Q1 2014

04 PAID SEARCH

03 ExECutIvE SummARy

14 ORGANIC SEARCH & SOCIAL

19 COmPARISON SHOPPING ENGINES

22 DISPLAy ADvERtISING

25 muLtI-CHANNEL

27 ABOut RKG & mEtHODOLOGy

tABLE OF CONtENtS

3

PAID SEARCH

• Googlepaidsearchspendinggrew17%Y/YinQ1,asmalldecelerationfrom19%growthinQ4.Paidclickswereup10%,whileCPCsincreased6%.

• PaidsearchspendingonBingAds,whichincludesBingandYahoo,alsogrew17%Y/Y.Paidclicksrose16%,whileCPCswerejust1%higher.

• Among retailers, Product ListingAds (PLAs)generated29%of totalGooglepaid search clicks in thequarterandnearlyhalfofnon-brandGooglepaidsearchclicks.ROIforPLAswas14%betterthanthatforcomparabletextads.

• BingProductAdsshowed improvement inQ1andcontributed12%ofparticipatingadvertisers’non-brandrevenuefromBingAds.

• Mobilegenerated36%ofpaidsearchclicks,withthatfiguresplitfairlyevenlybetweensmartphonesandtablets.Smartphonesaccountedforjust7%ofspendthough,comparedto20%fortablets.

• AccordingtoGoogle’sconversiontrackingdataandestimates,cross-deviceconversionsamountto20%ofconversionsthatGoogleattributestosmartphonesforRKGclients,butjust7%ofconversionsacrossalldevicetypes.

ORGANIC SEARCH & SOCIAL

• Organicsearchproduced30%ofsitevisitsinQ12014,downfrom33%ayearearlier.Googledrove82%oftotalU.S.organicsearchvisitsand87%ofmobilesearchvisits.

• Mobilegenerated31%oforganic searchvisits inQ1.The iPadand iPhoneeachdrovemoreorganicsearchvolumethanallAndroiddevicescombined.

• NotProvidedquerysharehasremainedstablesinceOctoberof2013andnowstandsatanaverageof85%ofGooglesearchvisits.

• Facebookgenerated54%ofsocialmediareferralsinQ1.Pinteresthasshownrapidgrowth,butwithawiderangeofinfluencefromsitetosite.Forthetopquartile,Pinterestgenerated47%ofsocialreferrals,butforthebottomquartilethatfigurewasjust3%.

• Mobiledevicesaccountedfor37%ofsocialmediareferralsinQ1,upfrom22%ayearearlier.

COmPARISON SHOPPING ENGINES

• AmongadvertisersrunningbothAmazonProductAdsandGooglePLAs,RKGfoundProductAdsCPCsrunning 31% higher, due largely to Amazonmaintaining its rate card fromQ4 toQ1. Consequently,ProductAdsvolumesufferedincomparison.

• Nextag’sshareofCSEspendingdeclinedto2%inQ1thisyear,from13%ayearearlier.EngineswithmoreflexiblebiddingsystemslikePriceGrabberandtheeBayCommerceNetworksawgains.

DISPLAy ADvERtISING

• WhilerevenueperclickisnearlyidenticalbetweenFacebookExchange(FBX)adsandotherdisplayads,CPCremains33%loweronFacebook,resultinginsuperiorROI.

• ForadvertisersactivelyadvertisingontheGoogleDisplayNetwork(GDN)andrunningAdWordspaidsearchads,GDNaccountedfor6%oftotalGooglespending.

muLtI-CHANNEL

• Lasttouchattributionmodelsshowaffiliatesaccountingformorethan15%ofrevenueinQ1,upfrom11%ayearearlier.Emailcontinuestoshowyear-over-yeardeclinesinlasttouchrevenueshare,likelytheresultofmobileemailcheckingandtherelegationofmarketingemailstoapromotiontabinGmail’stabsystem.

ExECutIvE SummARy

PAID SEARCHSinceourlastreport,twoofthebiggeststoriesinpaidsearchthathavepiquedmarketers’ interesthavedonesomorefortheirsymbolismthananysubstantive impacts they will have in the nearterm. InFebruary, Yahooannounced itsGeminiprogram, which is nowmigratingmobile searchad traffic away from the Bing Ads platform. InthefirstquarterwefoundmobileBingAdstrafficmadeupalittleover4%ofU.S.advertisers’paidsearchclicks.WiththattrafficsplitbetweenYahooandBing,onlyabout4%of searchclickswillbeaffectedbythischangeandasmallerpercentageofsearchadrevenues.

In early April, Google confirmed that it will nolonger be passing raw user search queries toadvertisers via the referring URL, effectivelybringingNotProvidedtopaidsearch.Whilethischange will hinder some query-based keywordandnegativeresearch,itwillnotimpactkeywordreportingorbidding.WhileNotProvideddealtaheavy blow to organic search analytics, for paidsearchitwillbeonlyarelativenuisance.

Overthefollowingpageswe’llhighlightsomeofthemoremeaningfulissuesaffectingpaidsearchtrendsincludingthecontinuinggrowthofproductads and mobile, as well as Google’s EnhancedCampaignsmodelandadvertisers’responsetoit.

