Rising CPC, Clicks, Ad Impressions Identify Positive Growth

Online advertising grew in the third quarter for search, display and social media among Efficient Frontier's clients, shaking off economic doubt that 2010 would end on a higher note. Search marketing rose 19% in the quarter, compared with a year ago, as well as 6% sequentially, according to the company's U.S. Digital Marketing Performance Report for Q3 2010.

Return on investment (ROI) in search jumped 8% year-on-year, which indicates a rise in advertiser demand. Overall, however, marketers spent more on search advertising across retail, finance, auto and travel during the quarter, according to the report.

CPC, clicks and impressions rose, pointing to strong advertiser and consumer demand. Financial services spent more for the first quarter in more than a year, rising 14% year-on-year and 20% sequentially. Consumer and advertiser demand in financial services lifted both clicks and CPC. Travel extended the strength seen throughout 2010 with 38% year-on-year and 8% sequential gains. The automotive sector posted 20% growth year-on-year and 12% sequentially.



Adoption of display ads through ad exchanges also rose, and demand for advertising through Facebook's marketplace points to the channel as having the ability to add a boost to digital marketing campaigns.

During the last three quarters Efficient Frontier indentified growth in retail, but in Q3 every sector shows strength. Efficient Frontier VP of marketing Justin Merickel says Q2 to Q3 typically is a flat quarter for search, so any sequential uptick in search identifies a positive trend because that will drive four-quarter numbers.

Sid Shaw, director of business analytics at Efficient Frontier, added that all sectors have picked up, so "we really think it's a recovery." He points to the overall spend trend and return on investment data as another indicator. Usually when spend goes up, ROI drops, because that's the way the marketplace works. In this quarter, the ROI rose along with the amount of money advertisers spent.

Across the engines, Efficient Frontier found that the amount advertisers spent on paid search rose 21% year-on-year and increased 8% sequentially. As expected, Q3 2010 ended on a more difficult quarter. In 2009, the amount of the budget allocated to advertising increased 10% between Q2 and Q3. ROI rose by 7%, indicating that the market has more room to spend.

During the quarter, Google maintained market share, but Bing inched up its share at the expense of Yahoo. As the Yahoo and Bing search integration continues, about 10% of Yahoo ads are now served by Bing. The move shifted additional spend to Google, as advertisers grew leery of the combined integration. Most will take a wait-and-see approach. The combined CPCs across Bing and Yahoo have led to a less efficient integrated marketplace in the short term.

As Bing continues to increase the ads served on Yahoo, the click volume increased by 21% year-on-year, according to the report. Google increased its click volume by 9%, while Yahoo's click volume declined by 21%. The report also points out that CPCs increased year-on-year across all engines, but Bing experienced the biggest increase -- 27% -- while Google and Yahoo's CPCs increased by 14% and 11%, respectively.

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