• by Laurie Sullivan  @lauriesullivan, July 12, 2009

The search engine marketing (SEM) sector appears to have stabilized, according to Efficient Frontier's U.S. Search Engine Performance Report: Q2 2009, released Monday.

Performance analysis shows Microsoft Live Search and Bing, during the first two quarters of 2009, increased Microsoft's click share by 5% since the June launch. While Microsoft had already begun gaining momentum in April 2009, the launch of Bing regained the spend share that Microsoft lost between the third quarter in 2008 and the first quarter in 2009.

Not surprisingly, Bing increased paid click share in finance and travel by 17% and 10%, respectively. Paid clicks for the retail category were flat.

Advertisers have been focusing on efficiencies to grow the effectiveness of campaigns with less capital. The increase in aggressive return on investment (ROI) rates and cost-per-acquisition (CPA) targets can deliver higher search engine market (SEM) efficiencies. This means cost per clicks (CPCs) decline, resulting in a search market operating at a 30% higher efficiency rate year over year.

Google lost a bit of spend share, the amount of money companies spend to advertise, because it has improved efficiencies, according to Justin Merickel, VP of marketing and new product development, Efficient Frontier. "Bing and Yahoo actually gained in spend share," he says. "Advertisers will need to look at how to shift the budget to make sure every dollar goes into the most efficient channel."

Overall, economic and advertising trends continue to fluctuate. During the quarter end June 30, 2009, SEM stabilized after a series of quarterly declines, according to Efficient Frontier. The data shows that overall spend declined by 21% from the prior year. But this quarter's decline demonstrates a slight improvement, compared with the first quarter's 23% drop in advertising spend. Sequentially, the amount of money marketers spent declined 3%, indicating the market has begun to stabilize.

Efficient Frontier supports about 70 advertisers, reflecting more than $400 million in annual U.S. spend in paid search. The large advertisers spend more than $200,000 monthly on search; medium between $50,000 and $200,000; and small, less than $50,000.

During the second quarter, large companies that advertise began to stabilize the amount spent. Medium-size companies increased spend, capitalizing on the opportunity to grow share given less competitive marketplaces. Small companies continued to slow spend.

The automotive, retail, travel and finance marketers show signs of positive growth. After a poor first quarter, the rising cost per click (CPC) in the second quarter provides hope for the search retail sector.

The retail sector, for example, has experienced a large increase in impression volume and a decrease in clickthrough rates (CTRs). While these trends suggest more consumers continue to comparison shop, as opposed to buying, the increase in CPCs indicates demand.

Retailers with discount merchandise continue to see improvements as consumers look for discounts, according to Siddharth Shah, director of business analytics, Efficient Frontier. "In automotive, we found companies that sell spare parts are doing better because more consumers are looking to fix old cars rather than buy new," he says.

Efficient Frontier's data reflects a healthier market in the automotive sector. Manufactures are making a play for market share given the bankruptcies of GM and Chrysler. Impressions increased sequentially, indicating a rise in shopping activity, a positive sign for U.S. auto sellers looking to stabilize the market. Sellers of auto parts are performing well as consumers maintain and repair their existing cars, as opposed to purchasing new ones.

Travel is experiencing consolidation. Larger players are offering incentives like waved booking fees to squeeze out the competition. Advertising spend has declined by 31% and CPCs have fallen by 22%.

Analysis for the Efficient Frontier report was based on data from a fixed sample of the overall Efficient Frontier U.S. customer base from Q2 2008 through Q2 2009, and covers nearly 81 billion impressions and 722 million clicks on search and content ads on Google, Yahoo, and Microsoft Live Search (now Bing). The report includes data from advertisers in the financial services, travel and entertainment, retail, automotive and business-to-business verticals.