Today we are going to talk about the challenges facing search marketers. Paid search is an industry that is just over 10 years old, and yet in that short span of time, paid search has grown to represent over 34 billion in advertising dollars worldwide. What’s even more staggering, is that the industry continues to grow at a double digit pace, capturing ever larger wallet share from advertisers.
And yet paid search, and online advertising in general, still represent a small slice of the overall media pie. According to eMarketer, the total online advertising market is just over 64 billion, while the total advertising market, if we include print, radio, television, and digital, clocks in at over 480 billion. Our CEO likes to show us this slide to make sure we stay humble. If Marin were in this picture, we would be a tiny piglet about the size of this blue guys leg.So what’s the problem? Search is large and its growing. It’s a part of a big market, leaving upside for digital. Where’s the rub?
The problem isn’t that search is growing. Its how fast it is growing. Every channel – print, radio, tv is seeing declines in % of media time and ad spend. Television today represents 31% of consumers “media time”, while capturing 38% of all ad dollars. Print is worse, capturing just 12% of media time, but 26% of ad dollars. Where is that time and money going? The Internet. Today consumers spend roughly 28% of their media time on the internet. And yet less than 15% of advertisers dollars are spent there. That Gap between media time spent and advertisers dollars spent is nothing short of tremendous. In many ways, it represents the inefficiencies in the online market. Ad networks have not yet perfected the right media to make online effective, but its coming.As Google and other networks become more efficient at monetizing this advertising, this gap will close. In online advertising this represents an opportunity roughly the size of the current market – over $50 billion.
And therein lies the problem. Query volume isn’t rising as fast as spend. As advertisers make the shift from traditional to digital media, those dollars need a place to go. In many ways, we are already seeing one place they are going – higher costs per click. In an auction market such as google, when spend rises faster than query volume, costs per click rise. And this is something we see happening consistently across our client base. Its also been validated by analyst reports. In a recent study by Forrester, for example, over 2/3rds of advertisers indicated rising costs per click were the largest threat to the success of their PPC programs.
So how can you respond? Internally, your business objectives remain the same. How do you increase your volume, while keeping your returns on investment constant. In a world of rising CPCs, however, just standing still you may not be able to keep your ROI constant. We’ve seen smart marketers begin to look beyond just paid search to find performance. While Google Search remains the dominant channel of advertisers programs, you don’t have to look too far afield to find other networks and platforms where inefficiencies abound. For advertisers with the bandwidth to get out in front on some of these channels, there are opportunities to exploit these inefficiencies to reduce cost – per –acquisition, and hopefully find some incremental revenues in the process.
Jump in impressions stemming from: more searches users interacting more with search results, changes in the definition of impressions (e.g. 3 second pause)Jump in clicks indicates a change in user behavior(Users are now more engaged with search results)Drop in CPC could be caused by:Advertisers not increasing daily budgets. Subsequent auctions might be less competitive leading to lower average CPC A small (2-3%) change in the distribution of searches across match types Small but perceptible shift in keyword-CPC distribution curve towards lower CPCs
Search alliance agreement between microsoft and yahoo. Microsoft serves all of the organic and paid ads.Billed at the time as creating “efficiencies”, it certainly reduces the management overhead for marketers.But were there gains beyond this that advertisers can take advantage of? Was it really a “happily ever after”At Marin, we dove into our data to see what the effects of the search alliance were. We looked at pre-and post transition market share and cost-per-acquisition and conversion rate data, across a sample that included hundreds of the worlds largest advertisers. The results were somewhat surprising, so lets take a look.
First, we saw impressions and clicks as a share of total rise. Encouraging news because at a high level, this meant increased volume available for advertisers. It would appear that the adcenter algorithm has a propensity to serve slightly more often than the Yahoo algorithm, creating more opportunity.Surprisingly, however, we saw cost share decline. In part, this can be attributed to the fact that Google is a strong retail engine, and the time of this survey was taken the holidays were just getting into full swing. With that said, other factors were in play as well. Adjusting for seasonality, we were able to take a closer look at the metrics.
Declines in CPC, seasonally adjusted.
Cost per acquisition fell.Conversion rates rose.Increasing efficiency. Not only did it become cheaper to acquire a click, those clicks became more valuable through increased conversion efficiency.Those two combined
On an annual basis, advertisers increased spend on paid search by 20%, increasing click-through rates by 12% and holding overall costs-per click in check. These improvements in click-through rates and clicks, without an accompanying increase in cost-per-click, point to efficiency gains for large scale advertisers over the past year. It’s also worth noting here that we saw a quarterly decline in spend and clicks, but that could be a consequence of seasonality or because many advertisers had a breakout first quarter.
This slide covers share of market by match type. Essentially, we’re looking at how what percentage of impression, clicks and spend came from a given match type, between two time periods – the second quarter of 2010 compared to the second quarter of 2011.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 clickthroughrates for keywords, thus improving quality scores and lowering costs. In the past year, search marketers have increased their use of Exact and Phrase match, growing click-share of Exact and Phrase match terms by 7% and 3% respectively.
In addition, we found that performance on exact match actually increased quite significantly on a year over year basis. The charts on this slide indicate year over year change in paid-search metrics by match type, and demonstrates the effectiveness of exact match from both a CTR as well as a CPC perspective
The Evolution of Paid Search
The Evolution of Paid Search<br />Spotting & Staying Ahead of the Trend<br />Matt Lawson<br />VP of Marketing<br />Marin Software<br />
About Marin<br />The leading platform for managing<br />search, display, and social<br />
The Leader In Paid Search Applications<br />But online still represents less than 15% of total advertising spend.<br />
Advertisers spend 3x more on traditional media than the internet<br />(Yet consumers spend an equal amount of time on each.)<br />
Online Ad Spend Can Double<br />% of Time Spent in Media vs. % of Advertising Spending, USA 2009<br />~$50BN Global Opportunity<br />% of Total Consumption<br />Note: Time spent data per NA Technographics (2009), ad spend data per VSS, Internet advertising opportunity assumes online ad spend share matches time spent share, per Yahoo!. Source: Yahoo! Investor Day, 5/10; Morgan Stanley.<br />
About Marin Software<br />Spend is rising faster than query volume, putting pressure on costs-per-click<br />
The Search Marketer’s Dilemma<br />Increase spend while maintaining a constant ROI<br />This Creates a Problem for Search Engines<br />How to increasing volume without increasing click costs?<br />9<br />
How are Search Engines responding?<br />Inventory (Improve Performance)<br />Consumers(Expand Query Volume)<br />Advertisers (Incentivize Efficiency)<br />
The Impact of Google Instant on Paid Search<br />
Quality as the Key Driver of ROI<br />"Quality Score helps ensure that only the most relevant ads appear to users. <br />The AdWords system works best for everybody -- advertisers, users, publishers, and Google -- when the ads we display match our users' needs as closely as possible…<br />…In general, the higher your Quality Score, the lower your costs and the better your ad position.”<br /> -- adwords.google.com<br />
Large Advertisers Realizing Efficiency Gains<br />25<br />
Trends by Match Types<br />Click-through rates on exact match have improved…<br />…while cost-per-click on exact match have declined.<br />26<br />
Resulting in a Shift by Advertisers<br />Advertisers increased their % of clicks on exact match by 7% last year, lowering costs.<br />27<br />
The Impact of Quality Score Changes<br />Engines (More clicks)<br />Consumers(Relevant ads)<br />Advertisers (Increased efficiency)<br />