Two reports have come out almost simultaneously, from Efficient Frontier and SearchIgnite, offering insights into the US paid search market for Q3 2009. The two data sets are based on client search campaigns managed by both firms. The data are directionally consistent in most cases but slightly different in terms of specific percentages and figures.

Search spending overall:

Efficient Frontier:

SearchIgnite:

Share of paid-search ad spend:

Efficient Frontier:

SearchIgnite:

Bing specifics:

Efficient Frontier offers some additional detail on Bing in particular:

Both firms said that overall search spending was up and that Bing showed growth in terms of both share of spend and clicks. In part because of these numbers, financial analysts expect Google to report strong results on Thursday this week.

Each year, Marketing Sherpa compiles an exhaustive look at the state of search marketing. Each year, these reports grow more comprehensive, reflecting the continuous change and evolution of our industry as it grows up. This year’s report is no exception.

The Marketing Sherpa 2009-10 Search Marketing Benchmark Report is 213 pages, and is divided into five major sections, including:

The business of search. There’s been a lot of talk about how search marketing budgets have been affected by the tumultuous economy, and this section of the report offers some interesting data on what’s really going on out there. Contrary to other areas of advertising and marketing that have seen budgets slashed, search marketing continues to grow, albeit at a slower pace. This section has great stats about how budgets have changed, how resources are being allocated, and for the first time, salary stats for various job categories in the industry compared with other traditional marketing positions.

Search benchmark data. This section offers invaluable competitive intelligence data, collected by surveying search marketers, agencies and advertisers. The stats here cover a wide range of cost-per-click data, clickthrough rates, an abundance of info on the types, quantities and prices of keywords used by both B2B and B2C marketers, volume and conversion rates, and a new section on searcher behavior.

Measurement and testing. Over the past few years, analytics has grown from something a few geeky search marketers played around with to a core pillar of most search marketing campaigns. This section looks at both the key metrics used by most marketers, as well as the most underused metrics that could, but largely aren’t, being exploited. Testing, ROI tracking and attribution modeling also get good coverage.

Tactical issues in search. This section offers a potpourri of data culled from search marketers, offering insights into everything from targeting tactics, key SEO factors, clickfraud rates and insights into dozens of other issues that search marketers grapple with on a daily basis.

Search engine usage. This section offers good stats covering market share, searcher preference and other data covering the top general and vertical search players. There’s also good info on secondary players as well as the international search engines, with an emphasis on the rapidly maturing Asian market.

Throughout, the emphasis is on data collected both by Marketing Sherpa and about a dozen or so partners who analyze the search marketing industry. For each topic, there’s both a chart or graph and written interpretation of the data. Most of the time this interpretation is helpful, but I found myself wishing for more detailed analysis for some topics. A few times, an analysis seemed superficial, as if the writers were rushing through a topic or didn’t understand it well enough to offer meaningful insight.

Most of the information in the report is useful and compelling, though occasionally the data gets too granular and seems more like fluff thrown in apparently to fill out the page count (e.g. detailed distributions of salary ranges for all job titles). Another drawback is that the graphics are occasionally difficult to interpret, with busy or confusing charts. I found myself wishing that Marketing Sherpa’s graphic designer would follow the guidelines laid out in Edward Tufte’s classic The Visual Display of Quantitative Information.

However, given the sheer scope and quality of the information presented in the report, these are comparatively minor quibbles.

While the insights in the report are valuable for anyone seeking a competitive edge in search marketing, the Marketing Sherpa 2009-10 Search Marketing Benchmark Report is probably most useful for anyone needing objective data to make a case for budgets or tactics in an SEM campaign. Many of the difficult questions asked by clients or internal executives have answers in the pages of the report, and even better, are backed by solid data.

Marketing Sherpa 2009-10 Search Marketing Benchmark Report
Sixth edition ISBN: 978-1-932353-96-9
Marketing Sherpa LLC, $447 (PDF Only: $397)

Search ad spending is stabilizing, advertisers are getting smarter, and Bing is making gains on Google and Yahoo. Those are a few of the trends cited in the latest research report from search marketing provider Efficient Frontier. The company regularly shares reports based on data collected from a portion of its U.S. advertisers. This new report covers nearly 81 billion impressions and 722 million clicks on search and content ads on the three major search engines during Q2 of this year.

