Retail Paid-Search Conversions Rise, But So Do Investments


Someone may want to tell tech companies and venture capitalists investing in startups that analysts expect California and the rest of the country to have slow economic growth in the near terms. Maybe that's why they have begun to invest more in tools. Retailers also have been upping budgets for paid-search ad campaigns, and investing more in online advertising.

I'm sure marketers are not shocked to discover that the UCLA Anderson economic forecast for the first quarter of 2011, released Tuesday, indicates slow growth for the economy through the second quarter and into the third -- especially with the gas prices quickly rising. (Side note: I paid $62 to fill up the gas tank on Monday.)

The UCLA report, titled "On the Mend", suggests that Gross Domestic Product (GDP) continues to grow at 3.8% in the current quarter with 3% through 2013, as employment increases. The U.S. economy will improve, albeit slowly, but the forecast for California -- the home of Silicon Valley, technology bubbles, and Charlie Sheen -- remains slightly weaker in the near term compared with December.



Tell that to Google Ventures, Sequoia Capital, and -- all shelling out $32 million to invest in Hubspot. The Series D funding round will assist HubSpot Cofounder Brian Halligan to invest in research and development that supports "inbound marketing," which taps search optimization, Web content and applications.

The Rewind Paid Search Performance Index: February 2011, which measures monthly paid-search performance for online retail clients, suggests that economic conditions have begun to improve, at least in retail.

The report, published monthly from SEM agency PM Digital, shows that revenue rose 36%, although companies did have to spend 29% more during the month to get better results. Clicks rose slightly year-over-year, but improvements in the average conversion rate became the major contributor to sales growth. Presidents' Day emerged as the top day in February for several key paid-search metrics -- namely spend, clicks and revenue.

Aside from paid-search revenue rising on Presidents' Day, the holiday generated 50% revenue growth, compared with the prior year, and 36% more than the average for the month. I'm not sure whether it made a difference, but the report notes Presidents' Day arrived nearly one week later this year, putting additional days between it and Valentine's Day.

The report also points to clicks tracking more closely with the amount of money marketers spent in February on paid search. Clicks came in slightly flatter than sales, but experienced the same highs and lows.

Although eager to see how the integration of social and search will influence organic and paid search for retailers, it's too soon to analyze any changes, according to PM Digital President Suzy Sandberg. The company may have some insights at the end of March.

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