Q3 Paid Search Spend Data Bodes Well for Google; Bing Continues to Slide

Q3 paid search spend reports from Covario, Rimm-Kaufman Group and Efficient Frontier/Context Optional show the despite economic concerns, paid search growth is strong, with 23 and 24 percent year-over-year increase in spend in the U.S. and globally, respectively. Mobile search spend is on the rise, with tablets capturing the majority of that ad spend, while Facebook Ads CPC rose dramatically with increased competition in the space.

Google Pounds Bing/Yahoo in Clicks and Spend

Google’s paid search ad spend is up 32 percent YoY in the U.S. and 23 percent globally, while Bing/Yahoo fell and additional 12 percent after dropping 21 percent in Q2. While U.S. ad clicks are up 16 percent YoY, it looks like Google took the lion’s share; they saw 25 percent more clicks while Bing dropped 12 percent here, as well. Return on ad spend remains flat, says RKG.

Covario released the following chart demonstrating spend by platform globally since 2007:


Efficient Frontier predicts Bing/Yahoo will focus on increasing their inventory in an effort to recoup some of these losses. In mid-September, we reported that Microsoft, Yahoo and AOL plan to pool their Class 2 display ads – the ones they can’t get rid of – to up the inventory of each property. Bing is also working on an improved infrastructure for search and mentioned in a recent job posting that the engineers responsible for those improvements will go on to work in the adCenter to build real-time ad processing and delivery.

Google’s Product Listing Ads Driving Growth

Since Google migrated PLAs from the Affiliate Network to AdWords in the fall of 2010, Mark Ballard, Senior Research Analyst at RKG, says they’ve been widely adopted by clients. PLAs accounted for just under 5 percent of total Google ad spend in Q3.

“It’s difficult to quantify, but I am under the impression that a significant percentage of advertisers were not running PLAs through the GAN, but adopted them once PLAs moved to AdWords, where they were more easily managed by paid search agencies,” Ballard told Search Engine Watch. “The closest we have to a case study is this post, where we observed that PLAs did appear to be largely incremental and not cannibalistic of text ads. I would also add that the 5% share figure for PLAs in the Q3 post might be a little low due to the mix of clients in the sample, not all of whom have the right offerings to run PLA ads. Among only those clients running PLAs, the share is higher, closer to 10%.”

Tablets Lead Mobile Growth; iPad Takes Most Clicks


Tablets appear to be driving mobile spend, as RKG shows that removing them from the equation shows a decline. The iPad generates about 95 percent of tablet clicks, or almost 3.5 percent of total paid search traffic. Apple still has a sizable lead over Google in the operating system battle, as iOS takes about 70 percent of mobile and tablet paid search traffic.

Facebook Ad Spend & CPC Up

Efficient Frontier reports that Facebook ad spend increased 25 percent over Q2, while the CPC shot up 54 percent in the same period. From their report: “Facebook has become an essential marketing channel for many brands. Increased cost per clicks (CPCs) reflect both a higher volume of advertisers and more price competition on the platform.”

Likes account for 84 percent of engagement and EF credits Facebooks ads for this. They report that brands are increasing their fan base by 9 percent per month, on average, with 2 times year-over-year growth. Covario puts Facebook at between 10 and 20 percent of the annual paid search budget, on average. This represents a 130 percent increase since 2010.

Looking Forward to Q4 and Beyond

Efficient Frontier expects that Facebook will continue to grow in the marketing mix, with projected 30 to 40 percent growth quarter over quarter. They expect engagement to continue rising year over year.

Covario predicts between 18 and 22 percent growth in paid search spend in 2012, with Asia Pacific experiencing up to 35 percent over 2011. Baidu currently sits at 6 percent and is expected to take up to 8 percent of global paid search market share next year, while mobile will account for no more than 5 percent of paid search advertising.

“We have seen consistent uptick in CPCs since Q3, 2010,” Covario noted. “Google Instant is driving incremental clicks, and incremental spend, to Google. Also, as additional budget comes into the channel, the money is going toward relatively expensive “generic” terms that are driving up CPCs and keeping impression growth lower. We expect this trend to continue.”

RKG is looking for a strong Q4, cautioning that marketers carefully consider holiday sales numbers as they’ve been more front-loaded in recent years.

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