The report shows that overall ad spend during Q2 2009 was down 21% from a year ago, but that’s better than the 23% decline between Q1 2008 and Q1 2009. At the same time, Q2 spending was down only 3% from Q1 of this year. Efficient Frontier says that’s an expected seasonal drop, and a sign that search advertising, like the economic downturn, is stabilizing. But the recession has impacted smaller advertisers (those spending less than $50,000/month) the most: Their spending was down 41% from Q2 2008 to Q2 2009. Large advertisers (more than $200,000/month) dropped their spending by 22%, while mid-sized advertisers upped their spend by 5%.

While ad spend overall was down, ROI was up pretty substantially year-over-year — to the tune of a 29% increase in Q2.

Sid Shah, Efficient Frontier’s Director of Business Analytics, points out that the ROI numbers are cost normalized; in other words, they’ve accounted for the fact that ROI naturally goes up when spending goes down. The report says Google offers the most efficiency of the three major search engines, with ROI up 43% Y-O-Y. Bing (and Live Search before it) showed a 24% increase in ROI from 2008 to 2009, while Yahoo dropped by 8%. “Yahoo!’s lower efficiency given stable click volume and lower CPCs indicates a likely decline in quality,” the report says.

Bing, in fact, gets special attention in the report. After Live Search lost ground in the previous two quarters, Bing gained click share and spend share as soon as it launched in early June and maintained those gains throughout the month.

As the top chart shows, Bing’s click share gains came at Yahoo’s expense; the bottom chart shows that Bing’s spend share gains came at Google’s expense. The report indicates that Bing’s paid click gains were most significant in the finance and travel sectors, with gains of 17% and 10%, respectively.

The complete Efficient Frontier Q2 2009 report can be downloaded at the company’s web site, www.efrontier.com.

Trade magazine AdWeek and pollster Harris Interactive conducted a survey in early June among 2,521 US adults. People were asked what types of ads they found most “helpful” and what types of ads they ignored. Below are the top-line results as well as the age and geographically segmented data.

Most helpful in making purchase decisions:

• 37 percent say that television ads are most helpful
• 17 percent say newspaper ads are most helpful
• 14 percent say search engine ads are helpful
• Radio ads (3 percent) and Internet banner ads (1 percent) are not considered helpful by many people
• 28 percent say that none of these types of advertisements are helpful to them in the purchase decision making process

Ad types that people ignore:

• 46 percent say they tend to ignore Internet banner ads
• 17 percent ignore search ads
• 13 percent ignore TV ads
• 9 percent ignore radio ads
• 6 percent ignore newspaper ads

One in ten Americans say they do not ignore any of these types of ads. Interestingly, younger survey respondents tended to find search ads less helpful than older users and ignored them more. That’s a bit counter-intuitive.

Here are the data segmented by age and geography:

This morning, I posted the results of a poll I ran at the Search Engine Roundtable asking SEMs if they are currently employed. We received just about 400 responses, and from those responses we learned there is a 7% unemployment rate in the search marketing industry. The poll was far from a valid study, such as a census data report, but it did poll many from the industry and might be a good metric to use.

The current US unemployment rate, according to the March 2009 U.S. Bureau of Labor Statistics data is about 9%. The search marketing industry is 2 points below that rate according to my small poll. What I found most interesting is that 25% of the respondents said they were self-employed while 65% said they worked for a company.

Again, this poll is far from having US backed data from the labor department, but it may be a good indication of the search marketing industry is weathering the recession.

Search marketing platform provider Efficient Frontier released a report on Q1 2009 SEM trends. The report is based on data collected from Efficient Frontier’s U.S. clients “and covers 84 billion impressions and 785 million clicks on search and content ads on Google, Yahoo and Microsoft Live Search.” At the highest level Efficient Frontier said overall SEM spend was down vs. a year ago (-13%), as were CPC prices; however, consumer search impressions were up and ROI for advertisers was also up significantly:

The results of the Q1 research show that while search advertising spend is down slightly quarter-over-quarter (3.3 percent) from Q4 2008 to Q1 2009, ROI has improved by 10 percent in the same time period, revealing that advertisers are reducing spend in order to maintain a higher return. ROI improved significantly from January 2009 to February 2009 experiencing a 30 percent increase, while advertising spend improved 6 percent from February to March 2009.

