Report: Search Ad Spending Stabilizes While Bing Gains On Google, Yahoo

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.