Search Taking More Ad Dollars, But Where's It Coming From?

Search and social compete for ad dollars. Analysts from J.P. Morgan believe this occurs most between Google search and Facebook Exchange, Google display and FBX/news feed ads -- and, in the future, will occur most between YouTube and auto-play video ads.

The share of budgets toward social for these agencies remains small, but during a call hosted by J.P. Morgan analyst Doug Anmuth, Rimm-Kaufman Group noted a 40% sequential decline in the amount marketers spent in FBX during 1Q 2014. "We do not think this is a surprise given the retail-centric nature of their client base and normal seasonality," he wrote in a research note. "RKG did indicate that FBX pricing was about 33% lower than on other display platforms."

Finally, an analyst admitting social and search compete for advertising dollars -- something we will discuss at the MediaPost Search Insider Summit on April 30 in Key Largo, Fla. Not only for the ad dollars, but who will manage the budgets.

Along with RKG, iProspect joined the call. Both agree that mobile remains the primary driver of query and click growth for paid search. Some brands tell me that Google Shopping and formats for product listing ads continue to take budgets from paid search because AdWords and Bing don't provide the metrics that product listing ads do.

Similar to the sentiment we're hearing elsewhere, RKG said marketers in the U.S. increased the amount they spent on paid-search ads in the first quarter of 2014, but not as much as they did in Q4 and Q3 in 2013. Google saw 17% growth last year, compared with 19% and 21%, respectively.

RKG reported a 10% year-over-year rise in click and 6% CPC growth, although average CPCs remain pressured by lower conversion rates on smartphones. iProspect also noted strong growth last quarter, but with the cost per click (CPC) sequentially rising, per J.P. Morgan.

Forecasts predict a good year for search engine marketing. Overall, RKG expects between 15% and 20% Y/Y growth in search spend in 2014, slightly below the approximate 20% levels the industry experienced last year.

Mobile remains the primary growth driver and the SEMs expect a heightened focus on mobile tools, cross-device initiatives, and better use of data.

RKG suggests that tablets continue to drive mobile CPC growth. The company notes that mobile took 36% of clicks in Q1, split evenly between smartphones and tablets.

Tablet conversion rates, at 20%, appear to be similar to desktop and smartphones at a 7% lag. J.P. Morgan tells us that tablet pricing has converged to levels seen in desktop through Enhanced Campaigns -- while smartphone pricing remains at about 35% of desktop levels, according to RKG.

There have been lots of reports lately highlighting the increase in search marketing spend from companies like IAB, and Kenshoo.

Chris Copland, GroupM Next CEO, tells me he'll reveal where the increase in search ad dollars are coming from at the MediaPost Search Insider Summit, April 28--30. Come join us in person or tune-in online and you'll know, too.

"$100 bill being stretched" photo from Shutterstock.

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