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  • 1. WHITE PAPER U.S. Online Advertising Report Key Trends & Insights October - December, 2011
  • 2. Online Advertising – Quarterly Benchmarking Report – December 2011 Introduction The fourth quarter of 2011 unveiled several important paid-search trends. On a year over year basis, advertisers increased click-through-rates (CTR), while reducing their overall costs-per- click (CPC). These trends point to advertisers realizing increased efficiencies from paid search, while growing their search programs. On the subject of efficiency, we also found that a larger percentage of advertisers were using Phrase and Exact type of keyword matching, and realizing strong performance gains as a result. Lastly, our data suggests that advertiser adoption of mobile and tablet devices for paid-search advertising is accelerating and showing significantly better performance than similar campaigns on desktop computers. Research Methodology To uncover key trends for the fourth quarter of 2011, we sampled the Marin Global Online Advertising Index, which includes over 1000 advertisers and agencies that invest over $2.7 billion annually in paid-search. The Marin Online Advertising Search Index consists of enter- prise-class marketers -- larger advertisers and agencies who spend in excess of $1 Million annually on paid-search, social and display. As such, our data sample and findings skew towards the behavior of larger organizations and more sophisticated advertisers. We kept the study longitudinal by focusing on a representative set of US advertisers who have been active on Marin for the previous five quarters, and measuring key performance indicators (KPIs) on a year over year (YoY) and quarter of quarter (QoQ) basis. Unless otherwise mentioned, all of the analysis in this study refers to trends in the search (versus content) network. Wherever possible, we used medians and indexed values to more clearly highlight overall trends instead of absolute values. This allows us to mitigate the effects of outliers, and make the findings more representative of the performance of the typical Marin client. Copyright © 2011 Marin Software Inc. All rights reserved. 2
  • 3. Online Advertising – Quarterly Benchmarking Report – December 2011 Findings: 1. Growth in Click Volume and Overall Performance: On an annual basis, advertisers saw paid search click volume rise by 56%. Improvements in click volume can be largely attributed to stronger CTR and a lower average CPC. The combination of improving CTRs and declining CPCs, point to a significant efficiency gain for Marin’s clients over the past year. Copyright © 2011 Marin Software Inc. All rights reserved. 3
  • 4. Online Advertising – Quarterly Benchmarking Report – December 2011 2. Improved Efficiencies on Google and Spend Increases on Yahoo! and Bing: According to Comscore1, 65.4% of all US-based search queries were conducted on Google during November 2011. During this same period, Yahoo! was at 15.1% and Microsoft at 15.0%. Despite having 65.4% of the overall US search volume, Google monetized its searches much more effectively -- accounting for 81% of paid search spend and 83% of all paid-clicks during the same period. On Google, the story we saw was largely about advertisers becoming more efficient. On a year over year basis, we saw a 48% increase in clicks without an accompanying increase in impressions. During this time, our clients saw a 48% increase in click through rates (CTR) on Google, while cost per click declined by 7%. This set of trends can largely be attributed to Marin clients realizing efficiency and performance gains through improved matching and more effective bidding. Copyright © 2011 Marin Software Inc. All rights reserved. 4
  • 5. Online Advertising – Quarterly Benchmarking Report – December 2011 On Yahoo and Bing, the story was largely about increased investment. For the Search Alliance, we saw a strong increase in impression volumes, most of which we attribute to our advertisers building out more robust search campaigns and increasing spend on the combined marketplace. On a year over year basis, our customers realized a 44% higher click volume combined with a 9% CPC increase and a 1% CTR increase. The following charts outline how search performance characteristics differ across Google and Yahoo! and Bing. Copyright © 2011 Marin Software Inc. All rights reserved. 5
  • 6. Online Advertising – Quarterly Benchmarking Report – December 2011 3. Match Type Optimization Creating Significant Performance Gains: Our analysis shows that gains in efficiency over the past year have been a result, in part, of advertiser efforts to refine match types. Refining match types from Broad to Phrase or Exact, increases relevance and click-through rates for keywords, thus improving quality scores and lowering costs. In the past year, search marketers have increased their use of Exact Match, growing their click-share by 6% while increasing share of spend by 2%. The following charts indicate year over year change in paid-search metrics by match type, and demonstrates the effectiveness of Exact Match from both a CTR and a CPC perspective. 4. Industry Specific Trends: While it’s helpful to understand the broader context of how paid search is evolving at a macro level, the reality is that different industries can demonstrate fundamentally different trends. To that end, we looked at the behavior of seven different industries and uncovered some new and unexpected trends. This section provides insights on representative values for CTR and CPC across seven verticals (Q4 2011), and industry-specific trends for key metrics. Copyright © 2011 Marin Software Inc. All rights reserved. 6