PAID SEARCH 5

total Paid Search Spending Rises 17% in Q1Paid search spending growth got offto a fairly sluggish start in Q1, butclosed strongly with ad spend up17% Y/Y for the full quarter on 11%higher clicks and 6% higher cost perclick(CPC).Thisintra-quartertrendingpointstosomeresidualimpactsofanaggressive Q4 holiday push amongretailers.

Overall U.S. Paid Search Trends

ClicksAdSpend CPC

+6%

RelativetoQ12013

+11%+17%

+75%

+50%

+25%

2013-Q1

-25%

2013-Q42012-Q4 2013-Q1 2013-Q2 2013-Q3 2014-Q1BASELINE

Google Paid Search Spending Growth Decelerates SlightlyAs the dominant player in the U.S.search market, Google’s growthtrendsmirrortheoverallfiguresabovewith spending up 17% Y/Y, clicks up10% and CPCs up 6%. In Q4 2013,RKG foundGoogle spending growthat 19% Y/Y, so this marked a slightdeceleration.FromQ4toQ1wesawspendingdecline27%,whichistypicalof theseasonalityweseeamongourretail-leaningclientsample.

Google Overall U.S. Paid Search TrendsRelativetoQ12013

ClicksAdSpend CPC

+6%+10%+17%

+75%

+50%

+25%

2013-Q1

-25%

2013-Q42012-Q4 2013-Q1 2013-Q2 2013-Q3 2014-Q1BASELINE

Bing Ads Growth Returns to Industry Average After Huge 2013 GainsThroughout 2013, RKG found BingAds spending growth reaching twoto three times that ofGoogle levels.Now that we are running up againstthosestrongcomps,weseeBingAdsgrowth falling back in line with theindustryoverallwithspendingup17%Y/Y on 16% higher click volume and1%higherCPCs.

Bing Ads Overall U.S. Paid Search TrendsRelativetoQ12013

+75%

+50%

+25%

2013-Q1

-25%

2013-Q42012-Q4 2013-Q1 2013-Q2 2013-Q3 2014-Q1

ClicksAdSpend CPC

+1%

+16%+17%

BASELINE

PAID SEARCH 6

Google Non-Brand Spending Growth Outpaces Overall LevelsFor more competitive, non-brandtraffic, including Product Listing Ads(PLAs),Google spendinggrowthwas18%Y/YinQ1,withclicksup8%andCPCsup10%.Lowerspendinggrowthon brand traffic depressed overallgrowth, asbrandCPCs fell 9%, likelytiedtoAdRankchangeslastOctober.

Google Non-Brand U.S. Paid Search TrendsRelativetoQ12013

+75%

+50%

+25%

2013-Q1

-25%

2013-Q42012-Q4 2013-Q1 2013-Q2 2013-Q3 2014-Q1

ClicksAdSpend CPC

+8%+10%+18%

BASELINE

Bing Ads Non-Brand Spending Growth at 22%SimilartoresultsonGoogle,spendinggrowthonBingAdswas stronger fornon-brand traffic,where click volumeincreased14%Y/Y,CPCsincreased7%and ad spend increased 22%. WhileCPCs forBingAdsbrand traffichavefallensharplyinthepastyear,includinga 14% Y/Y decline in Q1, Bing Ads’brandCPCs remainwellabove thoseforGoogle.

Bing Non-Brand U.S. Paid Search TrendsRelativetoQ12013

+75%

+50%

+25%

2013-Q1

-25%

2013-Q42012-Q4 2013-Q1 2013-Q2 2013-Q3 2014-Q1

ClicksAdSpend CPC

+7%+14%+22%

BASELINE

Product Ads Driving Bulk of Paid Search GrowthImage-based product ads, includingGoogle’s Product Listing Ads (PLAs)format and Bing’s Product Ads aredrivingthebulkofoverallpaidsearchgrowth across theRKGclient samplewithadspendup69%Y/Yandclicksup51%.Bycomparison,textadspendinggrowthwasjust6%withclicksup4%.

Overall U.S. Paid Search Growth by FormatQ1 2014

75%

50%

25%

0%

TextAdsPLAs/ProductAds

AdSpend Clicks CPC

PAID SEARCH 7

PLAs Generate 29% of Google Paid Search Clicks for RetailersAmong retailers using the format,PLAstooksharefromGoogletextadsat a faster rate in Q1 2014. Overall,PLAsgenerated29%ofGooglepaidsearchclicksforretailers,andhalfofallnon-brand clicks. Google gave PLAsgreaterprominence inthequarterbyshowingthemabovethemainsearchresults, instead of on the right rail,morefrequently.

PLA Share of Google Paid Search ClicksAggregateResults-U.S.Retail

+29%

+50%

60%

40%

30%

20%

0%2013-Q42012-Q4 2013-Q1 2013-Q2 2013-Q3 2014-Q12012-Q2 2013-Q3

50%

10%

Non-Brand

Overall

PLA ROI Still 14% Better than Comparable Non-Brand text AdsSuggesting there may still be roomfor PLA CPCs to increase, ROI forthe formatwas 14%higher than thatfor non-brand text ads in Q1. Click-through rates for PLAs were morethandoublethosefornon-brandtextads,whileconversionrateswere50%higher for themedianretailclientweanalyzed.

