Search engine advertising continues to show healthy growth as spending in Q4 2012 grew 11% year-on-year (YoY), impressions grew 11%, and total clicks grew 4%, according to the "State of Paid Search Report: Q4 2013," released from The Search Agency Tuesday.
Advertisers allocated more of their budget to ads running on smartphones and tablets in 2012 overall, compared with prior years. The 79% YoY uptick represents 15.6% of total spend for the quarter. Smartphones and tablets drove 23.4% of total clicks -- an 89% increase YoY, which represents one of the more interesting changes in search engine marketing and insight into earnings that Google will report after the stock market closes Tuesday.
Keith Wilson, VP of agency products at The Search Agency, said advertisers continue to have trouble monetizing traffic on smartphones.
Still, marketers spent more of their paid-search budget on tablets compared with smartphones -- 8.5% versus 7.1%, respectively. Overall during Q4, marketers spent 11% YoY more. Smartphone spend rose 44%; tablets, 199%; and desktop computers, 3%.
While Google's and Bing's respective market share for paid-search budgets on desktops remained virtually unchanged for the past five quarters, marketers spent more on Bing in Q4 to advertise on mobile devices compared with the prior year. Bing's share on smartphones rose 58% to 11.2%, and on tablets the share rose 42% to 11.2%.
Mobile searches comprised 25% of all searches. The increase did not come at the expense of desktop searches, which remained level from Q3 to Q4 2012. Mobile experienced an increase in search share, demonstrating steady growth.
Overall cost per clicks (CPCs) rose 7% and click-through rates (CTRs) fell 7% YoY. The paid-search advertising market on tablets became more competitive. CPC discount for tablets fell from 28% in Q3 2012 to 22% in Q4 2012. The report suggests that advertisers will shift a larger portion of their budget to tablet advertising as impression volume increases with consumer usage during Q1 2013.
CPCs on smartphones declined 17% YoY to $0.30, while CPCs on tablets rose 25% YoY to $0.50, as engagement on smartphones continues to grow, demonstrated by impression and click-share growth.
Overall, total clicks on Google rose 4% YoY and CPCs rose 7% from $0.55 to $0.59. Bing click traffic rose 4% and CPCs 15%.
What can marketers expect during the first quarter in 2013?
The Search Agency says the share of search queries on smartphones and tablets should increase, with Google taking the majority of the share. Overall, CPCs will rise, but growth will slow with the shift to smartphones and tablets, where CPCs are lower than desktop. CPC discounts on tablet devices will continue to decline as search volume increases and more advertisers invest in tablet-optimized landing pages and Web sites.
The cost for clicks on smartphones will also narrow in Q1, but remain well above the relative discount on tablets.