Global search advertising trends 2012 by Kenshoo

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Global search advertising trends 2012 by Kenshoo

  1. 1. GLOBAL SEARCHADVERTISING TRENDSOctober 2012 Edition © 2012, Kenshoo, Inc. | CO-04-1001  © Kenshoo, Inc. 2012 1
  2. 2. ContentsIntroduction .............................................................................................................................................. 3Global Paid Search Ad Spend and Campaign Metrics ....................................................................... 4 Budgets Significantly Higher in 2012 but Effects of Seasonality Less Pronounced ................................................................... 4 Average Cost-per-Click Higher Each of Past 2 Quarters but Still Trailing 2011 Rates ................................................................ 5 Impression Volume Declining But Click Volume Holding Steady .................................................................................................... 5U.S. Search Engine Performance .......................................................................................................... 7 Yahoo! Bing Network Average Click-through Rate and Cost-per-Click Consistently Higher than Google .......................... 7 Paid Search Budgets Growing Faster on Yahoo! Bing Network than Google ............................................................................. 8 Yahoo! Bing Network Outperforms Google in Return on Ad Spend but Only Delivers a Fraction of Click Volume ............. 9Regional Search Ad Spend and Cost-per-Click ................................................................................. 11 U.S., U.K, and E.U. Paid Search Budgets Up Year-over-Year .................................................................................................................. 11 U.K. Paid Search Average Cost-per-Click Rising; Nearly Reaching U.S. Rates .......................................................................... 12Google Shopping and Product Listing Ads ........................................................................................ 13 Product Listing Ads Outperform Text Ads on All Key Metrics ......................................................................................................... 13U.S. Mobile Device Breakdown ........................................................................................................... 15 Mobile Devices Account for More than 1 in 5 U.S. Paid Search Clicks ........................................................................................ 15 Tablets Represent Strong Share of Paid Search Conversions but Relatively Low Cost-per-Click ....................................... 16Insights and Implications ..................................................................................................................... 17Methodology ......................................................................................................................................... 18About Kenshoo ..................................................................................................................................... 18Contact ................................................................................................................................................... 18 © Kenshoo, Inc. 2012 2
  3. 3. IntroductionKenshoo Global Search Advertising Trends is the first in a new series of reports reflecting aggregatecampaign data across search engines like Google, Yahoo!, Bing, Baidu, and Yahoo! Japan.More than $3 billion in annual paid search budgets are managed through Kenshoo™ by the mostsophisticated advertisers and agencies in the world.Kenshoo clients include 4 of the top 5 U.S. travel websites, 6 of the top 10 global hotel chains, 7of the top 10 global retailers, 8 of the top 10 global telecoms, 10 of the top 10 global ad agencynetworks and 24 of the Fortune 50 companies.This report includes paid search trends segmented by the following categories: • Key Campaign Metrics • Search Engines • Geographic Regions • Product Listing Ads • Mobile DevicesIncluded at the end are 6 marketplace insights and implications for search advertisers. © Kenshoo, Inc. 2012 3
