices, which makes up only8% of ad spend, but 15% of clicks and 12.4% of conversions.

3 http://www.idc.com/getdoc.jsp?containerId=prUS250587144 http://www.iab.net/media/file/ShareThis_CSTR_July2014.pdf5 http://adwords.blogspot.com/2013/02/understanding-full-value-of-mobile.html

68.9% 62.2% 57.4% 70.2%

17.5% 22.7% 34.5% 17.4%

13.6% 15.0% 8.0% 12.4%

Impressions Clicks Spend Conversions

Desktops Smartphones Tablets

Search Advertising Share by Device: Q3 2014

5


Device share for the display advertising channel exhibits similar characteristics tosearch. Mobile impression, click, spend, and conversion share amongst displayadvertisers has grown at a significantly higher rate YoY than search. Smartphones have taken up much of this growth, with desktops losing over 10% click share, whichhas almost exclusively shifted to smartphones. There is a much heavier mobile devicefocus for display than there is for search. Almost half of all display spend in Q3 was on mobile devices, and over half of clicks. Again, there is a discrepancy betweensmartphone and tablet spend versus clicks, where tablet clicks outpace tablet spend,and vice versa for smartphones. This is due to the aforementioned increase in mobiledevice usage across the world and the corresponding increase in mobile display adexchanges. Mobile-focused display advertising has been on many advertisers’ minds,with Google even recently revealing new mobile display ad formats.6

6 http://venturebeat.com/2014/09/29/google-rolls-out-new-display-ads-for-mobile/

-5.5% -8.5% -7.6%

-10.3%

2.9% 6.1% 6.4%

10.6%

2.6% 2.4% 1.2%

-0.3%



Search Advertising Share: Year over Year Change

60.5%45.8% 50.0%

61.4%

26.6%37.7%

40.1% 22.7%

12.9% 16.5% 9.8% 15.9%



Display Advertising Share by Device: Q3 2014

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In Q3, over 50% of impressions, clicks, and spend on social channels were on mobiledevices. This is because social networks have the fastest mobile user growth of anychannel. In Q2 this year, over a billion Facebook users accessed the site via a mobiledevice, with about 400 million of those users being mobile-only.7 This explosive mobileusage for social channels has fueled advertisers to pour money into this channel.However, social conversion share by device is still mostly desktop-focused, with 65% of all social conversions happening on a desktop computer. In fact, social mobileconversion share is less than display conversion share, even though social mobile clickand spend share are far greater than display. There is a disconnect between socialchannel spend and actual conversions. Consumer intent on social networks does notcenter on finding products and services, which makes them less likely to convert. Thisis in contrast with consumer intent on search, where the very act of searching is whenthey are directly looking for specific items, which increases chances of engagementand conversion on ads.

-14.1% -10.4%

-15.3% -15.8%

12.1% 10.2%

20.1%

10.9%

2.0% 0.2%

-4.8%

5.0%



Display Advertising Share: Year over Year Change

47.7% 37.0% 39.1%

64.8%

52.3% 63.0% 60.9%

35.2%


Desktops Mobile

Social Advertising Share by Device: Q3 2014

7 http://www.pewresearch.org/fact-tank/2014/02/04/overseas-users-power-facebooks-growth-more-going-mobile-only/

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PERFORMANCE ACROSS SEARCH, SOCIAL, AND DISPLAY BY DEVICE

This shift in both consumer behavior and advertiser spend has also affected howconsumers interact and engage with advertising. Understanding advertiser click-through rates, cost-per-click, and conversion rate reveal the story in how the bottomline has been affected.

When we look at click-through rate by platform, we see very similar trends acrosssearch, social, and display. Smartphones are clearly the device with the highest click-through rate, suggesting that mobile devices, and especially smartphones, may capturethe majority of consumer engagement. However, search stands out as the clear leaderin click-through rate across all devices when compared to performance on social anddisplay channels. Social and display click-through rates lag behind sharply, with bothunder 1%. Historically, social and display CTRs have always been significantly behindsearch due to consumer behavior. Display and social ads are served when consumerintent is not centered on searching for a product or service, and thus consumers areunlikely to interact with them. In addition, display is a passive channel, which lowersthe possibility of consumer engagement.

