Comping COVID

Comping Covid
Making Sense of Volatile 2020 Performance in Paid Search
There’s no question that 2021 will be a strange year for advertisers; that’s essentially baked into the cake when you’re ‘comping’ a year as aberrant as 2020.
There’s no question that 2021 will be a strange year for advertisers; that’s essentially baked into the cake when you’re ‘comping’ a year as aberrant as 2020. Revenue growth tended to vary widely by industry in 2020, primarily determined by whether COVID-19 policy, and subsequent changes in user behavior, affected it positively (home goods) or negatively (air travel). But how can one measure the efficacy of one’s paid search program when revenue growth is so clearly driven by events beyond one’s control?
In many ways, the emphasis on continuous year-over-year revenue growth was a luxury of the longest period of economic expansion in U.S. history—a period in which (unsurprisingly) consumer debt also saw a rapid expansion. In this economic environment, consistent year-over-year revenue growth became normalized for many eCommerce retailers, even those who made missteps that might have been fatal in other circumstances.
But 2020 was a year in which even impeccably run accounts could see revenue contraction if they were positioned in a hard-hit industry. Conversely, some mediocre digital programs grew considerably due to external factors favoring their vertical. In this unusual state of affairs, evaluating paid search performance exclusively in terms of revenue growth paints a misleading picture of both the 2020 effort and the current health status of your Google Ads account. One risk is that accounts experiencing exceptional 2020 growth might be papering over significant issues that will come to the fore when the winds inevitably turn.
With such rapid swings of (vertical-dependent) fortune, we need to bring in additional context to understand whether we’re really making progress. Below are a few considerations that will be important to evaluating paid search performance in 2021—especially for advertisers who saw big changes, both positive and negative, in 2020.
Analyze Changes in ROAS Variation
Reduced year-over-year return on ad spend (ROAS) variation, both within your Google Ads account and across time, can be considered evidence of improved account management. Theoretically, the closer and more consistently performance is managed toward your ROAS target across time, the more revenue is generated while remaining within the constraints of your efficiency target.
Some variation is inevitable, given constantly changing auctions and user behavior. This is the case whether you’re managing bids manually, via bid automation, or a combination of the two. Even with predictive features like ‘auction-time bidding’ that use contextual signals to set unique bids at each auction, algorithmic bidding models are simply not sophisticated or data-rich enough to be 100% accurate. But large discrepancies in ROAS represent opportunities for increased efficiency, i.e., instances in which ad spend can be reallocated for better return.
For example, suppose you have a non-brand ROAS target of 3.0, with Category A returning 2.0 while Category B is achieving 4.0. Cutting ad spend from A and redirecting it to B will increase revenue, maximizing revenue within your definition cross-category efficiency target.
The same is true concerning performance across time. If you spent $100K in both June and July, but June returned $200K while July returned $400K, your budget allocation was inefficient, i.e., you’d have generated incremental revenue by cutting from the former and reallocating to the latter, ceteris paribus.
Reduced month-to-month ROAS variation versus the comp year can provide evidence of improved bid management, whether that’s in terms of strategy, execution, or attentiveness—even in an environment of contracting impressions, clicks, and revenue. Alternatively, if ROAS variation increased, it can represent a missed opportunity.
For example, a hypothetical advertiser in the home goods vertical might have experienced a significant bump in conversion rate in May of 2020, but failed to adapt bids accordingly due to inattention. When they finally picked up on the trend in July, they over-corrected, pushing ROAS well below the stated target.
ROAS Deviation from Target, by Month
2020
2019
Even though revenue grew compared to the prior year, significant revenue was left on the table due to poor execution. The same logic also applies to reduced ROAS variation across categories, assuming their margins, strategic importance to the business, and similar factors are the same. Reviewing ROAS variation by month, category, and a host of other segments can help growing advertisers evaluate whether they truly improved in 2020, or the degree to which they were merely the beneficiaries of favorable vertical trends.
While we’ve focused on eCommerce above, similar considerations will apply to lead generation advertisers with respect to cost-per-acquisition (CPA).
Review Auction Insights Reports
Google’s Auction Insights reports are one of the most powerful diagnostic tools available to paid search advertisers. By providing competitor impression share data at the account, campaign, ad group, keyword, and even SKU level—depending on how you structure your Google Shopping campaigns—Auction Insights can help you flesh out the structure of your competitive landscape, and in some cases tie back changes in performance to the increased (or diminished) prominence of competitors.
The importance of these reports was highlighted in 2019 as Amazon made a sustained push in Google Shopping that affected nearly every major eCommerce vertical. The increase in impression share—sometimes by as much as 50% year-over-year in verticals like home goods and apparel—was made all the more painful by the fact that Google Shopping had become a key source of ad revenue for retailers.