  4. 4. Global Paid Search Ad Spend andCampaign Metrics› Budgets Significantly Higher in 2012 but Effects of Seasonality Less PronouncedThrough the first 3 quarters of 2012, paid search budgets were significantly higher year-over-year (YoY). However, there has notbeen as much fluctuation in ad spend quarter-over-quarter (QoQ) as we observed in 2011. Last year, there was a large ramp-upin Q3 but this year, advertisers increased their budgets early and consistently throughout the year. Global Search Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Advertising Spend Quarter-over-Quarter Baseline 23% 32% -14% 4% 4% (QoQ) DeltaSource: Kenshoo Global Search Advertising Trends, © 2012, Kenshoo, Inc. Global Search Q1 2012 Q2 2012 Q3 2012 Advertising Spend Year-over-Year 52% 46% 24% (YoY) DeltaSource: Kenshoo Global Search Advertising Trends, © 2012, Kenshoo, Inc.Note: YoY comparisons for Q1 2012 are based on a set of Kenshoo clients active over past 7 quarters, whereas calculations for remaining quartersare based on clients active over past 6 quarters. QUARTERLY GLOBAL SEARCH ADVERTISING SPEND VOLUME 1.62 1.52 1.46 1.40 1.23 1.00 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Source: Kenshoo Global Search Advertising Trends, © 2012, Kenshoo, Inc. Note: Volume metrics have been normalized to a factor of 1 based on the initial quarter of data. Data points from subsequent quarters are based on a multiplier from the first quarter - for example, 1.52 means that volume is 52% greater than volume in initial quarter measured (Q2 2011). © Kenshoo, Inc. 2012 4
  5. 5. › Average Cost-per-Click Higher Each of Past 2 Quarters but Still Trailing 2011 RatesFollowing 4 consecutive quarters of falling rates, global paid search average cost-per-click (CPC) rose in both Q2 and Q3 of 2012.After bottoming out at $0.40 in Q1, CPC rates have now risen back to $0.46, which nearly equals the average CPC rate of $0.47during Q3 in 2011. However, this is still down from an 18-month high of $0.52. Q UA RTER LY G LO B A L S EA R C H A DV E RT I S I N G C O ST- P ER - C L I C K R AT ES $0.52 $0.47 $0.47 $0.46 $0.43 $0.40 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Source: Kenshoo Global Search Advertising Trends, © 2012, Kenshoo, Inc.› Impression Volume Declining But Click Volume Holding SteadyIn Q3, total search ad impression volume dropped for a second consecutive quarter and is down 23% overall since Q1. This representsa steeper decline than click volume, which has been relatively flat for the past 4 quarters, albeit higher YoY. Accordingly, average paidsearch click-through-rate (CTR) has risen for the second consecutive quarter and now stands at an 18-month high of 1.31%. Q UA RT E R LY G LO B A L S E A R C H A DV E RT I S I N G I M P R E S S I O N VO LU M E 1.87 1.65 1.68 1.44 1.29 1.00 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Source: Kenshoo Global Search Advertising Trends, © 2012, Kenshoo, Inc. © Kenshoo, Inc. 2012 5
  6. 6. Q UA RT E R LY G LO B A L S E A R C H A DV ERT I S I N G C L I C K VO LU M E 1.81 1.80 1.75 1.73 1.37 1.00Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Source: Kenshoo Global Search Advertising Trends, © 2012, Kenshoo, Inc. QUART E R LY GLO B A L S E A R C H ADVE RT I S I N G C L I C K-T H R O U GH R AT E S 1.31% 1.20% 1.09% 1.17% 1.06% 1.14%Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Source: Kenshoo Global Search Advertising Trends, © 2012, Kenshoo, Inc. © Kenshoo, Inc. 2012 6