PLA CPCs Edge Down Compared to text Ads in Q1, But trending Higher Over Long-termAgaincomparedtonon-brandtextadsamongretailsites,PLACPCswere8%higher than those for the traditionaltextformat.Thatwasdownfroma13%advantageinQ42013,butPLACPCshaveexhibitedastrongupwardtrendover the last twoyearsasadvertisersexploittheROIadvantageofPLAs.

Google PLA CPC vs Non-Brand Text AdsMedianSiteResults-U.S.Retail+25%

Non-BrandTextAds

-25%

2013-Q42012-Q4 2013-Q1 2013-Q2 2013-Q3 2014-Q12012-Q2 2012-Q3

+8%

BASELINE

PLA Performance vs Text AdsMedianSiteResults-U.S.Retail+150%

+50%

TextAds

-100%

+100%

-50%

PLAsvsNon-BrandTextAdsPLAsvsOverallTextAds

CPC CTR ROI Conv.Rate AOV

BASELINE

64%

8% 24%

134%

-56%

14%

50%

-16% -17%-11%

PAID SEARCH 8

PLAs Nearly 60% of Google Paid Search Clicks for Consumer Electronics RetailersWecontinuetoseeawiderangeinPLAs’shareofnon-brandtrafficacrossretailsub-industries,buttheformatisa significantcontributorevenat thelowerendofthespectrum.AtypicalApparel retailer generated 32% oftheircompetitiveGoogletrafficfromPLAs, while the median ConsumerElectronicsretailergenerated58%.

PLA Share of Non-Brand Google Paid Search ClicksMedianSiteResults-U.S.RetailQ12014

Flowers&Gifts

Cars&Auto

Health&Beauty

Apparel SportingGoods

Books Home&Garden

ConsumerElectronics

40%

0%

60%

20%

Bing Product Ads make Strides in Q1, Contribute 12% of Non-Brand RevenueJust out of beta testing at theend of the quarter, Bing ProductAds accounted for 12% of non-brand Bing Ads revenue amongparticipants in the program. Thatis a significant improvement overthe previous quarter when ProductAds contributed 8% of non-brandrevenueatalowerROI.

Bing Ads — Product Ads Share of Non-BrandMedianSiteResults-U.S.Retail

2013-Q4 2014-Q1

10%

0%

15%

5%

AdSpend AdClicks Revenue

Bing Product Ads Revenue Per Click up Sharply Compared to text AdsWhileProductAds’shareofBingAdsclicksonlyimprovedslightlyfromQ4toQ1,amuchimprovedrevenueperclick(RPC)drovethestrongrevenuegains seen above. In Q4 2013, thenascent format delivered an RPCthatwas 22% lower thannon-brandtextad levels. InQ1,BingAdsRPCrosetosurpassnon-brandtextadsinvalueby79%.

Bing Ads — Product Ads vs Non-Brand Text AdsMedianSiteResults-U.S.RetailQ12014

CPC RPC CTR

+50%

+100%

-50%

TextAdsBASELINE

Non-Brand -3%

79%

-2%

PAID SEARCH 9

Google Share of u.S. Paid Search market Edging Back upWhileBingAdsmadestridesintakingpaidsearchspendandclicksharefromGoogleinlate2012andearly2013,wehaveseenabitofareversalinrecentquarters.AmongourQ1clientsample,Google’sshareofU.S.paidsearchadspendwas83%,upatenthofapointfromQ4,whileGoogle’sshareofpaidsearchclickswas82%inQ1,upeighttenthsofapoint.

Google Share of U.S. Paid Search

84%

83%

82%

86%

2013-Q42012-Q4 2013-Q1 2013-Q2 2013-Q3 2014-Q1

83%

85%

82%

AdSpend Clicks

81%

Google Generating 33% Higher Revenue Per Click for Advertisers than Bing AdsLooking at non-brand ads, includingPLAs and Product Ads, Googlegenerateda 33%higher revenueperclick than Bing Ads for the medianadvertiser in Q1. Advertiser ROI onGoogle was 12% higher, thanks inlarge part to PLAs and the relativeimmaturityofthatauction.

Non-Brand: Google Metrics vs Bing AdsMedianSiteResults-Q12014

+10%

+40%

+20%

-10%

+30%

Bing Ads Closer to Parity with Google on Brand Ads, Except for CPCsWeseemoresimilaritybetweenBingAds and Google when looking atconversion metrics for brand traffic.However, brand CPCs on Googlestill run nearly 40% lower, leading toa much higher ROI and suggestingthat advertisers receive a greateralgorithmic ranking advantage fortheirbrandtermsonGoogle.