  • 7. Online Advertising – Quarterly Benchmarking Report – December 2011 Paid Search Trends – Auto Paid Search Trends – B2B 7
  • 8. Online Advertising – Quarterly Benchmarking Report – December 2011 Paid Search Trends – Education Paid Search Trends – Finance Copyright © 2011 Marin Software Inc. All rights reserved. 8
  • 9. Online Advertising – Quarterly Benchmarking Report – December 2011 Paid Search Trends – Healthcare Paid Search Trends – Retail Copyright © 2011 Marin Software Inc. All rights reserved. 9
  • 10. Online Advertising – Quarterly Benchmarking Report – December 2011 Paid Search Trends – Travel 5. Device Targeting & Performance: While Desktops and Laptop computers still command the vast majority of search spend, we are starting to see positive trends as marketers explore new platforms to extend their reach. Device targeting, in particular, is showing promise as smart phone and tablets become increasingly popular around the world. To provide context around usage patterns and spend allocation, the charts below shows how impression and click share was segmented across our client base during the fourth quarter of 2011. Copyright © 2011 Marin Software, Inc. All rights reserved. 10
  • 11. Online Advertising – Quarterly Benchmarking Report – December 2011 Mobile and Tablet devices accounted for 7% share of impressions and 10% share of clicks during the last quarter of 2011. Growth in consumer adoption has been a strong driver of click volume growth on these devices. Additionally, spend allocation on mobile and tablet devices is also growing very quickly and marketers are realizing solid performance across both mobile and tablet devices. The following chart compares click through rates across devices. While device targeting may not be relevant for all advertisers, marketers should evaluate their target demographic, and where appropriate, leverage the performance and cost effectiveness of targeting ads to tablet or mobile users. 6. Facebook Ads: With approximately 800 million users around the world, Facebook has become an invaluable part of the online marketing mix. Given Facebook’s dual-use as both a brand and performance channel, we wanted to report Facebook as its own category. Presented below are a snapshot of Facebook metrics for the fourth quarter of 2011: Copyright © 2011 Marin Software, Inc. All rights reserved. 11
  • 12. Online Advertising – Quarterly Benchmarking Report – December 2011 Conclusion On a year over year basis, click volume increased by 56% for paid search marketers. Additionally, increases in click-through rates, as well as lower cost per click prices indicate that advertisers have increased their efficiency and performance in the past year. Google continued its search dominance by garnering 81% of US spend share and 83% of US click share while controlling 65.4% of overall US search volumes. Yahoo! and Bing are continuing the transition to the Search Alliance, with the combined marketplace showing a strong growth in click volume and spend. The past year has also seen advertisers improve efficiency by increasing usage of exact and phrase match keywords. Tools such as Marin greatly simplify the process of keyword expansion and automated bid calculation for large keyword sets, and enable search marketer to focus on more strategic objectives such as keyword refinement. Lastly, we found that tablet and smart phones, while still in early stages of adoption relative to desktop computers, are showing strong and accelerating gains in search share, while delivering quality performance with higher than average Click Through Rates. As these devices become more widespread, and marketers develop smarter targeting strategies, we expect to see an ever increasing percentage of ad spend funneled towards smart phones and tablets. Copyright © 2011 Marin Software, Inc. All rights reserved. 12
  • 13. Online Advertising – Quarterly Benchmarking Report – December 2011 About Marin Software Marin Software is a leading provider of online advertising management solutions, offering an integrated platform for managing search, display, and social marketing. The company provides solutions for advertisers and agencies, enabling them to improve financial performance, save time, and make better decisions. Marin Enterprise, the company’s flagship product, addresses the needs of online marketers spending at least $100,000 per month on biddable media. Marin Professional delivers the same power and ease of use as Marin Enterprise, through an applica- tion designed for marketers spending less than $100,000 per month. Headquartered in San Francisco, with offices worldwide, Marin’s technology powers marketing campaigns for over 1,100 customers managing more than $2.7 billion of annualized ad spend in more than 160 countries. For more information, please visit: United States EMEA APAC San Francisco United Kingdom Singapore 123 Mission Street 1st Floor, Orion House, One Raffles Quay 25th Floor 5 Upper St Martin’s Lane, North Tower, Level 25 San Francisco, CA 94105 London, WC2H 9EA 048583 415-399-2580 +44 (0)203 595 1595 Tel: +65 6622 5888 New York France Japan 215 Park Avenue South Actualis Level 2 L3rd Floor, Sanno Park Tower Suite 1801 21 and 23 Boulevard Haussmann 2-11-1 Nagata-cho New York, NY 10003 Paris 75009 Chiyoda-ku Tel: (646) 490-2427 Tel: +33 1 56 03 66 44 Tokyo 100-6162 Tel: +81 3 6205 3000 Chicago Germany Australia 203 N. LaSalle St, Ste 2100 Am Kaiserkai 1 Level 31 Chicago, IL 60601 20457 Hamburg RBS Tower @ Aurora Place Tel: (312) 267-2083 Tel: +49 40 80 80 74-522 88 Phillip Street Sydney NSW 2000 Tel: +61 (0)2 8211 0553 Copyright © 2011 Marin Software, Inc. All rights reserved. 13