Search Study Highlights Facebook, Display Ad Benefits, Complexities

Search engine marketing will become more closely entwined with Facebook and display advertising this year as marketers discover the benefits of cross-channel marketing. That's according to Efficient Frontier's Q1 2011 Digital Marketing Performance Report released Monday. Cross-channel marketing will require search marketers to learn new skills or partner with those who have them.

Each channel -- search, display, and Facebook -- serves a significant yet unique role in the management of campaigns. Advertisers with the tools and the skills to manage campaigns across channels will have an advantage.

But as more advertisers learn of the benefits behind cross-channel marketing, costs could rise. For example, CPCs for Facebook ads in Q1 2011 rose 40% sequentially, resulting from new advertisers jumping in to test the platform, according to Justin Merickel, vice president of marketing at Efficient Frontier. The ads are driving consumers out of the Facebook Fan page to ecommerce sites, says Merickel -- but he could not comment on sales within the social site. Coupons, polls and branding continue to dominate advertising in the channel.

Efficient Frontier predicts that investments in Facebook ads -- a small, static image with limited text -- will double over the coming year. Clients have already begun to make substantial investments. The company's clients saw about 300% more inventory across ad exchanges in first-quarter 2011, pushing CPM costs 30% lower compared with the year-ago quarter. The company expects continued flux in prices for display ad units. If inventory continues to expand, expect to see further CPM declines. Even with price declines, major exchanges such as Google's Ad Exchange will benefit.

As for paid-search marketing, retail and finance sectors helped drive 17% overall growth for the U.S. search marketing sector in first-quarter 2011 compared with the year-ago quarter, according to the Q1 2011 Quarterly Report from Efficient Frontier. The report suggests that advertisers have begun to realize benefits from real-time bidding (RTB) and Facebook's ad products.

While investments from marketers rose nearly across the board, retailers led gains, raising investments by 22%. The results helped them reap 30% gains on impressions. Investments in search marketing from finance companies rose 18% and automotive by 10% -- but travel companies spent less, declining 13%. Most sectors experienced stability or increases on return on investments (ROI) and click volume.

Aside from the United States, marketers in the United Kingdom spent 9% more in the quarter, reaping a 6% ROI year-on-year and 19% sequentially. Google holds 91% of market share in the U.K. Unlike the U.S., where companies in the travel sector spent less on search marketing, the overall demand rose across the U.K. by 8% year-on-year, gaining 14% ROI as a result of impressions and click growth.

Unlike the U.S. and Europe, Google and Yahoo share the search market in Japan. Google holds 53% market share, and Yahoo has the remainder. Despite the earthquake crisis in March, search marketing investments in Japan held steady. Spending grew 13% year-on-year in Japan. Efficient Frontier attributes the growth to a 7% CPC increase and 5% click volume.

Google also holds the majority of search market share -- at 93% -- in France, Germany, and Australia. Yahoo follows in Germany and Australia, but Bing holds a larger share in France, according to Efficient Frontier.

Efficient Frontier expects investments in search to rise in the U.S. by 15%, resulting from strength in both finance and retail, and 10% in the U.K. Company analysts believe Bing and Yahoo will gain market share from Google due to its higher ROI, suggesting that "rational advertisers" will shift dollars from Google.

Bing gained market share in finance and retail sectors, but lost market share in travel. Overall, the market share numbers remain the same sequentially. Google's CPCs rose 11% year-on-year; Yahoo and Bing, 4%. Bing advertisers gained -- 10% higher ROI in the quarter compared with a year ago -- while Google's fell 12% in the first quarter. On a normalized click basis, revenue per click (RPC) on Bing was 12% lower than Google.

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