Keeping Pace As Competition In Paid Search Heats Up

Back in December 2010, I was relatively convinced that click prices were going to continue increasing in 2011, but Marin Software recently released a study of large scale paid search programs that suggests otherwise.

The Paid Search Quarterly Benchmarking Report showed that although average cost per click (CPC) has increased since December 2010, it hasn’t changed year-over-year. However, the underlying trend is the same trend we’ve seen for the past couple of years: advertisers continue to migrate dollars from offline to online advertising, driving spend on paid search higher.

The first couple months of 2011 revealed some interesting paid search marketing trends, including increased paid search volume and click-through rates for large advertisers. But, as mentioned, click prices remained stable over year-over-year.


A review of the first quarter of this year in comparison to the same period in 2010, shows that large scale advertisers ramped up their paid search ad spend by an average of 61%  year-over–year. At the same time, paid search ads served jumped, providing 41%* more impressions this year versus last.

As paid search impressions and spend increased, large-scale paid search marketers have also increased efficiency. By better optimizing their growing campaigns, marketers in the index have increased click-through-rates 14% since 2011, while holding overall costs-per-click stable.

While it’s possible that CPCs rose for some terms, overall improvements in quality appeared to have helped large advertisers keep a lid on average keyword prices.

Have you seen similar trends in your campaigns? More importantly, given the trend, have you taken the right steps to structure your campaigns for profitable growth?

Here are a couple tips for “industrial strength” paid search marketers to pay attention to as they continue their quest for increased volume and efficiency.

  • Use Technology to Drive Scale – As the paid search landscape becomes more competitive, the ability to grow paid search campaigns while maintaining a consistent ROI will become increasingly challenging. Whether you choose to develop your own tools, or use a third party platform, make sure that you are leveraging technology to drive efficiency. Remember that saving a couple of hours a week through automated reporting or bidding provides time savings that you can reallocate towards launching new campaigns, refining keyword sets, or optimizing creative.
  • Benchmark Growth Against the Competition – Are you growing your campaigns fast enough?  To find out, start by comparing your spend growth against the industry, or better yet your competition. Your search engine account teams likely have some basic information that you can use as a starting point. To get a more precise picture of how you stack up, you can leverage industry benchmarking reports available free from a variety of SEM vendors, agencies, and research organizations. Finally, the best benchmarking tools allow you to make comparisons to competitors directly. Tools like Hitwise or Comscore are a great source for this data, but typically require a subscription.
  • Make Sure Your Ad Copy Stands Out – With increasing volume, you can also expect increased competition, making your creative more important than ever. Make sure you are periodically performing an analysis of your ads in comparison to competitors. Being thoughtful about how your calls to action compare in the competitive landscape will not only help you to grow your programs, but will help to maintain or increase efficiency.
  • Add Negatives – Whenever you scale programs by adding new campaigns, it’s important to remember to optimize your negative keywords. Adding negatives will help you shape your traffic and maintain return-on-investment ratios. I suggest reviewing the raw queries from the past couple months and adding appropriate negatives to ensure you’re aren’t paying for non-converting clicks.

Increased search volume and click-through rates are good news. If online activity is a leading indicator of the economy then hopefully everyone’s revenue will be up in 2011. I look forward to seeing if these early 2011 trends continue.

*Editors Postscript: An updated chart has been posted and a change made to the copy here, to resolve the error with juxtaposed numbers (as noted in comments below).

Opinions expressed in the article are those of the guest author and not necessarily Search Engine Land.

Related Topics: Channel: SEO | Industrial Strength


About The Author: was the Vice-President of Marketing at Marin Software, a leading platform for digital advertising management, and held a variety of executive roles at Coremetrics, one of the early innovators in web analytics.

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  • Kevin Lee

    These numbers seem wrong. 61% growth in spend driven exclusively by an increase in impressions? Large advertisers only?

  • Jason Anderson

    Also have some questions about the data. If impressions rose 61% YOY and clicks only went up 41% then how could CTR have increased? If CTR remained flat then clicks would also have gone up 61% which it apparently didn’t.

  • sidshah

    Hi Matt,
    Either I am understanding these numbers wrong or basic numbers are not adding up.
    Ad Spend= CPC * Clicks
    If spend is up 61%, clicks is up 41% then CPC has to be up by 1.61/1.41 -1 = 14%.

    That number is roughly inline with what most industry vets are seeing, so I am not surprised that you have the same number.

    Jason, has rightly pointed out an issue with the CTRs too.

    In my experience, these issues could arise when
    (a) Your sample client sets are different for each metric
    (b) You use a median/mean value for CTR as against taking total Clicks by total impressions. You can’t take an average CTR as that “unweights” the data. In other words
    sum( clicks)/ sum ( impressions) is the right way to do it as against taking the average CTR (that would be the average of averages).
    (c) The 61% growth seems highly unlikely. All the data suggests that core impressions are growing 15-20% a year. So even with a CPC growth of 10-15% you are looking at 30-35% growth for ad spend.. and thats TOPS.

    Let me know if you need any help/input from me.


  • Matt Lawson

    Kevin — You are correct, our sample size is large advertisers only. We were surprised by the skew as well. It would appear that large advertisers are growing their budgets at a rate that is much faster than the industry overall.

  • Matt Lawson

    Jason — Thanks for pointing this out, in the original graph we accidentally juxtaposed the metrics for impressions and clicks. With the help of SEL, we were able to repost the graph with the correct numbers. Nice catch, and sorry for any confusion!

  • Dave

    Very interesting to see the consistency of CPC even with the increase in CTR. It seems the down economy has a reverse effect on ad spending and impressions.

    The internet is a large source of potential advertising space. With this increase in paid search marketing but consistency in CPC over the last year, can we assume this to be true for following years? Or will online retail space become a game of supply and demand?

    Also, to touch on your wonderful point about benchmarking your ad spending growth against your competitions, you should also use an intra-organizational ad audit. At times, the slightest miscue of wording or eye-sore can hinder your CTR.

    For example, shows the difference on conversion rates due to the slightest change in an ad. It is always important to analyze your failures.


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