Brief:

• Facebook ad spend, excluding Instagram, fell 2% in Q1 from a year earlier, per a study by marketing agency Merkle. This is the first time Facebook ad spend has declined since Merkle began its annual Digital Marketing Report, which analyzes trends in search, display and social media advertising, in 2011.
• Instagram was a bright spot for Facebook, with a 44% jump in ad spend from a last year. The image-sharing platform accounted for 19% of the media spending on Facebook-owned platforms among marketers that placed ads on both platforms. Overall, paid social spend grew 24% from a year earlier, outpacing the 12% gain for traditional display advertising.
• Paid search spending continues to slow, with Google seeing a 16% decline from a year earlier and rivals Bing and Yahoo both falling 3%. Google Shopping again was a primary driver of click growth, as spend for the format jumped more than 40% year-over-year for the second straight quarter.

Insight:

Merkle's annual survey confirms other reports that estimate Facebook and Google's dominance in digital advertising has weakened somewhat, although the broader market is still growing as advertisers continue to shift their spending to mobile platforms. The percentage of ad clicks from computers fell to 5% during the period from 24% two years ago as mobile traffic grabbed a greater share, per Merkle.

The dip in Facebook's ad spend comes as advertisers shift their budgets to Instagram for paid social placements. In a response to this move — which comes in the wake of Facebook's continued privacy scandals and forthcoming pivot to privacy — Facebook has opened Instagram to marketers with a variety of features. Instagram last month began rolling out Checkout, a native feature that lets mobile users complete and track purchases without having to leave the app, and could help the company fend off Amazon as it continues to dominate e-commerce.

With that in mind, the report also confirms the growth of Amazon as a significant force in digital advertising as the e-commerce giant aims to monetize the massive amounts of data it collects about its customers. Amazon advertisers saw sales attributed to its Sponsored Products and Sponsored Brands ad formats more than double, with spend growing 19% and 77% for those formats, respectively. Sponsored Products accounted for 85% of all Amazon spend, with more than half of spend on the format coming from placements other than the top-of-search results, Merkle found.

For retailers in general, phones and tablets collectively produced 74% of Google search ad clicks in Q1 2019, an eight-point increase from a year earlier and the highest rate among the five industries that Merkle analyzed. Financial services saw the largest increase in the share of Google search ad clicks produced by mobile devices with 12-point jump to 72%, per Merkle.