  7. 7. U.S. Search Engine Performance› Yahoo! Bing Network Average Click-through Rate and Cost-per-Click Consistently Higher than GoogleOver the past 6 quarters, the Yahoo! Bing Network (YBN) has delivered sequential increases in search ad CTR in every quarterexcept Q1 2012, in which CTR was flat QoQ. Meanwhile, Google AdWords CTR has oscillated, hovering near 1% with a significantuptick to 1.25% in Q3 2012. 6 quarters ago, the gap between YBN and Google CTR was miniscule. Today YBN CTR is 29% higherthan Google. Similarly, the 2 engines were very close in CPC back in Q2 of 2011 but now there is a considerable gap with YBNCPC 46% higher than Google. During that time, YBN CPC increased significantly from Q2 to Q3 2011 and then remained relativelyflat, while Google CPC has come down from an 18-month high of $0.61 to $0.45 in Q3 2012. QUARTERLY U.S. SEARCH ENG INE AVERAG E CLICK-THRO UG H RATES 1.80% 1.56% 1.61% 1.60% 1.49% 1.49% 1.40% 1.25% 1.18% 1.20% 1.09% 1.10% 1.08% 1.03% 1.01% 1.00% 0.89% 0.80% 0.60% 0.40% 0.20% Google 0.00% Yahoo! Bing Network Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Source: Kenshoo Global Search Advertising Trends, © 2012, Kenshoo, Inc. Q UA RT E RLY U.S . S E ARC H E N G IN E AV E R AGE C OST- P E R- C L IC K RAT E S (IN US D ) $0.80 $0.70 $0.67 $0.66 $0.66 $0.63 $0.65 $0.61 $0.57 $0.60 $0.49 $0.49 $0.50 $0.45 $0.43 $0.40 $0.40 $0.30 $0.20 $0.10 Google $0 Yahoo! Bing Network Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Source: Kenshoo Global Search Advertising Trends, © 2012, Kenshoo, Inc. © Kenshoo, Inc. 2012 7
  8. 8. › Paid Search Budgets Growing Faster on Yahoo! Bing Network than GoogleFor Q3 2012, YBN ad spend was up 10% QoQ and 35% YoY. This represents a faster rate of growth than Google, which was up 7%QoQ and 28% YoY. In terms of clicks, YBN grew faster QoQ but Google grew faster YoY. Q3 2012 U.S . YAHO O ! B I NG NE T WO RK PE RF O RM ANCE 50% 40% 37% 35% 29% 30% 20% 10% 7% 10% 6% QoQ 4% 3% 1% YoY 0% -5% -10% -20% -30% Impressions Clicks Ad Spend CPC CTR Source: Kenshoo Global Search Advertising Trends, © 2012, Kenshoo, Inc. Q3 2012 U. S . G O O G L E PE RF O RM ANCE 50% 39% 40% 28% 30% 24% 20% 20% 16% 7% 10% 5% QoQ 2% YoY 0% -10% -8% -20% -18% -30% Impressions Clicks Ad Spend CPC CTR Source: Kenshoo Global Search Advertising Trends, © 2012, Kenshoo, Inc. © Kenshoo, Inc. 2012 8
  9. 9. › Yahoo! Bing Network Outperforms Google in Return on Ad Spend but Only Delivers a Fraction of Click VolumeDuring each of the past 6 quarters, YBN has outperformed Google in paid search campaign return on ad spend (ROAS), endingQ3 2012 with the largest gap of the 18-month period at 28%. While YBN delivers more converting traffic, Google delivers moreoverall traffic – 684% more in Q3 2012. Q UA RT E R LY U. S . S EA R C H A DV ERTI S I N G R E T U R N O N A D S PE N D BY S EAR C H EN G I N E 1.29 1.27 1.24 1.30 1.23 1.20 1.14 1.04 1.05 1.00 0.99 0.96 Google Yahoo! Bing Network Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Source: Kenshoo Global Search Advertising Trends, © 2012, Kenshoo, Inc. Notes: ROAS figures are calculated from an aggregate of Kenshoo clients tracking direct online sales revenue through the platform. Metrics have been normalized to a factor of 1 based on the quarter of data with the lowest search engine ROAS. Data points from other quarters are based on a multiplier from that baseline quarter - for example, 1.23 means that volume is 23% greater than volume in baseline quarter measured (Google Q2 2011). © Kenshoo, Inc. 2012 9