2.1%

0.4% 0.2%

3.1%

0.6% 0.4%

2.6%

0.3%

Search Social Display


Click Through Rate

Conversion rates tell us a completely different story. While CTRs are lowest ondesktops, conversion rates are much higher on desktops than on mobile devices.Consumers are simply more willing to buy when on a desktop than on a mobile device.Again, this is partly due to mobile behavior, such as using a smartphone for research or an in-store visit, and also partly due to the relative ease of converting on desktopversus mobile devices. Attribution on mobile devices is much more difficult formarketers to quantify and has remained a challenge for many. There is still a lot ofroom for advertisers to improve when it comes to mobile conversion and mobileattribution tracking.

Copyright © 2014 Marin Software Inc. All rights reserved.

Copyright © 2014 Marin Software Inc. All rights reserved. 8


When we look at cost-per-click, we can see that it closely mirrors conversion ratebehavior (above). Desktops are the leader in CPC for search, social, and display, andmobile devices lag behind, perhaps due to the lower conversion rates that can be easilyattributed to smartphones and tablets. Interestingly, tablet search CPC is lower thanthat of smartphone, even though tablet conversion rates are higher. In addition, searchCPCs are much higher than those of social and display, meaning that advertisers canbuy more clicks for the same amount of spend on non-search channels. Also of note ishow close desktop and mobile CPCs are for the social channel. This is a signal thatwith the increased investment in mobile on social, CPCs are levelling off andapproaching parity with desktops.

9.8%

1.0%

5.1%

6.7%

0.3%

2.3%

7.2%

3.6%



Conversion Rate

100

16

87 84

14

50

73 61



Cost Per Click

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CONCLUSIONS

Over the past year, it has become clear that mobile devices and cross-channelmarketing are becoming more and more an important part of digital marketing. Acrossall channels, mobile devices have been on the forefront of consumer and advertiserattention, with huge portions of ad spend and consumer time moving away fromdesktops towards smartphones and tablets. Consumer behavior also varies drasticallyby platform, and understanding the intersection between channel and device is crucialfor the smart marketer to reach their audience and guide them towards conversion.

Marketers should take advantage of the mobile reach and engagement that socialplatforms have, while leveraging the relatively higher conversion rates on desktops andsearch. Properly utilizing each platform and device to their relative strengths willbecome more crucial as we enter the holiday season in Q4.

Advertisers also must closely examine their mobile campaigns in order to improve theirconversion tracking. As mentioned before, mobile clicks can translate into in-storevisits, phone calls, or desktop conversions. Until an advertiser can properly attributethese conversions back to the initial mobile click, it will be hard to definitively quantifythe number of mobile conversions and conversion rate. Across the board, there is a disparity in mobile spend versus conversion share, and understanding whereconversions are coming from can help an advertiser correctly allocate spend to where itdrives the most revenue.

Online advertising will only continue to shift across both channel and device as themarketplace becomes more saturated with smartphones and tablets around the world.With tools like Marin Software to help advertisers understand cross-channel and deviceperformance, it becomes easier for advertisers to find crucial opportunities in this ever-changing space to reach and engage their audiences.

Copyright © 2014 Marin Software Inc. All rights reserved.

© 2014 Marin Software. All rights reserved. Other trademarks belong to their respective owners. WP 565_101614

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ABOUT MARIN SOFTWARE

Marin Software Incorporated (NYSE:MRIN) provides a leading cross-channel advertisingcloud for performance marketers to measure, manage and optimize more than $6 billion inannualized ad spend across the web and mobile devices. Offering an integrated SaaSplatform for search, display and social advertising, Marin helps digital marketers improvefinancial performance, save time, and make better decisions. Advertisers use Marin tocreate, target, and convert precise audiences based on recent buying signals from users’search, social and display interactions. Headquartered in San Francisco, with officesworldwide, Marin's technology powers marketing campaigns in more than 160 countries. For more information about Marin's products, please visit:http://www.marinsoftware.com/solutions/overview.

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