Brand: Google Metrics vs Bing AdsMedianSiteResults-Q12014

50%

100%

-50%

Non-BrandBASELINE

BingAds

RPC CPC ROI AOV CR

12%

35%

22%

33%

Non-BrandBASELINE

BingAds 9%

-39%

90%

2% 11%

RPC CPC ROI AOV CR

2%

PAID SEARCH 10

0%

Smartphones and tablets Each Generate 18% of Paid Search ClicksWithashareof18%each,smartphonesandtabletscombinedtogenerate36%of paid search clicks in Q1, up from32% in Q4 2013. Smartphones havegainedmoreshareoverthepastyearthantablets,6%vs5%,despitemanyRKG programs reducing smartphonebids to improve ROI over that timeframe.

Mobile Share of Paid Search Clicks

20%

10%

40%

30%

Tablet Smartphone

18%

18%

With Lower CPCs, Smartphones Account for Just 7% of Paid Search Ad SpendBetween smartphones and tablets,27% of paid search ad spend wasmobile in Q1, but smartphones onlyaccounted for 7% of spend despitetheir 18% share of clicks. This is areflection of ROI-focused advertisersaccounting for the disparity inconversionperformanceacrossdeviceclasses.

Mobile Share of Paid Search Ad SpendTablet Smartphone

20%

7%

20%

10%

30%

0%

38% of Google Paid Search Clicks are mobile, 25% for Bing AdsGoogle continues to hold a relativeadvantage in monetizing its mobiletraffic with 38% of its paid clickscomingfromsmartphonesandtabletsinQ1,comparedto25%forBingAds.Google gained ground in this areafromquartertoquarterwithitsmobileshareup4%versus1%forBingAds.

Mobile Click Share by Engine

20%

10%

40%

30%

0%

Google BingAds

Combined Smartphone Tablet

PAID SEARCH 11

Google Smartphone CPCs Slip to 35% of Desktop LevelsAs noted earlier in this report, RKGadvertisers have moved to improvesmartphone ROI by reducingtheir CPCs for smartphone clicks.Smartphone CPCs have fallen fromnearly 60% of desktop levels in Q1of2013 to35%thispastquarter.Therecentresultsareabetterreflectionofthevaluebeingdrivenbysmartphonetraffic.

Google Mobile CPC vs Desktop120%

60%

40%

20%

80%

100%

0%

98%

35%

Desktop

TabletSmartphone

2013-Q42012-Q4 2013-Q1 2013-Q2 2013-Q3 2014-Q1

Smartphone Revenue Per Click trending Higher Post-Enhanced CampaignsForsmartphoneCPCstoevercatchorsurpassdesktoplevels,advertiserswillneedtoseethevalueofsmartphoneclicks improve. At least in termsof direct response revenues, weare seeing progress in this area assmartphonerevenueperclickhasrisenfrom23%ofdesktoplevelsinQ12013to34%inQ12014.EnhancedCampaignsand RKG’s bidding platform havehelpedadvertisersbettercapturetop-performingmobiletraffic.

Revenue Per Click vs Desktop120%

60%

40%

20%

80%

100%

0%

84%

34%

Desktop

2013-Q42013-Q1 2013-Q2 2013-Q3 2014-Q1

TabletSmartphone

Desktop Clicks Down 3% y/y, Smartphone Clicks up 64%Despite RKG advertisers reducingsmartphone CPCs 21% year-over-year to bring ROI more in line withdesktops, smartphone click growthwas 64% in Q1, surpassing tablets,whichsawa10% increase inCPC.Atthe same time, desktop click volumewas down 3% Y/Y, although spendrose9%duetohigherCPCs.Google’s

Year-Over-Year Growth by Device Class

Smartphone

Desktop

Tablet

80%

20%

0%

-20%

40%

60%

AdSpend Clicks CPC

EnhancedCampaignsmodelhashelpeddrivesmartphonevolumegrowthbymakingiteasiertoscalemobilekeywordcoverageandbiddingsegmentation.

9%

-3%

29%

72%64%

56%

13%

-21%

10%

PAID SEARCH 12

iPad Share of tablet traffic Slips to 80%, Windows Devices in Distant Second PlaceThough still far and away the largesttraffic driver among tablets, the iPadsawitsshareoftablettrafficslippost-holiday from 84% to 80%. Touch-compatible Windows computers,including the Surface, have quicklytakenthenumbertwospotwithover5%oftrafficinQ1.TheKindleFireandGalaxy Tab lines each generated 4%of tablet clicks, while Nexus tabletsaccountedfor1.2%oftabletclicks.

2014-Q12013-Q4

2013-Q22013-Q12012-Q4

2013-Q3

OtherTablets

75%

50%

25%

0%

100%

iPad OtherTablets

4%

3%

2%

0%

5%

1%

WindowsTablet

OtherAndroid

Kindle GalaxyTablet

NexusTablet

6%

Google Estimates Suggest Cross-Device Accounts for 20% of Smartphone ConversionsAccording to Google’s conversiontracking data and estimates,smartphones accounted for anaverage of just 10% of single deviceconversions in Q1, but initiated athird of all cross-device conversions.Cross-device conversions amount to20%ofconversionsGoogleattributesto smartphones, but just 7% ofconversionsacrossalldevicetypes.