  10. 10. Q UARTER LY U. S. SEARC H ADVERTISING CL I CK VO LU ME BY SEARC H ENGINE 11.48 11.30 11.29 11.38 8.17 5.20 Google 1.12 1.49 1.21 1.32 1.45 Yahoo! Bing Network 1.00Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Source: Kenshoo Global Search Advertising Trends, © 2012, Kenshoo, Inc. Notes: Volume metrics have been normalized to a factor of 1 based on the initial quarter of search engine data. Data points from subsequent quarters are based on a multiplier from the first quarter - for example, 11.38 means that volume is 1138% greater than volume in initial quarter measured (YBN Q2 2011). © Kenshoo, Inc. 2012 10
  11. 11. Regional Search Ad Spend andCost-per-Click› U.S., U.K., and E.U. Paid Search Budgets Up Year-over-YearPaid search ad spend is up 29% YoY in the U.S., growing faster than the U.K. and broader E.U. However, each of these regionsshow increased search ad spend YoY for each quarter in 2012. Q UART E R LY U. S. SE AR C H A DV E RT ISING SP E ND VO LUM E 2.00 1.76 1.64 1.52 1.42 1.50 1.27 1.00 1.00 0.50 0.00 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Source: Kenshoo Global Search Advertising Trends, © 2012, Kenshoo, Inc. Q UART E R LY U. K. SE AR C H A DV E RT ISING SP E ND VO LUM E 2.00 1.50 1.23 1.10 1.18 1.11 1.12 1.00 1.00 0.50 0.00 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Source: Kenshoo Global Search Advertising Trends, © 2012, Kenshoo, Inc. © Kenshoo, Inc. 2012 11
  12. 12. Q UART E R LY E .U. SE AR C H A DV E RT ISING SP E ND VO LUM E 2.00 1.50 1.33 1.31 1.25 1.24 1.12 1.00 1.00 0.50 0.00 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Source: Kenshoo Global Search Advertising Trends, © 2012, Kenshoo, Inc. Notes: U.K. excluded from E.U. data set. For all regional ad spend volume figures, YoY comparisons for Q1 2012 are based on a set of Kenshoo clients active over past 7 quarters, whereas calculations for remaining quarters are based on clients active over past 6 quarters.› U.K. Paid Search Average Cost-per-Click Rising; Nearly Reaching U.S. RatesComparing CPC among the different regions, we see a major drop in the U.S. during 2011 while CPC in the E.U. and the U.K. felljust slightly. However, in 2012, each of these 3 regions has shown steady CPC increases QoQ (though EU increase over the lastquarter was slight). If growth rates remain consistent, CPC rates in the U.K. could match the U.S. CPC by Q4 2012. QUARTER LY R EGIO N A L AV ER AGE COST-P ER -CLICK (IN USD) $0.60 $0.50 $0.48 $0.45 $0.40 $0.37 U.S. U.K. EU $0.30 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 © Kenshoo, Inc. 2012 12
  13. 13. Google Shopping and ProductListing Ads› Product Listing Ads Outperform Text Ads on All Key MetricsStarting on October 17, 2012, Google Shopping results in the U.S. will come only from merchants who are buying Product Listing Ads(PLA). Overall, PLA outperforms text search ads in CTR (68% higher), conversion rate (38% higher) and return on ad spend (25% higher). U.S. AVERAGE CLICK-THROUGH RATE BY AD TYPE FOR SELECT MERCHANTS 2.50% 2.19% 2.00% 1.50% 1.49% 1.00% 0.50% 0% PLA Text Search Ads Source: Kenshoo Global Search Advertising Trends, © 2012, Kenshoo, Inc. U.S. AVERAGE CONVERSION RATE BY AD TYPE FOR SELECT MERCHANTS 2.50% 2.05% 2.00% 1.49% 1.50% 1.00% 0.50% 0% PLA Text Search Ads Source: Kenshoo Global Search Advertising Trends, © 2012, Kenshoo, Inc. © Kenshoo, Inc. 2012 13
  14. 14. U.S. AVE R AGE R E T U R N O N A D S P E N D BY AD T Y P E F O R S E L E CT ME R CHA N TS$4.50 $3.96$4.00$3.50 $3.17$3.00$2.50$2.00$1.50$1.00$0.50$0 PLA Text Search Ads Source: Kenshoo Global Search Advertising Trends, © 2012, Kenshoo, Inc. Note: PLA data reflects an aggregate of Kenshoo clients that are running PLA as well as Google campaigns with keywords covering similar product themes, excluding brand and head terms. Sample size includes more than 1.5+ million clicks. © Kenshoo, Inc. 2012 14
