Digital Marketing Sector Starts off Strong in Q1 2011; Retail & Finance Lead Growth; Demand for Facebook Ads Soars

Data Based on Efficient Frontier’s Q1 2011 Digital Marketing Performance Report

SUNNYVALE, Calif. – The first quarter of 2011 started off strong in the U.S. for digital marketing, with search engine marketing growing by 17% Year on Year (YoY) due primarily to solid increases in the retail and finance categories. Facebook advertising is also getting more competitive, with Cost Per Clicks (CPCs) increasing by 40% Quarter on Quarter (QoQ). Display advertising also showed positive signs with a 300% increase in exchange ad inventory and a 30% Cost Per Thousand (CPM) decline, indicating greater gains in reach and efficiency within the ad exchanges.

This is according to Efficient Frontier, a leading performance marketing company managing more than $1 billion in marketing spend annually on behalf of advertisers worldwide. This data and specific industry trends were released in the company’s Q1 2011 Digital Marketing Performance Report.

“The strong showing for digital marketing in the first quarter of 2011 was in line with our prediction of a 15% to 20% increase in spend in 2011,” said David Karnstedt, President and CEO, Efficient Frontier. “We’re also seeing great demand for Facebook’s ad products as the social networking giant’s ad offerings continue to evolve. This is all solid evidence of an economic recovery, and that marketers are seeing tremendous results when they intelligently allocate their marketing spend and optimize across channels.”

Report Highlights

Digital marketing continues to show strength in the first quarter of 2011. While search marketing decelerated as expected off of a big Q4 2010, YoY growth remains robust at 17%. Advertiser demand for Facebook’s ad products increased significantly with spend rising sharply on 40% QoQ CPC growth. The display ad exchanges also rapidly expanded with Efficient Frontier’s advertisers accessing more than 300% more inventory than a year ago at 30% lower Cost Per Thousand (CPMs). This means that display advertisers are gaining both reach and efficiency as new technologies like Real Time Bidding (RTB) become more prevalent.

Broad-Based Search Growth Across Nearly All Sectors

The retail sector was the big winner this past quarter, as retail impressions grew by 30% YoY, showing higher consumer interest in retail products. The Finance sector also fared well, growing at 18% YoY. The travel sector was the only sector that saw a decline in spend as CPCs remained flat.

Retail: Spend was up 22% YoY on increased consumer demand
Travel: Spend is down 13% YoY as CPCs are flat
Finance: Spend was up 18% YoY on CTR gains
Auto: Spend was up 10% YoY on CPC gains as well as increased in consumer demand
Bing-Yahoo! ROI Increase

Google continues to have the majority of overall market share in SEM spend and clicks post the Bing-Yahoo! integration. However, Bing’s ROI is currently higher than Google’s ROI. Bing’s ROI has increased 10% YoY while Google’s ROI has decreased by 12% YoY. While the revenue per click (RPC) on Bing is 12% lower than Google, the CPCs on Bing are also lower than the CPCs on Google, which is driving Bing’s higher ROI.

Facebook Becomes More Competitive

Efficient Frontier saw tremendous momentum in Facebook advertising throughout the last several quarters. Advertisers are eager to take advantage of the full capabilities in the Facebook Marketplace to engage with their fans and promote their brands. Because of this, spend on Facebook is growing. Our analysis shows CPCs have grown by 44% QoQ, indicating that Facebook is becoming more competitive as advertisers realize its tremendous value.

International SEM Analysis

United Kingdom

In the United Kingdom, spend grew 9% YoY, reflecting increased confidence in consumer consumption power. ROI in the U.K. increased by 6% YoY. Google dominates the SEM market with a 91% market share. Unlike the U.S., where the travel industry has declined, the overall demand for travel has increased in the U.K., with spend in the travel sector growing by 8% YoY due to impressions and click growth. ROI in travel has increased 14% YoY, indicating strong consumer buying intentions.

France, Germany, Australia

SEM market share is dominated by Google in France, Germany, and Australia with approximately 93% of the market. Yahoo! comes in second place in Germany and Australia while in France, Bing has a larger market share than Yahoo!.


Unlike the U.S. and Europe, Japan’s SEM market is more evenly divided between Google and Yahoo!, with Google taking a slight edge at 53% market share. Amidst the horrific crisis in Japan, SEM spend has grown by 13% YoY. The growth is due to a CPC increase of 7% YoY as well as click volume increase of 5% YoY.

Outlook for 2011

SEM Growth Continues

Efficient Frontier continues to be optimistic about SEM growth. Our prediction is that search will continue to grow 15% this year in the U.S. due to the strength in the finance and retail sectors. Our prediction for the U.K. is that search will continue to grow at 10%.

Bing-Yahoo! Market Share Increase

As Bing expands its network, it is likely that the traffic quality will drop. Having a 12% higher ROI puts Bing in a good position to expand its network while giving it a significant margin of error. The higher return on Bing-Yahoo! should cause rational advertisers to shift their advertising dollars from Google to Bing.

Cross-Channel Marketing

Advertisers should allocate their advertising spend across the various digital marketing channels including search, display, and Facebook. Each channel serves a significant yet different role in overall management of advertising campaigns. The ability to manage advertising in a transparent cross-channel manner will give advertisers a leg up in getting consumer attention in a market that is becoming increasingly competitive. Efficient Frontier’s prediction is that channels like display and Facebook will double over the next year.

Research Methodology

This analysis was completed based on data from Efficient Frontier search engine marketing customers and the resulting Efficient Frontier 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 a fixed sample of large-scale 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 YoY and QoQ basis.

The complete U.S. Digital Performance Marketing Report: Q1 2011 is available for download from the Efficient Frontier website at:

About Efficient Frontier

Efficient Frontier is a leader in online performance marketing managing search marketing, display and social media campaigns for advertisers and agencies around the world. Efficient Frontier currently manages more than $1 billion in annual marketing spend on behalf of their clients globally. Founded in 2002, Efficient Frontier pioneered the application of modern portfolio theory for search engine marketing and today combines its core predictive modeling algorithms and bidding technology with comprehensive strategic and tactical value-added services. 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, Hong Kong and Australia. Efficient Frontier is a privately held company with funding from Redpoint Ventures and Cambrian Ventures. For more information, please visit and subscribe to the Efficient Frontier blog at