Retail Leads the Comeback Followed by Positive Trends in Finance and Autos; Data Based on Efficient Frontier’s Q1 2010 U.S. Search Engine Performance Report
SUNNYVALE, Calif. – In Q1 2010, the Search Engine Marketing (SEM) industry posted solid year on year (YoY) growth of 20% and a quarter on quarter (QoQ) decline of 8%, which was less than half of the decline posted last year. This is according to Efficient Frontier, a leading performance marketing company with more than $900 million in global client spend annually. This data and specific industry trends were released today in the company’s Q1 2010 U.S. Search Engine Performance Report.
“The performance marketing industry is off to a strong start in 2010,” said David Karnstedt, President and CEO, Efficient Frontier. “We saw strength across the retail, finance and autos categories and initial signs of a comeback in travel. We continue to believe that the search sector will approach gains of 20% year over year.”
Report Highlights:
Q1 2010 Executive Summary
Spend Growth Exceeds Expectations
In Q1 2010, the search marketing sector slowly roared back, building on a fourth quarter 2009 that posted solid sequential and year on year growth. YoY spend was up 20% with a light seasonal pull-back in QoQ spend of 8%, less than half of the previous year’s sequential drop.
Search query and click volumes are up substantially YoY while Cost per Click (CPC) remains relatively stable. Overall, return on investment (ROI) in search was up 4% YoY as consumers returned to purchasing with a more favorable economic outlook.
Retail Keeps the Accelerator On Beyond the Holidays
In Q4 2009, spend in the retail sector grew 17% YoY and 46% QoQ. Building on that momentum, retail spend grew 32% YoY in Q1 with a relatively tame seasonal 27% QoQ decline. CPC grew 10% YoY after a 9% YoY decline in Q4, suggesting strengthening advertiser demand.
Query volume was up 73% YoY in Q1 2010, clearly depicting that consumers’ shift to shopping online shows no signs of abating. Rather, the light post-holiday Q1 abatement in query volume suggests that the online channel is a consistent part of day-to-day life rather than a one-off spike during the holidays.
SEM Strength Expands in Finance and Autos
Both the finance and automotive sectors saw a return to health this quarter as spend increased 9% YoY. Large query volume increases in automotive, up 29% YoY, highlight a renewed consumer interest in the new and used cars.
Travel showed initial signs of a comeback as spend grew 38% QoQ in the seasonally strong first quarter. Travel CPCs and spend were down just 4% YoY, the most favorable YoY comparison in several quarters. The numbers for the various sectors included:
Retail: Spend was up 32% YoY on strong consumer and advertiser demand;
Travel: Spend was down 4% YoY in the seasonally strong Q1;
Finance: Spend was up 9% YoY on click through rate (CTR) gains;
Auto: Spend was up 9% YoY on volume gains.
Search Engine Share Growth Goes Bing, Bing, Bing
After a pause in growth during Q4, Bing renewed its market share gains in Q1 2010 as it increased its click and spend share to 5.5% and 6.5%, respectively. These represent YoY gains of 45% in both click and spend.
In contrast to Bing’s growth, their partner Yahoo! saw further losses in market share across both clicks and in spend. Yahoo!’s share of clicks fell to 20.5% from 24.2% in Q1 2009 and 22.7% in Q4 2009. Additionally, Yahoo!’s share of spend fell to 18.7% from 21.3% in Q1 2009 and 22.7% in Q4 2009. Yahoo!’s Q1 2010 numbers represent a 15% YoY click share loss and 12% YoY spend share loss.
Google expanded its dominant position in Q1, closing in on 75% share of both spend and clicks. Return on investment on Google is up 16% YoY on slightly lower CPCs and improving conversion rates. Overall, clicks were up 8% YoY and 4% sequentially (QoQ).
Outlook for 2Q10 and 2H10
Advertiser Spend Trends
Efficient Frontier believes that SEM growth will approach 20% YoY for the full year 2010. There are several reasons for this prediction, including: 1) Impression volumes are higher in all sectors as compared to a year ago, indicating greater consumer interest; 2) CPCs have made a broad recovery, indicating greater demand and larger budget appetites from advertisers; 3) Broader economic conditions appear to have stabilized, a trend that will result in a lift in consumer purchasing and companies advertising online.
Search Engine Landscape
The search engine landscape is experiencing shifts in both click and market share as Bing continues to emerge. Unfortunately for their broader partnership, Yahoo!’s loss in share is Bing’s gain. There is also no sign of Google’s growth abating as they close in on 75% share of spend and clicks.
Research Methodology
This analysis was completed based on data from Efficient Frontier search engine marketing customers and the resulting Efficient Frontier’s Customer Index. The Efficient Frontier Customer Index represents a subset of the company’s clients with spend data for six consecutive quarters or more, whose resulting SEM metrics are then normalized to average industry category contributions established by multiple third party data providers. The Efficient Frontier Customer Index consists of an axed sample of large scale U.S. search engine advertisers across multiple sectors, including finance, travel, retail and automotive. The Efficient Frontier Customer Index sheds light on trends in search engine spending and performance on a year-over-year (YoY) and quarter-over-quarter (QoQ) basis.
The complete U.S. Search Engine Performance Report: Q1, 2010, is available for download from the Efficient Frontier website at:
http://www.efrontier.com/research/search-engine-report/Q1-2010
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About Efficient Frontier
Efficient Frontier is a leading digital performance marketing company managing search and display optimization for large-scale marketers around the globe. Founded in 2002, Efficient Frontier pioneered the application of modern portfolio theory to Search Engine Marketing. Today, the company combines its core predictive modeling algorithms and bidding technology with comprehensive, value-added services to manage more than $900 million in annual 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 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 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.