  15. 15. U.S. Mobile Device Breakdown› Mobile Devices Account for More than 1 in 5 U.S. Paid Search ClicksIn Q3 2012, 21% of all search advertising clicks in the U.S. were generated via mobile phones or tablets. These devices represented13% of total U.S. paid search spend. Computers (desktops and notebooks) still produce the majority of search ad spend and clicks at87% and 79% respectively. Q 3 2 01 2 U. S. SE AR C H ADVE RT ISING S P EN D AND C LIC KS BY D E VIC E 100% 87% 79% 80% 60% 40% 20% Computer 11% 10% 6% 7% Phone 0% Tablet Ad Spend Clicks Source: Kenshoo Global Search Advertising Trends, © 2012, Kenshoo, Inc. © Kenshoo, Inc. 2012 15
  16. 16. › Tablets Represent Strong Share of Paid Search Conversions but Relatively Low Cost-per-ClickDespite 11% of all search ad clicks and 6% of all spend coming from mobile phones, these devices only represented 0.6% of allconversions. Meanwhile, tablets generated 8.8% of all conversions with 10% of total clicks and just 7% of total ad spend. Computersare still the primary source of conversions with more than 90% coming from desktops and laptops. In turn, computers have thehighest average paid search CPC at $0.45 followed by tablets at $0.30 and phones at $0.22. Q 3 2 01 2 U. S. SE AR C H ADVE RT ISING C O N VE R SIO NS BY D E VIC E 100% 90.6% 80% 60% 40% 20% Computer 8.8% Phone 0.6% Tablet 0% Conversions Source: Kenshoo Global Search Advertising Trends, © 2012, Kenshoo, Inc. Q3 2012 U. S . S E ARCH ADVE RT IS IN G COST-PER-CL ICK BY D E VICE (IN U S D ) $0.50 $0.45 $0.40 $0.30 $0.30 $0.22 $0.20 $0.10 $0 Computer Phone Tablet Source: Kenshoo Global Search Advertising Trends, © 2012, Kenshoo, Inc. Note: All mobile device data reflects an aggregate of Kenshoo clients in the U.S. who are tracking online conversions and revenue metrics within the Kenshoo platform. © Kenshoo, Inc. 2012 16
  17. 17. Insights and Implications 1 Search Advertising is a Vibrant IndustrySearch advertising already represents the biggest share of digital marketing spending but has not reached its peak. With annual growthrates in the 24-52% range each quarter in 2012, paid search marketing continues to create opportunities for all the various industrystakeholders – advertisers, search engine publishers, marketing service providers, technology platforms, etc. 2 Rising Cost-per-Click Rates Will Require Increased Q4 Investment and Optimization by MarketersWith average paid search CPC rising in each region during each of the past 2 quarters, the trend is likely to continue through thecompetitive Q4 holiday shopping season. To achieve desired traffic and conversion volumes, marketers will have to increase search adbudgets and/or develop sophisticated optimization strategies. 3 The Yahoo! Bing Network is a Must BuySEM 101 has traditionally mandated the maximizing of campaigns via Google before expanding efforts to other search engines. Thisconventional wisdom was based on the notion that scarce resources (manpower and ad budgets) are best managed through the networkwith the most volume. However, with YBN consistently delivering better ROAS and advanced technology tools available to easily managecampaigns across multiple search engines, the new imperative for marketers is, at the very least, to be active on YBN, if not make it thefirst place resources are allocated and maximized. 4 The E.U. is Ripe for ConquestThe economic hardships plaguing members of the European Union are clearly impacting the search advertising market. The E.U. was theonly region examined in this report that did not show sequential growth in Q3 2012 over Q2 2012. With a more conservative marketplaceand CPC rates below that of the U.K. and U.S. , the E.U. represents a great market for global advertisers to generate targeted traffic. Ofcourse, marketers must keep a close eye on conversion rates to ensure consumers are responding with the desired actions. 5 PLA or DieU.S. retailers have no choice but to actively manage Product Listings Ads for placement on Google Shopping. With a richer formatincluding images, PLA units perform better than text ads on all key metrics. Key to success for marketers is leveraging a paid searchtechnology platform that can create and manage PLA while tracking clicks, conversions and revenue at the product level and deployingcustom bid optimization algorithms accordingly. 