Windows tablets Remain Best Performing

Looking at revenue per click acrossdevices, we found that Windowstablets were the best performing foradvertisers in Q1, generating a 13%higherrevenueperclickthandesktop.Ayearearlierthough,Windowstabletsproduced a 42% higher RPC thandesktops,suggestingthattherewasastrongearlyadoptereffectthatisnowwearingoff.

Revenue Per Click by Device vs DesktopQ1 2014

100%

80%

60%

20%

0%

40%

120%

Desktop

Windows

Tablet

Desktop

iPad

Other

Tablets

OtherAnd

roid

Tablets

Nex

usTablet

iPho

ne

KindleFire

And

roid

Phone

Other

Dev

ices

Windows

Phone

Other

Phone

s

Devices, But Gap Narrows

% of Est. Cross-Device Conversions

% of Est. Single-Device Conversions

Cross-Device % ofEst. Total Conversions

DesktopSingle-DeviceCross-Device

TabletSingle-DeviceCross-Device

SmartphoneSingle-DeviceCross-Device

72%

17%

10%

53%

14%

33%

6%

20%

TabletConversions

5% DesktopConversions

SmartphoneConversions

PAID SEARCH 13

Not Provided Quickly Jumps to 45% of AdWords Search ClicksOnApril9th,GoogleannouncedthatitwouldsoonnolongerpassrawusersearchqueriestoAdWordsadvertisersvia referrer, effectively bringing NotProvidedtopaidsearch.Whileasmallpercentage of ad clicks did not passqueriespriortothischangeforotherreasons, Not Provided immediatelyreached37%ofGooglepaidclicksonthedayof the announcement. Overthe next several days, Not Providedsharehasbeensteadyatabout45%.

Not Provided Share of Google AdWordsPaid Search Traffic

Clicks from Safari users twice as valuable as an Average ClickAs Google’s Enhanced Campaignsmodelismakingiteasierforadvertisersto incorporate user context likegeography and device into biddingsegmentation, the searcher’s browserremains a strong predictor of trafficquality that does not have its ownbid modifier. In Q1, a Safari 7 usergenerated an average revenue perclickthatwasmorethantwiceashighas the overall average. Conversely,Internet Explorer 8 users had a 24%lowerthanaverageRPC.

Revenue Per Click by Desktop Browservs Overall Average

Exp

lorer10

Exp

lorer9

Exp

lorer8

Chrome31

Chrome32

Chrome33

Firefox25

Firefox26

Firefox27

Safari5

Safari6

Safari7

+125%

+100%

+50%

-25%

+25%

+75%

AverageBASELINE

Overall -24%16%

23%

11%

31% 29%

16%

44%

99%

119%

-9% 2%

50%

40%

20%

10%

30%

0%

4/1/20

14

4/13

/201

4

4/2/20

14

4/3/20

14

4/4/20

14

4/5/20

14

4/6/20

14

4/7/20

14

4/8/20

14

4/9/20

14

4/10

/201

4

4/11

/201

4

4/12

/201

4

45%

ORGANIC SEARCH & SOCIAL

Measuring organic search trends has been likeagameofWhac-A-Moleover the last coupleofyears.Asone issue impairingsiteowners’abilityto assess their data gets resolved, another onewill spring up. In Q1 2014, Yahoo.com begandefaulting to secure search, which resulted innearlyhalfofYahoosearchvisitsbeingrecordedas direct site visits from early January throughearlyFebruary.

Similar to an issue with Google searches ondevicesusing iOS6,Yahoo initiallydidnotpassany referrer information for its secure searches,making it impossible for analytics to determinethe source of the traffic.When Yahoo began topass referrers in early February, some analyticspackages,includingGoogleAnalytics,categorizedthevisitsasreferralsratherthanorganicsearch,anissuethatpersistsasofthiswriting.

WhiletheiOSissuereducedtheperceivedshareoforganicsearchvisitsasapercentageofallsitetrafficbynearly 4%at itspeak last year, Yahoo’ssecuresearchmoveaffectedabout1%ofsitevisitsonaverage.Thoughasmallpercentage,‘hidden’Yahoo searchesmay be the difference betweentotalorganicsearchvisitsbeingseenasgrowingordecliningyear-over-yearformanysites.

ORGANIC SEARCH & SOCIAL 15

Organic Search visit Share Stable at 30%, Despite yahoo Secure Search IssueIncluding RKG estimates for organicsearchvisitshiddenbyiOS6lastyear,wefindthatorganicsearchvisitsharehas been fairly stable from Q3 2013toQ12014atbetween30-31%.Overa longer window though, organicsearch visit share has slipped slightlyfrom33% in thefirstquarterof2013.TheperiodoverJanuaryandFebruarywhenYahoosecuresearchdidnotpassreferrers depresses the Q1 numbersslightly.

Organic SearchShare of All U.S. Site Visits

35%

30%

25%

0%

40%

2013-Q42012-Q4 2013-Q1 2013-Q2 2013-Q3 2014-Q1

OrganicRecorded OrganicActual

30%

Hidden yahoo Searches Skew Search Share trendsRKG finds that Google’s share oforganic search visits edged up onepercentage point from Q4 to Q1,while Yahoo’s share fell by the sameamount.Thesefiguresdonotattemptto account for the Yahoo searcheshiddenbysecuresearchovertheearlypart of the quarter. Doing so wouldproduceresultsshowinglittlechangefromquartertoquarter.

