Paid Search Drives $6 In Local Sales For Every $1 In Online Sales — Study

Annual US retail spending is roughly $4 trillion according to the US Commerce Department. And while e-commerce is growing very rapidly, it remains less than 5 percent of total retail sales. Historically, most search marketers have focused almost exclusively on e-commerce sales. But a new study finds that the real impact of paid search is offline.

Six-to-One Impact in Offline Stores

Based on two years of research conducted by retail marketing firm RevTrax, the study discovered that “for every $1 of e-commerce revenue generated from paid search, marketers can expect to see approximately another $6 of in-store revenue.”

In other words, paid search has 6:1 impact on offline sales over e-commerce. Because of the challenges of tracking consumer behavior online to offline, most of this has been invisible to marketers. Only now with the rise of smartphones and other methodologies is online-to-offline tracking becoming more widely available.

Between August 2009 and August 2011 RevTrax monitored millions of paid-search ads and consequent sales for its retail clients. To track in-store sales accurately RevTrax used landing pages with coupons and unique IDs:

  • A paid search ad was displayed to a consumer
  • The paid search ad led the consumer to a printable or mobile landing page displaying a coupon with a unique barcode
  • The consumer redeemed the coupon inside a brick & mortar store
  • Each coupon was tracked back to the online search (and the keyword)

Average Paid Click Worth $15 in Store

Using this methodology, RevTrax could conclusively determine in-store sales affected by paid search ads. Here’s how RevTrax’s findings illuminated the “value of a click” (where the average transaction size was under $200):

  • The average click on a paid search ad generated approximately $15 of in-store revenue, with some merchants seeing as much as $28 of in-store revenue.
  • Approximately 9% of clicks on a paid search ad generated an in-store sale, with some merchants seeing up to 26% of clicks on a paid search ad generating an in-store sale.

Again, what the company found was that paid search drove $6 in offline sales for every $1 in sales online. RevTrax thus argues that multichannel merchants who do not include in-store sales into the ROI calculation are potentially “undervaluing the paid search channel by as much as 85 percent.”

This is the first study to conclusively show the offline impact of paid search at this kind of scale, based on actual behavior rather than consumer surveys and self-reported data. The findings are pretty radical, with broad implications for search marketers and the industry as a whole.

Postscript: Here’s a bit more color and explanation from Seth Sarelson, COO of RevTrax, in response to a couple of questions I received about the study:

Clients are measuring these paid search campaigns at the keyword level and looking at brand keywords, competitive keywords, categories/products, etc. and the study uses a mix all these different types of executions to come to these results. I’m not sure that it’s clear to the person commenting that we’re talking about paid search only, not organic, so there’s certainly no guarantee that a brand is at the top of the paid search results for any keywords in a particular category.

One of the things that the study also mentioned is that many clients are reporting that 40-50% of customers acquired via paid search were new. This is big as it shows that this isn’t just an example of existing customers searching on branded terms looking for a deal.

It would certainly make sense for us to do a follow up that compares brand vs non-brand to address this specifically, as it’s an important point of distinction. I’m going to push for this internally.

As for PC vs Mobile, we’re working on a later study that will address these results, but most of what we’re looking at here is printable coupons from a PC.

Stock image from Shutterstock, used under license.

Related Topics: Channel: Analytics | Search Marketing: General | Search Marketing: Landing Pages | Search Marketing: Local Search Marketing | Search Marketing: Shopping Search Marketing | Top News

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About The Author: is a Contributing Editor at Search Engine Land. He writes a personal blog Screenwerk, about SoLoMo issues and connecting the dots between online and offline. He also posts at Internet2Go, which is focused on the mobile Internet. Follow him @gsterling.

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  • http://www.rimmkaufman.com George Michie

    Hi Greg, reposting my comment on your personal blog…

    I’ve yet to see anyone do a careful study on this topic. The six to one, seven to one, ten to one numbers are grossly misleading. They’re misleading because the vast majority (all?) of this effect is occurring off of brand search. People go to store locator pages, the go to look at store hours, they go to look for coupons before they walk out the door. The ads they’re clicking on are the brand ads for these companies. Absent those ads most of those folks would probably find the website anyway. Moreover, since brand ads are at the top of the page already, there are no actions to take to get more.

    The incremental value of search advertising in almost entirely on the non-brand side. That’s where creative, landing page design, promotions, and bid management can generate more or less incremental revenue for a company within their ROI constraints.

    Advertisers who see these types of studies are likely to be mislead into believing that they’re getting 6 times the incremental value they see online from paid search, and that simply isn’t the case. I wish it were so, but it isn’t.

    A careful study would include only non-brand search and would identify whether the person who clicked on an ad from advertiser X (to do product research, check out reviews whatever) made an offline purchase FROM advertiser X. If advertiser X drove a sale to advertiser Y, that shouldn’t really count, right?

    When will someone do THAT study?

  • http://www.rimmkaufman.com George Michie

    Thanks for the postscript, Greg. Glad they’re going to revisit that question.

    Two follow up points: The fact that 40%-50% are new customers is meaningless. People search for your brand because they’ve seen TV ads, print ads, or had friends rave about those brands. They searched for your brand for a reason that doesn’t have anything to do with the brand ad which shows up AFTER they’ve searched. Second, every advertiser’s brand ad is at the top of the page.

    Interesting to see what a more careful study reveals, but I’m betting we hear crickets because the results don’t tell the story interested parties want to tell.

  • http://www.thesmallbusinessplaybook.com/ GaryShouldis

    Nice point about using brands for the research George. I work with many local small business owners and if they are unfamiliar with internet marketing, they are very skeptical. I think it’s from years of getting empty promises from newspaper and direct mail marketers. This will be a nice article to at least show them that not only the paid search advertising does work, bu that it can be tracked in a way that is impossible for most offline advertising venues.

  • http://www.wouterkiel.nl Wouter Kiel

    Won’t the use of coupons skew the data? Those are powerful incentives to actually go into an offline store.

  • Benoit Arson

    I agree with Wouter Kiel, especially if the coupon is only valid in-store.
    I think the title of the study should be “Coupons displayed on paid-search ads drive $6 In Local Sales For Every $1 In Online Sales “.

  • Winooski

    Yeah, we’d need to know a little bit about the methodology, especially whether the searches were for merchant brand names or for non-brand keywords. (I’m assuming it was a straight A/B test where each ad viewer had a 50% chance of seeing the ad that led to offline-redeemable coupons vs. seeing the ad that led to an ecommerce site.)

    But even if we find the study only used brand names, that’s still valuable to know…it’s just not as generalizable a fact as is implied by the headline “Paid Search Drives $6 In Local Sales For Every $1 In Online Sales”.

  • http://mattlillig.blogspot.com Matt Lillig

    This is a big eye opener for retailers as this study shows that online incentives (such as coupons) used in search are very effective at boosting offline foot traffic and sales.

    With printable coupons and mobile coupons driving an average redemption rate of 10%-20% and searches for coupons online at near record levels, the need is there to attribute the redeemed coupon back to the online ad it was referred from.

    Even more important in the near future will be the need to attribute ads via a mobile coupon redemption. “The total redemption value of mobile coupons globally by 2016″ will be $43B! (according to a 2011 Juniper Research report). Also, “Total mobile coupon spending in the US” will hit $6.5B by 2014 (according to a 2010 Borrell Associates report).

    Many retailers are already taking advantage of RevTrax’s technology giving them a leg up on their competition.

  • uribreitman

    It’ll be nice to see the actual report (PDF?) in order to understand the pig picture. Couldn’t find it on the RevTrax website.

  • http://mattlillig.blogspot.com Matt Lillig

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