6 Tap Tablets for Strong Volume and PerformanceTablets boast a bigger screen and more affluent user-base than mobile phones and, as a result, represent a very lucrative targetingopportunity for marketers. To capitalize on the 10% of all U.S. paid search clicks coming from tablets, marketers must create device-optimized websites and/or apps to deliver a bespoke user-experience. And, with tablet CPCs 33% lower than computers, it’s also a bestpractice to create separate SEM campaigns targeted different devices with unique keyword bids. © Kenshoo, Inc. 2012 17
  18. 18. MethodologyTo analyze quarterly data in its historical context through the most uniform and largest sample possible, an aggregate data set was builtfrom Kenshoo clients who had been active during the previous 18 months.This rolling data set covered several billion dollars in global paid search ad spend. While this sample better reflects changes over timein the overall marketplace, there may be variations in numbers for future reports published by Kenshoo, as the rolling data set will bedynamic each new quarter.In cases where it was useful to compare data from the previous 18 months to even earlier data, only data from the set of Kenshoo clientswho had been active for the newly-defined and extended time period was utilized unless otherwise noted. All volume metrics have beennormalized to a factor of 1 based on the initial quarter of data (or other baseline quarter as noted). Data points from other quarters are basedon a multiplier from baseline quarter – for example, 1.55 means that volume is 55% greater than volume in baseline quarter measured.To determine return on investment (ROAS), an aggregate data set was built from Kenshoo clients who had been active during the previous18 months and tracking direct online sales revenue through the platform. For regional comparisons, U.K. was excluded from E.U. data(even though it is a member country) so that it could be analyzed separately.Mobile device data comes from a smaller subset of the above data reflecting Kenshoo clients in the U.S. who are tracking onlineconversions within the Kenshoo platform.Product Listing Ad (PLA) data is taken from an aggregation of Kenshoo clients that are running PLA as well as Google campaigns withkeywords covering similar product themes. To provide the closest comparison, brand and head keyword were excluded. For example, PLAfor “office furniture” were compared to campaigns and ads using keywords targeting “office furniture” related searches.About KenshooKenshoo is a digital marketing software company that engineers technology solutions for search marketing, social media andonline advertising. Brands, agencies and marketing providers use Kenshoo Enterprise, Kenshoo Local and Kenshoo Social todirect more than $25 billion in annual client sales revenue. The Kenshoo Universal Platform delivers automation, intelligence,integration and scale to make better marketing investments. With campaigns running in more than 190 countries, Kenshoo clientsinclude CareerBuilder, Expedia, Facebook, KAYAK, Havas Digital, Hitwise, iREP, John Lewis, LendingTree, Resolution Media, Sears,Starcom MediaVest Group, Tesco, Travelocity, Walgreens, and Zappos. Kenshoo has 16 international locations and is backed bySequoia Capital and Arts Alliance. Please visit www.Kenshoo.com for more information.Kenshoo is a trademark of Kenshoo Ltd. Other company and brand names may be trademarks of their respective owners.ContactAriel Rosenstein, Director of Marketing ResearchAriel.Rosenstein@Kenshoo.com © Kenshoo, Inc. 2012 18

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