U.S. Organic Search Visit Share by Engine

75%

50%

25%

0%

100%

2013-Q42012-Q4 2013-Q1 2013-Q2 2013-Q3 2014-Q1

Google Yahoo OtherBing

yahoo Secure Search move Impacted 1% of All Site visitsThepointatwhichYahoo.combegandefaulting to secure search is quiteobvious when we look at a weeklytrendoftheshareoftrafficattributedtoYahooorganicsearch.OverthefirsttwoweeksinJanuary,Yahooorganic’smeasurable share of all site visitsdropped from 2.5% to 1.5%. Duringthe first week of February, Yahootrafficappears to reboundasa resultof referrers, now stripped of searchqueries,beingpassedagain.

Yahoo Organic SearchShare of All U.S. Site Visits

2%

1%

0%

3%

2013Dec1

Dec15

2014Jan1

Jan15

Feb1

Feb1

5Mar1

Mar15

Mar30

YAHOOSECURE

SEARCHBEGIN

S

ORGANIC SEARCH & SOCIAL 16

Google Continues to Hold Relative Advantage in mobile Search ShareWhile Google generates roughly81%oforganicsearchvisitsoverall, itcontinuestogenerateahigherportionof mobile search visits. In Q1 2014Googleaccountedfor87%ofmobileorganicsearchvisits,comparedto8%forYahooand5%forBing.

Share of U.S Mobile Organic Search by EngineQ1 2014

Google

Yahoo

Bing

87%

8%

5%

iPad and iPhone Each Drive more Organic Search visits than all Android Devices CombinedMobiledevicesaccountedfor31%oforganic search visits in Q1, up from24% a year earlier. iPad users drove12%of all search visits, compared to11%foriPhoneusersand8%forusersofallAndroiddevicescombined.

Mobile Share of U.S. Organic Search Visits35%

20%

10%

0%

30%

25%

15%

5%

Android iPhoneiPad Other

2013-Q42012-Q4 2013-Q1 2013-Q2 2013-Q3 2014-Q1

mobile’s Share of Bing traffic Doubles year-Over-year, Still Half that of Google, yahooIn Q1 2014, 16% of Bing organicsearch visits occurred on mobiledevices,doublethesamemetricfromayearearlier.Bycomparison,mobilewasamuchlargerportionoftrafficforGoogleandYahoo,whichsawmobileaccount for 33% and 36% of visits inQ1,respectively.

Share of Each Engine’s Traffic from Mobile

30%

20%

10%

0%

40%

2013-Q42012-Q4 2013-Q1 2013-Q2 2013-Q3 2014-Q1

Google YahooBing

ORGANIC SEARCH & SOCIAL 17

mobile Search Growth Offsetting Desktop DeclinesA 29% year-over-year increase inmobile organic search visits pushedoverall organic search growth intopositive territory inQ1.Organicvisitshidden by Yahoo’s move to securesearchdepressthesenumbersslightly.

Y/Y Growth in Organic Search VisitsQ1 2014

30%

20%

10%

0%Mobile All

Not Provided visit Share Steady at 85%TheshareofGoogleorganicsearchesthatdidnotpasssiteownerstheuser’srawsearchqueryhasbeenfairlysteadysinceOctober of 2013 and stands at85%. This Not Provided percentageaccelerated in Q3 of last year asGoogle pushedmore users andwebbrowsers to secure search. Queriesstill being passed have been biasedtowards certain web browsers anddevices,suchasSafariandAndroid.

Not Provided Share ofGoogle Organic Search Traffic

75%

50%

25%

0%

100%

FebMarJa

nAprMayJu

n

2013

JulAugSepOct

Dec

Nov

FebMarJa

nAprMayJu

n

2012

JulAugSepOct

Dec

Nov

FebMarJa

n

2014

Bounce Rates for mobile Search Remain 5% Higher than Desktop Bounce RatesThe average bounce rate for mobileorganic search traffic was 46% inQ12014 compared to 41% for desktoporganic search. The gap betweenthe two device classes has been apersistent one with this quarter’sresults mirroring performance fromtwoyearsearlier.

Mobile Overall

Organic Search Bounce RatesMobile vs Overall Q1 2014

40%

30%

20%

0%

50%

10%

ORGANIC SEARCH & SOCIAL 18

Social media Sites Contribute an Average of 1.5% of All Site visitsTheimportanceofsocialmediasitesastrafficreferrersremainshighlyvariablefromsitetosite,butonaveragewefindthatsocialsitesgenerated1.5%ofallsitevisitsinQ12014,aslightincreasefromQ42013.Atthehighend,wefindsomesitesgenerating10-15%oftheirtrafficfromsocial.

