Paid-Search Spend Rises, Signals Stronger Year Ahead

Q1 Spend Growth

Marketers spent 11% more on paid-search ads between January and March in the U.S., compared with the year-ago quarter, making it the strongest quarter since the fourth quarter of 2008, according to a report published Tuesday by SearchIgnite.

The SearchIgnite Q1 2010 U.S. Search Market Report reveals that retail and travel marketers drove most of the growth in paid search, with investments in these sectors rising 26% and 9%, respectively, compared with the year-ago quarter. In fact, it represents the fifth consecutive quarter that retailers increased the amount spent on paid search based on prior years.

The first quarter typically shows significant sequential declines, as marketers cut back on the amount spent on paid-search ads after the holidays. Comparing first-quarter 2008 with the same quarter in 2009 reveals a 14% decline in paid-search ad marketing investments.



Last year, paid search performed much better overall than the rest of the advertising industry, but Roger Barnette, founder and president at Searchlgnite, says the first quarter in 2010 shows marked improvements. "Retail continues to be strong, but we also see signs of life in travel¸ which is almost up 10% year-on-year," he says. "It makes sense that a rebound in travel would lag a rebound in retail. It's a larger-purchase item and longer consideration cycle."

Barnette says "sentiment" is improving among travel clients. The sector should continue to improve as the industry emerges from a down year.

Although Bing's market share for the first quarter fell 19% sequentially -- slightly less than the average 21% slide for Google and Yahoo -- the overall double-digit uptick based on the same quarter in the prior year shows promise that the industry has hit a turnaround.

Bing grew market share in the first-quarter 2010 compared with the fourth quarter of 2009, as marketers increased investments 22% in paid search. Overall, Microsoft's market share held steady from the fourth quarter at 7% share of total U.S. paid-search spend, while Google gained ground slightly -- rising to 78% of all spend. Yahoo continues to see declines, holding 15% share in the U.S.

For the most part, SearchIgnite clients rely on the platform to market based on performance -- meaning they judge the campaign's performance based on profitability, not for brand, exposure or product awareness. If companies spend more, it's generally because they make a higher return on investment (ROI).

Historically, Bing generates a higher ROI, but some of that might be attributed to fewer advertisers on Bing, Barnette says. There's less competition for the same keywords. Better inventory and a cashback program for retailers also might contribute to higher ROI on Bing. The ability through technology SearchIgnite developed enables the company to provide guidance to clients on ads that could bring the highest return.

The report tracks more than 50 billion impressions and 1 billion clicks on Google, Yahoo, and Bing.


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