Paid Search Connecting More Advertisers With Consumers This Holiday Season

Money

Advertisers continue to spend more on search engine marketing this holiday season to reach consumers clicking through paid-search ads to purchase online.

On average, consumers spent 20.7% year-over-year in the first half of Q4 2010 and conversion rates rose 28.7%, compared with the same time period in the previous year, according to the Holiday Shopping Report for Q4 2010 U.S. Search Market Report released Monday.

Unfortunately, it's costing more to reach consumers because for retailers the cost per click (CPC) continues to rise. On Google, CPCs are up nearly 13% year-on-year, compared with a 4% uptick on Yahoo and Bing.

In the year-ago quarter, consumers curtailed spending as many faced home foreclosures spurred on by an unstable job market. The ad industry faced a difficult recovery against a steep recession. This long and slow recovery has begun to look a bit brighter this holiday season.

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Retailers with multichannel marketing strategies increased their U.S. search spend 36.7% year-on-year in 2010, compared with the first half of Q4 2009. However, they have slowed the amount spent on Bing and Yahoo search campaigns. The combined Bing and Yahoo accounts only grew 2.2 year-on-year, down from mid Q4 2009, when both engines showed more significant year-on-year increases at 47% at Bing, and 8% at Yahoo.

It's not clear whether this uptick will carry over into 2011 as the U.S. dollar continues to struggle to recover. The weak dollar has an influence on the economy, which in turn affects search marketing. "U.S. goods sold internally are relatively less expensive for the rest of the world, making it easier for U.S. companies to export goods, which hopefully will spur the economy and add more jobs and get people into stores and online to buy things," explains Roger Barnette, SearchIgnite CEO. "That will prompt advertisers to spend more money advertising."

The Federal Reserve prints money to stimulate inflation, but will it make the dollar weaker? The converse of that means buying goods made overseas becomes more expensive and could potentially have a damaging effect on the economy, Barnette explains -- but he doesn't believe it will have a dramatic effect on SEM.

In fact, despite experiencing economic hard times, the majority of respondents in a recent uSamp online survey of 700 Americans revealed that consumers are divided about whether 2011 will have a better or worse financial outcome, compared to 2010.

American men have a somewhat more positive outlook than American women, as 26% of male respondents reported a belief that the recession will end soon, compared with 18% of female respondents. Only 16% plan to do most of their shopping on Black Friday -- the day after Thanksgiving -- and 70% of all survey respondents plan to do their shopping at discount stores or online, about 36% and 43%, respectively. About 72% believe bad economic times will either last a while or get worse.

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