Social Share of All Site Visits

1.5%

1.0%

0.5%

0%

2.0%

2013-Q42012-Q4 2013-Q1 2013-Q2 2013-Q3 2014-Q1

Pinterest Generates 25% of Social Referrals on Average, But Impact Not ConsistentFacebook continues to be thedominant generator of social mediareferrals with a share of 54% in Q12014. Pinterest is very interestingthough,asithasshownrapidgrowth,particularly for retail sites. In Q1 wefound Pinterest generated 25% ofsocial media referrals on average,butwith a verywide rangeof resultsfromsitetosite.Forthetopquartile,Pinterest generated 47% of socialreferrals, but for the bottom quartilethatfigurewasjust3%.

Share of Social Media Referrals

Facebook

Reddit

Pinterest

Twitter

YouTube

Google+

LinkedIn

Other

54%

3%

25%

2%

3%

0.8% 12%0.4%

mobile Devices Account for 37% of Social media ReferralsWhile Facebook generated 53% ofitsQ42013 revenue frommobile,wefindthatmobileaccountedfor37%ofall social media referrals in Q1 2014and 35% of Facebook referrals. Thismay speak to the nature of the adsdriving Facebook’s mobile revenues,particularly mobile app install ads,which do not refer traffic to sitesdirectly.

Mobile Share of Social Media Referrals

2013-Q42012-Q4 2013-Q1 2013-Q2 2013-Q3 2014-Q1

30%

20%

10%

0%

40%37%

COMPARISON SHOPPING ENGINES

COMPARISON SHOPPING ENGINES 20

Amazon Product Ads See Biggest y/y Average CPC IncreaseWhile Amazon Product Ads, Nextagand Shopzilla all saw year-over-year increases in average CPC,PriceGrabber and eBay CommerceNetwork (ECN) CPCs held relativelysteady. The flexible bidding optionson these two engines have allowedadvertisers to keep CPCs the sameover time, while the other engines’more rigidbidsystemsand increasesinratecardminimumshaveresultedinsteadyCPCincreases.

CPC by Engine$0.70

$0.40

$0.20

$0Amazon

ProductAdsNexTag eBay

CommerceNetwork

Shopzilla-Bizrate

Other

2013-Q1 2014-Q1

PriceGrabber

$0.60

$0.50

$0.30

$0.10

Nextag Spend Share Nearly Gone, Down to 2% of CSE SpendThe declining value of Nextag traffichas further reduced spend share onthe engine, down from 13% in Q1of last year to 2% in Q1 this year.PriceGrabberandtheeBayCommerceNetworkbothsawincreasesinspendshare year-over-year as their flexiblebidding systems allow advertisersto adjust bids on low performingproducts rather than exclude themfromtheirfeedentirely.

Ad Spend Share by Engine40%

30%

20%

0%

10%

AmazonProductAds

NexTag eBayCommerceNetwork

Shopzilla-Bizrate

Other PriceGrabber

2013-Q1 2014-Q1

Advertisers Getting Less Revenue out of Nextag, Shopzilla y/yWhile advertisers generated lessrevenue from Shopzilla-Bizrate andNextag year over year, revenue fromthe eBay Commerce Network grew55%. The ECN continues to expandby attracting new partners whileprovidinghighvalueclicks.

PriceGrabber eBayCommerceNetwork

Shopzilla-Bizrate

NexTag AmazonProductAds

80%

20%

0%

-80%

-40%

Y/Y Q1 Same Site Revenue Growth

COMPARISON SHOPPING ENGINES 21

Amazon Product Ads Average CPC 31% Higher than Google PLAsAverage CPC for Amazon ProductAds went from running 18% lowerthan Google Product Listing Ads inQ4to31%higherinQ1.PLAaverageCPC decreased for most advertiserspost-holiday in response todecliningvalueandcompetition.Amazon’sratecards, on the other hand, remainedunchangedfromquartertoquarter.

Amazon Product Adsvs Google PLA CPC140%

80%

40%

0%

120%

100%

60%

20%

GooglePLA AmazonProductAds

Revenue from Google PLAs Now more than ten times that of Amazon Product AdsFor advertisers using both, AmazonProduct Ads produced just 9% ofthe revenue volume seenonGooglePLAs,downfrom11%inQ4,asPLAssaw relative traffic increases in Q1.Relative revenue contribution variessignificantly by industry as a resultof Amazon’s restrictions on somecategories such as Apparel, as wellas PLAs being larger for retail sub-industrieslikeHome&Garden.

Amazon Product Adsvs Google PLA Revenue

80%

40%

0%

120%

100%

60%

20%

GooglePLA AmazonProductAds

DISPLAY ADVERTISING

DISPLAY ADVERTISING 23

GDN Accounts for 6% of total Google SpendingForadvertisersactivelyadvertisingonthe Google Display Network, GDNspendis6%oftotalGooglespendingincludingAdWordstextadsandPLAs.ThemajorityofGDNspendisallocatedto remarketing and placement ads,while a small percentage goes tocontextualads.

Google Text Ad Spend vs GDN

GoogleTextAd&PLASpend

GDNSpend

80%

40%

0%

120%

100%

60%

20%

Ad Spend on the Facebook Exchange Dropped Significantly in Q1Following the holiday season,investment on the Facebook AdExchange dropped over 40%. Thisis due largely to seasonality withinthe retail sector and decreasedcompetitionassomeadvertiserswhoinvestedinthespaceovertheholidaysexitedoncedemanddieddown.

