High-tech companies spent 26% more on paid-search advertising in 1Q, compared with the year-ago quarter, and 6.4% sequentially, according to a report that search marketing firm Covario plans to release this week.
While the year-over-year percentage might seem a little steep, it's important to note that spending dropped nearly 15% between 4Q 2009 and first-quarter 2010. Not since 2007, however, have companies in the high-tech industry invested more in paid-search campaigns during the first quarter, compared with the fourth.
In Covario's 2010 end-of-year analysis, the company recommended that clients increase global paid-search budgets by 15% to 20% for 2011, compared with last year's budgets. The company suggested the necessary increase would help high-tech companies maintain market share.
Cost-per-click (CPC) increases drove two-thirds of the growth in spending during the past two quarters worldwide. Improved monetization techniques by the search engines, such as Google, as well as purchases of expensive generic search terms propelled increases.
Covario expects click-through rates, CPCs and overall spending to increase on Google this year as a result of the impact Google Instant has on transferring clicks from natural search to paid search. The company "documented a rise of between 3% and 4% of all clicks transferring to paid search, meaning advertisers need to spend more on paid search for keywords where they do rank highly on natural search in order to maintain the same levels of traffic and conversions," according to the report. (These are the listings where clicks will be transferred to paid search.)
Globally, advertisers spent 25% more on Google in the first quarter, compared with the year-ago quarter. Spending on Yahoo rose 28%; and Bing, 3.7%. Bing's strength in the U.S. market drove weak investments throughout APAC and EMEA in the world, according to Covario.
In conversations with clients, Covario says the rise of CPCs and CPA rates in the U.S. continues to prompt companies to look overseas for large gains in paid-search advertising returns.
When breaking out campaign budgets for paid search globally this year, the Americas will get 60%, up between 8% and 12%, compared with the prior year. The APAC region will account for 22% of budgets -- up between 20% and 25%; and EMEA at 18%, up between 30% and 35%, compared with 2010.
As for the Americas, Covario expects market share for Bing and Yahoo on the combined platform to stabilize this year at between 25% and 30%.