As this is my last column for 2010, I thought it would be a good time to share some macro trends with you and make some predictions for 2011. While some of my analysis corroborates generally held conceptions in the marketplace, I hope you find my other findings new and insightful.
Trend #1: CPCs Will Continue To Increase By 12-15% Per Year
In the above chart, I have plotted the change in CPCs since January 2009. These are robust numbers as they are derived from the more than $1 billion in online marketing spend that we manage. The regression line shows that on average CPCs have increased by 1.34% per month since the beginning of last year. Over a year this amounts to a 16% increase. We can expect these trends to continue next year albeit at a slower pace. By my estimates CPCs will increase by 12-15% on a year over year basis.
Trend #2: Cross Channel Optimization Will Become More Important Than Ever
Until now, search marketers could operate in their own silo and do a good job managing their campaigns. However, with the advent of social media advertising, cross channel reporting and optimization becomes imperative.
The following graph shows Facebook performance for a retailer. When one looks at conversions that involved Facebook, only about half were conversions where Facebook was the last click. The other half involved Facebook as the first touch but another channel as the final touch before conversion. If the marketer was only looking at the last click, he or she would have underestimated the performance of Facebook by a factor of two! Similar analysis for display funnels reveal that up to 60% of display conversions have a search overlap. Thus, as advertisers look to grow their social media and display programs they will also have to pay attention to the cross-channel piece of the puzzle.
Trend #3: Bing Will Continue To Gain Marketshare After A Short-Term Marketshare Loss
From Q1 2009 up to the alliance with Yahoo, Bing had quietly but remarkably increased its marketshare from 3.5% to 7.3% in 7 quarters. The chart below shows that it had done so very steadily without any erratic jumps or drops.
However, I had anticipated a temporary market share loss for Microhoo for a few reasons. For one, lower quality Yahoo traffic would be subsidized by higher quality Bing traffic in the unified CPC marketplace. Second, many smaller advertisers that didn’t pay attention to their Bing campaigns would suddenly have all their Yahoo-Bing traffic served through adCenter. Third, due to the difference in Yahoo’s and Bing’s algorithms, many advertisers will underserve ads due to keyword coverage issues. My preliminary research shows that there has indeed been a short term market share loss.
However, I expect these trends to reverse for two reasons. First, smaller advertisers should catch up with the change and improve the quality of their Bing campaigns. Second, I expect Bing to continue to innovate. Microsoft’s recent announcement of merging social data with search results will benefit them in the retail vertical (where it has a disproportionately low market share).
Trend #4: A Smarter, Bargain-Centric Customer
The 2008 recession fundamentally changed consumer behavior. Consumers went from using search as an intent channel to a research one. Where once a single search would have led to a transaction, the new bargain savvy consumer searched multiple times and across channels before making a purchase. The chart below tracks the average impressions per click over time. The upward trend implies that consumers are less prone to clicking on an ad than they were before. The new consumer is savvier and is willing to do a lot more research before making a purchase.
Trend #5: Mobile Will Finally Take Off
Yes, every year is anticipated to be the year of mobile. But I really think next year will be different. As things stand now, mobile queries represent about 10% of all queries made on Google. However, very little of this monetizes. This should all change soon. Several start-ups are working on enabling mobile ecommerce. Google itself announced that it is working on a phone that will replace credit cards. I think that after years and years of anticipation mobile e-commerce will have finally arrived and will take off next year.
How To Leverage These Trends
So this begs the question, what should marketers do to anticipate these trends? Here are some recommendations.
Plan for an increasingly competitive marketplace. While CPCs are increasing, and thereby affecting the bottom line, consumers are looking for a better deal thereby pressuring the top line. In the face of this increasingly competitive marketplace, it is important like never before to focus on the basics: ad copy testing, landing page optimization and SEO (to get “free” traffic as well as helping SEM CTRs).
Optimize your Bing campaigns. Bing should now represent 20-25% of your volume. Ensure that these campaigns are running optimally with full keyword coverage, if you haven’t done so already.
Plan for mobile. If mobile starts to monetize in a big way next year, you could see 10% or more conversions coming from mobile. It’s prudent at this time to start testing mobile via the AdWords platform.
Put cross-channel infrastructure in place. As an advertiser of reasonable scale, chances are that you are using Facebook as an advertising channel. Ensure that you are looking at Facebook data in a cross-channel context to fully understand the efficacy of the channel.
It has given me a lot of pleasure to share my analysis and insights with you this year. I look forward to sharing more of the same in 2011.
Wishing you happy holidays and a happy new year!
Opinions expressed in the article are those of the guest author and not necessarily Search Engine Land.