By Alistair Barr
Google Inc. says it is doing a better job connecting purchases
in stores with ads the shoppers saw on smartphones, prompting some
advertisers to boost spending on mobile ads.
Hundreds of retailers in the U.S., Canada and Australia now see
regular reports on store visits that follow clicks on Google search
ads. A smaller group that includes Target Corp. and Home Depot
Inc., two of the largest U.S. retailers, get the purchase data.
"We know from Google's store-measurement data that our
mobile-search ads greatly influence in-store sales," said Kristi
Argyilan, a Target senior vice president.
She said Google data show people who have clicked on
mobile-search ads spend more in its stores than those who click on
desktop search ads. One-third of Target's mobile-search ads led to
a user visiting one of its stores during the 2014 holiday season,
she added.
The favorable reaction from advertisers could help Google tackle
a big challenge: the lower prices of mobile-search ads. Marketers
have been cool to mobile ads, because they think fewer users take
the trouble to complete purchases on phones. If Google can show
that many of these users later buy items in stores, that could lift
the prices of mobile ads, which tend to be about half the price of
desktop ads.
Digital-marketing agency Merkle RKG said its clients paid 23%
more for mobile-search ads on Google in the first quarter, compared
with a year earlier. On personal computers, prices for Merkle
clients rose 14%.
"This offline data is a big factor in Google's ability to change
the situation and close the gap between mobile-search ads and
desktop," said Mark Ballard, Merkle's director of research.
In an interview, Jerry Dischler, a product manager for Google's
largest ad business, said advertisers are spending more on mobile
because they see more impact in their stores.
"They were valuing offline at zero and now they are valuing it
at more than zero," he said.
For retailers, mobile ads may generate more revenue in stores
than in online purchases. Consulting firm Deloitte estimates that
28% of sales in physical stores, or $970 billion, were influenced
by mobile devices last year, up from 5% in 2012. By comparison, all
online sales last year totaled roughly $300 billion.
To connect store purchases to its ads, Google works with data
companies including Acxiom Corp., the Epsilon unit of Alliance Data
Systems Inc., and Oracle Corp.'s Datalogix.
Here is how it works: When a shopper clicks on a search ad,
small bits of software called cookies are placed on the phone's Web
browser. Acxiom's LiveRamp unit often can match the cookie to a
user's email account, which the user may have registered with other
websites that work with LiveRamp. Once that connection is made,
store purchases can be tied to these email addresses, and
associated account information.
Google also tracks how clicks on search ads lead to store
visits, through users who have agreed to share their location
through its mobile apps, such as Maps.
Facebook Inc., Google's biggest rival for online ads, has been
tapping similar data on store sales since 2012. Facebook has a big
advantage: it knows its users' identities. It can then match those
to customer accounts and email addresses stored by the data
companies.
In Google's case, the matching process is far from perfect.
Cookies don't work on mobile apps, and Apple Inc.'s Safari browser
automatically blocks most cookies. People familiar with the system
say the data companies can connect 15% to 20% of clicks on ads on
phones using Google's Android operating system to a customer
account; on Apple's iPhones, the match rate is even lower.
For many retailers, that is sufficient to show that phone ads
lead to purchases.
Home Depot said it has seen a "significant" number of store
transactions following clicks on search ads. The results "confirmed
our commitment" to search ads on smartphones, said Dave Abbott,
vice president of online marketing at Home Depot.
Write to Alistair Barr at alistair.barr@wsj.com
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