The report’s executive summary identified these trends:

• SEM Spend and ROI Trends Show Advertisers Shift Towards Efficiency Strategy
• Impression Volume Surged Across all Search Engines, Especially in the Financial, Retail and Travel Sectors
• Consumer Search Trends Show Shift Towards Frugality and Comparison Shopping
• Google Continues to Dominate the Market by Spend, YOY Market Share Shows Minimal Change
• Google’s Content Network Continues to Refine as Advertisers Allocate Increased Budgets

I’ve pulled a few of the charts from the report. The following chart indicates monthly SEM spend compared with ROI:

Source: Efficient Frontier

The following chart compares CTR trends YoY at the major engines:

Source: Efficient Frontier

As marketers have tightened budgets CPC prices have come down:

Source: Efficient Frontier

The report provides comparable metrics and visibility in four verticals: finance, retail, travel and automotive. There is also a discussion of consumer behavior as it relates to each of those verticals (which is not identical). However, overall, Efficient Frontier said the following about consumer search patterns during the recession:

In the current economic environment, ROI will continue to be a priority as advertisers trend towards the efficiency model in an effort to reach a higher ROI as a buffer against economic uncertainty. The drop in CPCs indicates a deflation in the marketplace. Thus we find ourselves at an interesting cross-road. On the one hand, advertisers are cutting budgets resulting in cheaper clicks, on the other hand more users are searching online. This situation presents the ideal opportunity for large advertisers with deeper pockets to expand in this market, consolidate their market share, and get more valuable traffic at a discounted price point. Our research indicates that an increased number of users are more price conscious and less brand conscious.

SEM tool provider AdGooroo today released a report that explores ad coverage per keyword among the big three engines in Q1 2009; it’s a hypothetical proxy for search revenues. The report concludes, among other things, that Yahoo has gained advertiser share and coverage (largely at Microsoft’s expense) during the quarter:

The biggest surprise this quarter, however, is a possible comeback for Yahoo!, which had been losing ground to Live Search since September. AdGooroo tracked a 10 percent increase in active first-page advertisers during the first quarter, suggesting that Yahoo! may have finally hit its stride. This coincides with a four point increase in advertiser share which appears to be at Microsoft’s expense. It would not be surprising to see strong numbers coming out of Yahoo! this month.

Here are some high level takeaways and charts from the report:

• Approximately 42 percent of Google keywords contain no ads throughout the course of a given month; 13 percent have only one ad; 15 percent have ten or more ads.
• Live Search is similar to Google in that keywords tend to have either no ads (33 percent) or a full page of them (30 percent have seven or more ads).
• Yahoo! search results pages tend to have the most ads. Only 18 percent of Yahoo! keywords displayed no ads, while 41 percent of keywords displayed eight or more.

We’ll see how accurate these data are and whether they are a reliable barometer of search revenues on April 21, when Yahoo reports quarterly earnings. There are indications here and there that Yahoo’s search share may have grown somewhat in recent months.

Dylan wrote, “When you ain’t got nothin’, you got nothing to lose,” but when you’re spending real dollars on search engine marketing you have plenty lose. And yet, according recent survey of 500 marketers, most search marketers still use the most basic metrics in evaluating the performance of their programs.

How basic?

While marketers picked conversion as their most important metric to optimize search campaigns, click through rate and cost per click, relatively less meaningful metrics, still ranked second and third.

These are certainly important metrics, but what about something slightly less basic, like revenue, leads or CPA? Well, even though 85 percent of our respondents said their primary goal was to sell products or services online, 31 percent cannot measure cost per customer (or sale) nor return on ad spend, and 40 percent do not know how to accurately measure profit per customer (or order).

Far too many search marketers are still making campaign decisions based on superficial metrics, such as click through rates and cost per click, and can optimize campaign effectiveness by increasing focus on deeper revenue-impacting measurements, such as profit per order, cost per unique customer and activity measurements such as time spent on site or click path.

Additionally, the survey indicated the majority of search marketers are manually managing keywords using Excel, limiting their ability to effectively scale search marketing campaigns.

According to the survey:

• Marketers picked cost per click and click through rate as among their top metrics to optimize search campaigns instead of deeper metrics such as return on ad spend, cost per customer (or sale) or profit per order
• 43 percent of e-commerce respondents do not know how to accurately measure profit per customer (or order)
• 67 percent of respondents indicated not having enough time to effectively manage campaigns as their top issue in search marketing, while only 35 percent use an automated bidding solution

Incorporating bid management solutions will enable customers to utilize both the most common metrics they need to optimize their campaigns like cost-per-customer and return on ad spend, and advanced metrics like profit per customer and lifetime value per customer.

