Google can dream all it wants about robots, smart homes and artificial intelligence. But as we explained yesterday in a story about its latest acquisition binge, Google is still basically an advertising company.

And Product Listing Ads (PLAs), which combine images and text, are one of the key tools it has in its increasingly large and sophisticated bag of tricks.

Let Me See

Introduced in 2012, PLAs are search ads with product images and prices that appear in a prominent place of a Google search results page. Displayed on the right side of a search results page, the PLAs are more visual and more engaging than paid text results that show up directly above the organic search results

They replaced free comparison-shopping listings, and both customers and retailers seem to love them.

Three studies — one from Adobe, another from Marin Software and a third from IgnitionOne — independently show PLAs earned a lot of the credit for the success of Google's ad business in the fourth quarter last year. 

In a released today, Adobe notes there was  "explosive growth" for PLAs in the last three months of the year. Kohki Yamaguchi, senior business analyst for Adobe Digital Marketing, told CMSWire the statistics show increased ad revenue potential and better ad format diversification. "Paid search advertising is transforming. Marketers are no longer dependent on single-format text ads. We are moving to a more varied, diverse marketplace filled with multiple ad formats," he said.

Adobe reports cost per click (CPC) rates for PLAs are up 80 percent year-over-year compared to 11 percent growth in Google text ads during the same period. And think about this: In just one year, PLAs have become more important to retail advertisers than Bing and Yahoo search combined.

Yamaguchi said advertisers using both Google PLAs and standard text ads got 22 percent of their clicks from PLAs. Bing and Yahoo collectively captured just 20 percent of search clicks.

Other Studies, Similar Findings

Adobe's report comes on the heels of a similar study (registration required) by IgnitionOne and yet another by Marin Software (registration required). 

IgnitionOne, a digital marketing firm, reports PLAs represented a "significant area of growth" in the final quarter of 2013 coinciding with the holiday shopping season. IgnitionOne President Roger Barnette said the performance proves "the ad product has come into its own” — and that "both marketers and consumers have found value in these ads," as shown by the increase in spending as well as the increase in the click-through rate compared to standard search ads.  

The click-through rate for PLAs last year was about 47 percent higher than the click-through rate for text-based pay-per-click ads on Google, IgnitionOne reports. The rates averaged 2.8 percent and 1.9 percent, respectively.

Marin Software, meanwhile, found advertisers increased spend on PLAs nearly 300 percent last year.  In fact, one out of every five paid shopping clicks last year was on a PLA, according to the company, which provides advertisers and digital marketing agencies a web-based management platform to manage revenue acquisition through online advertising campaigns.

What Does this Really Mean?

Basically, digital marketers who haven't jumped on the PLA bandwagon should — and those who already have should optimize their use of the platform. By the end of this year, Marin projects retailers will allocate 33 percent of their entire paid search budget toward PLAs.

Learning Opportunities

Dave Ragals, global managing director of search at IgnitionOne, told CMSWire that PLAs are growing because they drive positive results for marketers and provide value to customers. "But what marketers need to understand to best take advantage of PLAs is that they have moved from being a feeds-based system that you can optimize to an optimization-based system that leverages a feed. This distinction is important to get even better results," he explained.

Adobe's Yamaguchi predicted two trends:

  1. More vertical specific ad formats — The product images used by PLAs are simply more informative to shoppers who want to quickly determine which retailers have the items they are ready to buy. Advertisers should expect that search engines will look for similar solutions to serve the needs of searches with other goals in mind.
  2. Deeper cross-functional collaboration — PLA advertising enables marketers to drive placement to move inventory or maximize margins whereas traditional text advertising is more copy based. PLA pricing levels affect not just sales but whether ads are even served or clicked on in the first place.

"This strengthens the link between marketing performance and all other aspects of business. Organizations that streamline data communication between departments will stand to reap the greatest benefits," he said.

Still, there are several things to keep in mind.

While demand drove up the cost of PLAs, advertiser return on investment (ROI) was roughly flat year-over-year, Yamaguchi noted. Going forward, there will be a greater need for marketers to adopt scalable, algorithmic solutions, he said. And retailers should expect more competition for this product image plus price ad format.

In addition, there is disagreement on how well PLA image ads perform on mobile devices. During the past holiday weekend, for instance, IgnitionOne found poorer performance for PLAs on mobile devices. While PLAs represented 21 percent of total mobile impressions and 11 percent of total mobile clicks, they generated a 38 percent lower CTR compared with paid search ads. 

However, Marin Software noted that PLAs only made their debut on smartphones this past October — and thinks it is just a matter of time until customers grow comfortable with the format on their mobile devices. According to its report:

PLAs delivered on smartphones not only cost less, but are also more engaging than those delivered on PCs and tablets. In October, PLAs on smartphones had a 33 percent higher CTR than PLAs on desktops and tablets. In fact, during the 2013 holiday season, smartphone PLAs outperformed desktop and tablet PLAs from a CTR perspective."

By December, Marin forecasts 40 percent of all PLA clicks will occur on smartphones.