Data Based on Efficient Frontier’s Q2 2009 U.S. Search Engine Performance Report
SUNNYVALE, Calif. – As the economy slows its free fall, the Search Engine Marketing (SEM) sector appears to have stabilized, according to Efficient Frontier’s U.S. Search Engine Performance Report: Q2 2009. Additionally, Bing captured attention and momentum for Microsoft, increasing its paid click share by 5% month over month since its launch in June. Efficient Frontier, a leader in performance marketing with the largest SEM spend under management, developed the report based on a fixed sample of the overall Efficient Frontier U.S. customer base.
“Search has always been a microcosm of the overall economy and our U.S. Search Engine Performance Report has become the go to source for market analysis and trend spotting,” said David Karnstedt, President and CEO, Efficient Frontier. “The second quarter report indicates that the search marketing sector may have bottomed out as spending stabilized, which is good news for the industry. Additionally, with the launch of Bing and its early signs of promise, the battle between search titans is once again heating up.”
Overall Economic and Advertiser Trends
During Q2 2009, Search Engine Marketing (SEM) stabilized from a series of accelerating quarterly declines. Efficient Frontier’s data shows that the rate of decline in total spend year-over-year (YOY) lessened over the past two quarters. Overall, spend was down 21% YOY. This YOY drop in spend is a mild improvement from Q1’s 23% YOY drop in spend. Quarter Over Quarter (QOQ) spend from Q1 to Q2 was down 3%, indicating stabilization given the expected seasonal impact.
This aggregate market stabilization masks very different trends by advertiser size. Large advertiser trends matched the total market, showing a stabilization in spend. Medium sized advertisers increased spend, capitalizing on the opportunity to grow share efficiently given less competitive marketplaces, as well as greater access to marketing resources compared to smaller advertisers. Smaller advertisers continued to slow spend.
Advertisers also remain focused on efficiency, working to meet or grow campaigns at lower investment levels. Advertisers are using more aggressive return on investment (ROI) and cost-per-acquisition (CPA) targets to ensure higher SEM efficiencies. As a result, cost per clicks (CPCs) are down, resulting in a search market that is operating at a 30% higher efficiency rate YOY. However, search engine efficiencies varied significantly with Google’s ROI rising dramatically, while Yahoo! showed a moderate decline in efficiency.
Search Engine Market Share — Clicks and Spend
Paid click share was relatively stable and remained consistent with recent quarters. The largest move was made by Microsoft that posted gains in click share at the expense of Yahoo! In regards to spend share, Google saw a slight drop while Bing, and to a lesser degree Yahoo!, gained ground.
Performance of Bing
Microsoft launched Bing at the beginning of June 2009. An analysis of the performance of Microsoft Live Search and Bing, during the first two quarters of 2009, shows that the launch of Bing increased Microsoft’s click share by 5% month-over-month. While Microsoft had already begun gaining momentum in April 2009, the launch of Bing regained the spend share that Microsoft had lost between Q3 2008 and Q1 2009.
Bing’s paid click gains were most significant in finance and travel, increasing share by 17% and 10% respectively. Travel was the more expected gain, given the revamped consumer experience. Finance may have gained momentum because of the sub-category drill-down features in the new engine. Paid clicks for the retail category were flat.
Trends by Vertical Market
Automotive
Efficient Frontier’s data indicates that the automotive sector in search is in fact healthier than market conditions suggest. Manufacturers are making a play for market share given the bankruptcies of GM and Chrysler. Impressions increased QOQ, indicating a rise in shopping activity, a positive sign for U.S. auto sellers looking for market stabilization. Additionally, sellers of auto parts are performing well as consumers maintain and repair their existing cars, as opposed to purchasing new ones.
Retail
The retail sector has seen a large increase in impression volume and a corresponding decrease in Click Through Rates (CTRs). While these trends are indicative of comparison shopping as opposed to serious buyers, the increase in CPCs indicates a growing demand in the retail sector. After a poor Q1, the rising CPC in Q2 provides a glimmer of hope for the search retail sector.
Travel
Due to the current economic climate, the travel category is experiencing a wave of consolidation. As the larger players in this sector attempt to increase their competitive edge by offering incentives such as waved booking fees, the smaller aggregators are being squeezed out of the marketplace. Spend has declined by 31% and CPCs have fallen by 22%. In addition to less competition, lower revenue per booking in the travel sector has driven down the cost tolerance for search.
Finance
Spend in the finance sector is closely tied to the performance of the stock markets. As the markets declined between Q2 and Q4 2008, spend in the finance sector likewise declined. As the markets recovered in Q2 2009, spend in the finance sector also improved. In line with the trend noted in Q1 2009, impression volumes in this sector continued to soar for two reasons: (1) consumers were looking for information, but not necessarily buying a product; and (2) consumers in the buying cycle were less qualified.
Outlook
Due to the immediacy of action on the part of the consumer, and the measurement and response on the part of the advertiser, the state of paid search is very closely tied to the state of the economy. As the economy continues its slow recovery, Efficient Frontier expects advertising budgets to be in line with overall economic trends. As such, the company expects Q3 2009 to be similar to Q2 2009 in regards to spend and ROI trends.
Performance in the various advertiser sectors will vary as the economic climate and the subsequent unique variables pressure each sector differently. Weakness in the travel sector will remain as consolidation continues with smaller players being purchased or going out of business. The finance sector will continue to move in line with the stock markets. Retail and automotive sectors will react to shifts in consumer sentiment and spending.
Larger movements within the individual search engines over the coming quarters are also expected. It is likely that Microsoft, given their investment, will continue to support the early success of Bing to drive market share. Yahoo! appears vulnerable to spend share losses due to their trailing efficiency trends.
Research Methodology
Analysis for the Efficient Frontier report was based on data from a fixed sample of the overall Efficient Frontier U.S. customer base from Q2 2008 through Q2 2009, and covers nearly 81 billion impressions and 722 million clicks on search and content ads on Google, Yahoo!, Microsoft Live Search and now Bing. The report includes data from advertisers in the financial services, travel and entertainment, retail, automotive and business-to-business verticals.
The complete U.S. Search Engine Performance Report: Q2 2009 is available for download from the Efficient Frontier website at: http://www.efrontier.com/research/search-engine-report/Q2-2009.
About Efficient Frontier
Efficient Frontier is a worldwide leader in performance marketing solutions for both advertisers and agencies. Founded in 2002, Efficient Frontier pioneered the application of modern portfolio theory to SEM and today combines its core predictive modeling algorithms and bidding technology with comprehensive strategic and tactical value-added services to manage more than $750 million in annual search spend globally. The largest and most sophisticated advertisers and agencies partner with Efficient Frontier to achieve and sustain optimal campaign performance and growth in highly complex and competitive search marketplaces. The company is headquartered in Sunnyvale, California, with offices in New York, the United Kingdom, France, Germany, and India, and technology licensing partnerships in Japan, Hong Kong and Australia. Efficient Frontier is a privately held company with funding from Redpoint Ventures and Cambrian Ventures. For more information, please visit www.efrontier.com and subscribe to the Efficient Frontier blog at blog.efrontier.com.
