• by Laurie Sullivan  @lauriesullivan, December 1, 2010

Cyber Monday brought in more than a billion dollars in sales for online retailers, but it's not clear if the advertising and the retail industries are prepared for the increase in transactions. Sound crazy?

U.S. visits to the top 500 retail sites on Cyber Monday 2010 rose 16%, according to Experian Hitwise. The research firm estimates that search and cross-shopping strategies across a variety of retail Web sites accounted for 44% of referrals last week.

On Wednesday, Kenshoo released its first 2010 Online Holiday Shopping Report. The key trends in the U.S. that benchmark paid-search advertising suggest the holiday shopping season began earlier this year. Thanksgiving Day, dubbed "Cyber Kickoff Day," officially kicked off the frenzy. The report aggregates more than 1 billion ad impressions, 30 million clicks, and more than 1 million online sales transactions between Nov. 4 and 29.

In 2010, advertisers spent 31% more on their paid-search campaigns in the 26 days through Cyber Monday than the previous year. And it seems to have paid off. Online transactions on Thanksgiving Day rose about 70%, compared with the prior year. Retailers also increased budgets about one week prior to Thanksgiving Day compared with 2009, when budgets climbed significantly in the last few days before the holiday.

Shoppers now seem more responsive to paid-search ads that have become increasingly effective, according to the Kenshoo study. They buy more often, but spend less per order. Sales, however, continue to peak on Cyber Monday.

"Advertisers got savvier in the way they present ads, such as customizing copy, choosing keywords and landing page, and making sure the experience is better from search to conversion," says Aaron Goldman, CMO at Kenshoo. "Consumer expectation also has shifted. They know retailers will be there on the right rail giving them access to all the good deals through the ads."

Apparently, so; comScore recorded a record $1.028 billion in online spending on Cyber Monday 2010, up 16% compared with a year ago. It represents the heaviest online spending day in history, and the first to surpass the billion-dollar threshold. The research firm estimates for the holiday season, retail e-commerce spending for the first 29 days in the November and December 2010 holiday season online rose 13% to $13.55 billion from the same days in the prior year.

While Kenshoo's numbers show substantial growth in online sales, challenges loom for search marketers and retail companies looking to reach consumers in time for the holidays. For one, campaign planning cycles will require extra time. Similar to the electronics industry that experienced longer design cycle times as system-on-chip (SoC) semiconductors like those in mobile phones became more sophisticated, it will take longer to plan and execute a profitable and well-run ad campaign. And what happens if this online selling trend continues through the year, spurred on by ads targeting consumers' needs?

Ironically, more online sales could prompt longer planning cycles that could complicate campaigns. Will it make them less flexible? Tools could lighten the load.

"Any time you have to manage the budget across a longer time period it gets harder to do because you have to check more frequently," Goldman says.

Advertisers may not have a choice but to automate campaign processes as more consumers go online to buy goods and services. Measured by ad impressions, Kenshoo's study also identifies that overall search traffic volume rose by 6% in 2010, compared with the prior year, while the number of search ads clicked on rose 55%, reflecting an overall increase in click-through rates.

Conversion rates -- the percentage of clicks that resulted in online sales -- for 2010 rose 13.54%, compared with the prior year, suggesting that consumers bought more and browsed less. The average order value dropped about 8% from $142.32 to $132.03. Overall, however, there was an increase of 60% in revenue from search advertising in 2010.