Store display name | Impression share ↓ | Overlap rate | Outranking share |
---|---|---|---|
Amazon.com | 63.01% | 45.61% | 18.46% |
Lowe’s | 33.96% | 22.03% | 19.61% |
Best Buy | 24.34% | 11.61% | 20.33% |
But while Amazon weighed heavily on advertisers in 2019, the reverse happened in March 2020 as Amazon left the auction environment due to fulfillment issues. While Amazon did reemerge on Google (and Bing) in June 2020, we have yet to see them re-adopt the aggressive posture of 2019, though this certainly isn’t something to rule out in 2021.
COVID-19 and the consequent public policy response led to different effects in different verticals. But within a given vertical, certain advertisers were better positioned to ride out or take advantage of those effects. For example, an advertiser with a large brick-and-mortar presence might have dramatically increased online advertising budgets to mitigate the lost store traffic. Such an advertiser might greatly increase impression share, putting pressure on other advertisers in the auctions for that vertical.
But whether one could engage in this strategy would largely have been a matter of one’s cash position. If cash was low and access to credit not forthcoming, the loss of cash flow from B&M operations might be a drag on digital, as the affected retailer is required to cut ad spend to remain viable. All else being equal, this would mean a more favorable auction environment for remaining competitors if the retailer had previously been a major presence in auctions.
Uncovering changes in position among vertical competitors is vital, but untangling the causal network can be challenging, especially as the shifts are often not as stark as those mentioned above. And in some cases, the limitations of these reports—particularly for Google Shopping—make it difficult to find definitive explanations for performance changes.
The cases above are primarily important because the actions of some advertisers, as expressed in the Auction Insights data, can help explain the performance of other advertisers in the same auction environment, thus enabling them to contextualize periods of extreme growth or contraction as were seen in 2020, and will likely be seen this year.
Rising Impression Share, Falling Impressions
Impression share can be useful for identifying changes in competition, but increasing year-over-year impression share isn’t necessarily an indication that an advertiser’s Google Ads account is better managed than the year prior. It could just mean that an advertiser is spending a lot more, or that a primary competitor is spending a lot less.
And while keeping tabs on competitors helps contextualize performance and inform a coherent response (e.g., one might decide to lower ROAS targets in order to temporarily maintain impression share), impression share data plays another crucial role in evaluating performance in the COVID-19 era: evidencing growth or contraction of one’s vertical.
In 2020, many advertisers saw increased impression share in conjunction with a decrease in total impressions. Absent significant account restructuring that would render year-over-year data incomparable, this is a key indication of a declining market.
Impressions
Impressions
Expanding impression share in a contracting market should still be considered a paid search win—though the degree it is a win will depend in large part on whether this was due to better management or the bad luck of a competitor forced to back out of the auction (see above). In evaluating the extent of external factors in driving year-over-year performance, one should take into account data relating to each section above. Consider these two examples at completely opposite poles:
Advertiser 1: Challenged with a declining market and aggressive primary competitor, but has been able to expand impressions and reduce ROAS variation (improve efficiency).
Advertiser 2: Benefits from both a rapidly expanding market and the timely exit of a major competitor, but hasn’t expanded impression share or improved efficiency.
ROAS Variation | Primary Competitor Share | Advertiser Impression Share | Total Impressions | Revenue | |
---|---|---|---|---|---|
Advertiser 1 | Decreased | Increased | Increased | Decreased | Decreased |
Advertiser 2 | Increased | Decreased | Decreased | Increased | Increased |
Obviously, there exist a multitude of examples between these two extremes, so in practice evaluating paid search performance will be much more complex. But the point of the above is to illustrate the misguidedness of a preoccupation with revenue growth—a point that applies acutely to the exceptional year we’re in, but will still be important even as the external environment normalizes.
For many advertisers, this year will be even more challenging than the last. Faced with a difficult comp period, many advertisers will point to an easing of lockdown policy as the cause of slowing demand. And they’ll be right, at least partially. But it’s time to take stock and engage in an honest appraisal of 2020 performance. By utilizing some of the data points above, advertisers can uncover account weaknesses and inefficiencies that might not have been apparent in verticals that saw increased demand. With a better understanding of your 2020 growth story, you’ll be better positioned for a successful 2021.

Eight Oh Two Marketing is a boutique, search-marketing agency for enterprise. As the VP of Digital Advertising, Dan Pietrucha is an industry veteran. With degrees in commerce, finance and philosophy, Dan takes an analytical approach to any challenge, and you’ll often find him knee-deep in projection models and pivot tables. Click here to learn more about Eight Oh Two, our methodology and our team.
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