Facebook Exchange Ad Spend & CPC Q/Q

AdSpend CPC

80%

40%

0%

120%

100%

60%

20%

2013-Q4 2014-Q1

Advertisers Investing more Heavily in Placements and Retargeting than Contextual Ads on the GDNPlacementandretargetingadsaccountfor almost five timesmore spend ontheGDNthancontextualads.CPCisalsosignificantlyhigherforplacementand retargeting ads, as these clickstypicallycarrygreatervalue.

GDN Placements & Retargeting vs Contextual

AdSpend CPC

80%

40%

0%

120%

100%

60%

20%

Placements&Retargeting Contextual

DISPLAY ADVERTISING 24

Lower Average CPC on FBx Remains Key Performance DifferentiatorWhile revenue per click is nearlyidentical between FacebookExchange ads andotherdisplay ads,CPCremains33%loweronFacebook.This has resulted in superior ROI ontheFBXplatform,asthereisstillroomforcompetitiontodriveupthecostoftraffic.

Facebook Exchange vs Other Display

FBx Conversion Rate Higher, AOv Lower than Other DisplayWhile FBX ads offer a slightly higherconversion rate than other displayads, average order value on FBX is12% lower. Thismay be indicative ofthedemographicdifferencesbetweenFBXtrafficandclicksfromotherdisplaysources.

Facebook Exchange vs Other Display

most Advertisers Continuing to Pursue mixed Prospecting, Retargeting Display Strategy70%ofRKGadvertisersare targetingboth new and existing customers intheirdisplaystrategies,upfrom63%inQ4.Retargetingremainsmorepopularthan prospecting among those notusingamixedstrategy.

Percentage of RKG Clients’ Display Goals

CPC RevenuePerClick

80%

40%

0%

120%

100%

60%

20%

DisplayOverall FacebookExchange

ConversionRate AOV

80%

40%

0%

120%

100%

60%

20%

DisplayOverall FacebookExchange

70%

20%

10%Prospect&RetargetingRetargetingOnlyProspectingOnly

MULTI-CHANNEL

MULTI-CHANNEL 26

Affiliate Share of Last touch Revenue up y/y, Email DownLast touch attribution models showaffiliatesaccountingformorethan15%ofrevenueinQ1,upfrom11%lastyear.Email continues to show year-over-year declines in last touch revenueshare, likely the result of mobileemail checking and the relegationofmarketingemails to apromotion tabinGmail’stabsystem.

Revenue Share Among Marketing ChannelsLast Touch Attribution Model

Affiliate CSEs DisplayAd Email OrganicSearch

PaidSearch

Social

2013-Q1 2014-Q1

Organic and Paid Search Revenue Share Higher in First touch modelAs search engines are frequently thefirst stop in the conversion processfor consumers researching products,organic and paid search account formuchhigher sharesof revenueusinga first touch model rather than lasttouch. 45% less revenue is attributedtoaffiliatesusingfirsttouchinsteadoflasttouch.

Change in Q1 Revenue Contribution Moving from Last Touch to First Touch Attribution Model

Affiliate CSEs DisplayAd Email OrganicSearch

PaidSearch

Social

Online Customers usually Interact with Just One ChannelTheaverageordernowinvolvesmorethan four marketing touches, butthe vast majority of customers (76%)interact with just a single channel.Eventheadvertisersmostlikelytoseetheircustomers interactwithmultiplechannels see about 60% of ordersplaced after interactionwith just onechannel.

Marketing Channels Per Order

One

Two

Three

Four

Five+75.6%18.6%

4.4%

1.1%0.4%

25%

-50%

50%

0%

-25%

30%

0%

40%

20%

10%

RKG is a search and digital marketing agency that combinessuperior marketing talent with leading-edge technology tocreate the industry’smost effective data-driven digital marketingsolutions.RKGdrivesbusinesstoclientsbymaximizingafullrangeof opportunities including paid search, SEO, product listing ads,socialmedia,displayadvertisingandcomparisonshoppingenginemanagementservices.

Foundedin2003,RKGpartnerswithclientssuchasDrugstore.com,Express,HermanMiller,JonesGroupandUrbanOutfitters.In2013,AdvertisingAgerankedRKGthefastestgrowingsearchagency.Aprivately held company, RKG is headquartered in Charlottesville,VAwithoffices inSanFrancisco,CA,Bend,ORandBoston,MA.For more information visit www.rimmkaufman.com or follow thecompanyonTwitter@rimmkaufman.

ABOut RKG

mEtHODOLOGyFiguresarederivedfromsamplesofRKGclientswhohaveworkedwithRKGforeachrespectivemarketingchannel.Whereapplicable,thesesamplesarerestrictedtothoseclientswho1)havemaintainedactive programs with RKG for at least 19 months, 2) have notsignificantly changed their strategic objectivesorproductofferings,and3)meetaminimumadspendthreshold.Alltrendedfigurespresentedinthisreportrepresentsame-sitechangesoverthegiven time period. Unless otherwise specified,thedatapoints in this report arederived fromtheNorthAmericanmarketregion.

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