Search engine marketing has been around for over 10 years now. Let’s help each other move beyond the basics and propel the industry forward.

The survey was conducted by Omniture as a part of the Omniture Online Marketing Research Report. Because the survey is ongoing, results over time may change. These results are as of April 8, 2009.

SEMPO formally released data on the state of search engine marketing, its annual survey of agencies and marketers. This year’s survey consisted of 800 respondents from all over the globle. However 68 percent of respondents were from the US, with 20 percent coming from a range of countries. Seven percent of respondents were from Canada and 5 percent from the UK.

The respondents/clients represented a range of industries. The top sectors were “retail, business services, electronics manufacturing and financial services.”

As part of the findings and related report SEMPO forecast that SEM spending would grow from a projected $14.7 billion in 2009 to $26.1 billion in 2013. SEM is defined broadly as all spending on search-related marketing including SEO. Consequently it represents more than the share of online ad revenues that the IAB assigns to search.

The report is lengthy and extremely detailed. Among other things it explores what marketers are willing to pay for specialized offerings or enhanced targeting including behavioral, local and mobile. Here are some of the high-level findings:

• In the past three years, offline channels are most frequently cannibalized to move budget towards SEM. This year, the top marketing channels advertisers are shifting budgets from are print magazines (26%), direct mail (21%), and print newspapers (19%).
• However, the degree to which certain channels are cannibalized is a bit lower than in last year’s survey. Only a quarter of advertisers (26 percent) report they are shifting budgets from print magazine advertising (down from a third last year), and only 15 percent of advertisers are cannibalizing their web site development budgets. Other channels affected by a shift in spending include TV advertising (13 percent), conferences (10 percent) and print yellow pages (9 percent).
• Organic SEO has always been the favored search marketing tactic among advertisers, but its popularity has risen significantly, from 80% in 2005 and 76% in 2006, nine out of ten advertisers using it the past two year.
• Advertisers are most willing to pay a premium for targeting consumers based on behavioral metrics followed by demographic targeting
• There is growing interest in new platforms for search marketing such as video and mobile search, and growing willingness to pay more for these emerging vehicles

In the context of the debate surrounding whether search is a branding or direct response medium, one of the most interesting findings was that respondents said “brand awareness” was the top goal of paid search, which took over from “sales” in the previous year’s report. The larger the firm the more the goal shifts from sales to brand awareness, which makes a certain amount of logical sense. Still I found it interesting.

Some charts from the report:

Where are marketers transferring budgets from to support paid search?

Source: SEMPO/Radar Research (2/09)

Overall the report shows the search industry to be maturing and increasingly sophisticated, diversifying into a range of related digital media.

According to data released yesterday by the IAB/PwC on Q4 and full year 2008 online advertising revenues, performance-based advertising and search gained while other segments declined slightly or were flat. Overall, online advertising grew 10.6% in 2008 to reach $23.4 billion. US online ad revenue in Q4 was $6.1 billion, up from $5.8 billion in the third quarter of last year. Especially noteworthy for the readers of this blog, search ad revenues comprised 46 percent of Q4 online ad revenues, up from 42 percent a year ago.

Here are a selection of charts from the report:

For all the talk of the collapse of display, usage remained constant in 2008 vs. 2007. By contrast, rich media and video lost share and so did classifieds, which has continued to lose share over the past four years. Also worthy of note is the big jump in performance based ads vs. CPM pricing. What that means is that more marketers were buying display advertising on a PPC basis. It also reflects the strength of search marketing at a time of economic uncertainty.

On a related note, eMarketer publishes some of SEMPO’s numbers regarding the breakdown of spending in the search market in 2008:

SEMPO’s survey data and projections indicate that $13.5 billion was spent on SEM last year. This is a broader category than the IAB’s search category; it includes technology and SEO-related spending. It also includes fees and costs not reflected in direct ad spending. The IAB and SEMPO numbers don’t line up but the different definitions of the market could help account for the relatively sizable discrepancy between the IAB 2008 search revenue number ($10.5 billion) and SEMPO’s SEM spending figure ($13.5 billion).