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New Data Points to Healthy Paid Search Market

15 October 2012 BY

This is a guest post by Pavitra Kumar, senior marketing manager at digital marketing software company, Kenshoo.

In a world full of bad economic news, our latest research shows that search marketers have many reasons to be positive: global paid search budgets have been rising with a growth rate of 24 per cent year-on-year (YoY).

These are numbers coming from the Global Search Advertising Trends Report which was released by Kenshoo last week. Below you will find a summary by Kenshoo’s Pavitra Kumar. The report also highlights a number of interesting take aways that search marketers need to think about – such as the strong performance of Product Listing Ads (PLAs) over text-based ads; mobile versus tablet and even the Yahoo! Bing Network against Google.

Data for the report was aggregated from Kenshoo’s clients who have been actively advertising over the last 18 months across Google, Yahoo!, Bing, Baidu and Yahoo! Japan. This rolling quarterly data set covered several billion dollars in global paid search ad spend.

State of the search ad market

Over the first three quarters of 2012, our data shows that paid search budgets were higher year-on-year, without the fluctuation in ad spend quarter-on-quarter (QoQ) that we saw in 2011. In Q3 2011, for example, we saw a ramp-up in spend, but this year advertisers increased their budgets early and have remained consistent throughout the year.

During 2012, both the U.S. and U.K., as well as the broader European Union, have seen CPC on the rise QoQ. If growth rates remain consistent, CPC rates in the U.K., which are currently at $0.45 USD, could match the U.S. rate of $0.48 by Q4 2012. With CPC rising, marketers will have to increase search ad budgets and/or develop sophisticated optimisation strategies to sustain traffic and conversion volumes.

 

PLAs produce better results

Product Listing Ads, which Google has introduced to replace the free shopping search results, perform better than traditional paid search text ads with an impressive 38 per cent conversion rate – CTR (68% higher) and return on ad spend (25% higher).  This is probably to be expected given their richer format, including images but online retailers in particular will be heartened by these findings because Google has announced it is moving to an all paid model for Google shopping using PLAs from 17 October in the US  - and believed to be doing the same during in 2013 in the UK and Europe.

Tablet search advertising trumps mobile ads

During Q3 2012 mobile and tablet devices accounted for more than a fifth (21 per cent) of all search advertising clicks in the US, and 13 per cent of total US paid search spend. When treated in isolation, mobile represented 0.6 per cent of all conversions from 11 per cent of all search ad clicks, while tablets generated 8.8 per cent of conversions with around the same (10 per cent) of total clicks. Tablet clicks ($0.30) are also a third cheaper than computer-based search ad clicks ($0.45), with mobile clicks cheapest at $0.22 on average.

This is further evidence, if we needed it, for search marketers to customise ad campaigns according to device, considering the user demographic, time of day and environment that searchers are using those devices from.

Yahoo! Bing Network generates better returns

In the US, while Google delivers more overall traffic (684 per cent more in Q3 2012), the Yahoo! Bing Network (YBN) drives online sales revenue at a more efficient rate, we found. Specifically, the return on ad spend of paid search on YBN was almost a third (28 per cent) higher in Q3 2012 than that of Google and the YBN click-through rate (CTR) was 29 per cent higher. As a result, advertisers increased their YBN ad spend 10 percent quarter-on-quarter and 35 per cent year-on-year, representing a faster rate of growth than Google.

Where does this report leave marketers?

What the above trends tell us is that overall our industry is in rude health, but that – as always – there are things we could do better by learning from data. As these findings are aggregated across brands and verticals, it is important that marketers use them only as benchmarks and analyse their individual campaigns based on their bespoke goals. Here are some questions for marketers to ask themselves: How are my strategies affected by rising CPC costs? How can I be more creative with ads to stand out on search results pages? Do I fully understand my mobile audience – on both smartphone and tablet – and how ads can be served to them? Am I investing much time in the YBN? By answering these questions in the context of your organisation, you can go from trend-follower to trend-setter.

To download the full report, visit the Kenshoo Global Search Advertising Trends page on our website.

AUTHORED BY:
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This post was written by an author who is not a regular contributor to State of Digital. See all the other regular State of Digital authors here. Opinions expressed in the article are those of the contributor and not necessarily those of State of Digital.