• by Laurie Sullivan  @lauriesullivan, January 6, 2011

Google Instant, Baidu's growth in China, and the integration of Bing and Yahoo in the U.S. drove brands to spend more on paid-search advertising in 2010 among Covario's clients -- but most will spend even more in 2011, according to Craig Macdonald, CMO of the San Diego-based search marketing agency.

Macdonald says in 2010, Covario's multinational clients like IBM and Lenovo spent 68.3% of global advertising paid-search budgets in the Americas, about 22.7% went to EMEA, and 9% went to APAC and Japan.

Similar to growth in emerging markets for financial investment in stocks, search engines overseas also experienced growth last year. Baidu of China grew 211% in 2010 compared with 2009, according to Macdonald. In 2011, he expects regional spend to change based on growth rates per region. Covario is advising customers to spend 60% of their budget in the Americas, 25% in APAC, and 15% in EMEA.

Covario has issued its latest Global Search Spending Analysis report suggesting that the company's paid-search ad clients in high-tech and consumer electronics -- representing about $350 million in paid-search spend -- increased nearly 27% in 2010, compared with the prior year. In aggregate, the group spent less in Q4, down from about 8% in Q3, ending in September. Most of the budget went to earlier quarters in those years. The quarterly growth rate between Q2 and Q3 came in 'unexpectedly high" -- between 30% and 40% --and continued through Q4, but nowhere near that rate.

Macdonald recommends that clients need to spend more this year on paid search -- in fact, between 15% and 20% more for 2011, compared with last year. Although it may seem like a pitch to make more money, he says the increase, on average, is necessary for clients to maintain market share in the global high-tech and consumer electronics sector. "The percentage is based on growth rates in the market and aggregating what our clients are saying," he says. "Companies believe if they don't keep pace with competitors they could lose market share."

The majority of that budget increase will go to engines overseas. Most incremental spending in EMEA will go to Google, and in China, Baidu. In China, Covario's clients spend about 80% on Baidu and the remainder on Google. About 50% of the increased budget spend in the Japanese market will go toward Yahoo.

"Incremental money being spend in the Americas is meeting decreasing marginal returns, and that's not true overseas," Macdonald says. "The U.S. is becoming more saturated."

No surprise that in the United States, Google continued to dominate paid-search marketing in 2010, with 78% global market share and 18% spending growth compared with the prior year. Marketers, however, did invest more in paid search on Yahoo -- which rose 34%, while global spending on Bing increased 84% compared with the prior year.

Macdonald cites Baidu's control of the Chinese search market and Google's 96% market share in Europe, the Middle East and Africa (EMEA) for a slight decline in Google's overall market share.

Covario clients also plan to spend more than $1 million on Facebook in 2011. Macdonald says companies will allocate between 10% and 20% of their paid-search budget on Facebook advertising.

The report recommends that advertisers should expect CPCs in 2011 to come in at around $0.75-0.80 per click. The company also believes that CPCs will decline in the second half of the year when Google Instant, Baidu, and Bing-Yahoo are finalized and short-term overrides are eliminated from the majority of global advertising programs. Click-through rates (CTRs) are mixed for the major platforms globally. Google is increasing due to the impact of Google Instant, yet Bing-Yahoo CTRs are down slightly from Q3'10.

This spend-more-in-2011 on paid search and Facebook strategy will work for other multinational companies in automotive, consumer packaged goods (CPG), and pharmaceutical, Macdonald says.