Paid-Search Investments Strengthen, Display Rises, RTB Heating Up

Roger-Barnette

Advertisers invested 7% more in search advertising during Q3 2011, compared with 6% in the year-ago quarter, according to a report released Wednesday. Overall, IgnitionOne's quarterly summary finds online ad budgets rose 10% during the quarter.

Most of the growth went to Google domestically. The company now takes about 81.6% of the search advertising budgets for companies supported by IgnitionOne, representing $1 billion in annual media spend globally. Google's U.S. search share rose 12.3% year-over-year, and grew sequentially by 5% compared with the year-ago quarter.

Advertisers spent less on search advertising with the combined Bing and Yahoo alliance. Market share fell to 18.4% of search advertising spend. The alliance between the two companies has had a negligible impact on their share of the search advertising market. The report estimates that in Q3 2010, Yahoo and Bing collectively held 20% share of ad spend.

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Advertisers will put their money where they can gain the most from the investment. The positive impact Bing and Yahoo expected has not come true, according to Roger Barnette, president of IgnitionOne. He estimates that IgnitionOne clients invested more in Bing and Yahoo search ads a year ago when the companies had separate search strategies, compared with today.

In Q3 2010, Yahoo held 13.4% and Bing 6.4% market share, or 19.8% combined. In Q3 2011, combined market share sits at 18.4%.

Overall, retailers spent more of the budget in search advertising, growing investments 22% year-over-year, but the return on investment (ROI) declined as consumers cut back on spending. Conversion rates and average order values (AOV) fell throughout the quarter compared with the same time last year.

Paid-search spend in Europe grew 20% year-over-year, but fell throughout the quarter, with spend rising 3.5% in September year-on-year.

While paid-search advertising continues to gain investments, advertisers are moving more money into performance-based display advertising supported by auction-based models and real-time bidding, Barnette said. "Technology and attribution tracking got better, and the rise of real-time exchanges improved attribution," he said.

Historically, display did not fall into the category of performance-based marketing because click-through rates were low, making it more difficult to track-back revenue to give credit to the campaign. While the shift began a couple of years ago, the trend accelerated this year.

Display continues to grow as more advertisers increase investments in advertising sold via real-time bidding (RTB). CPMs on RTB display are also declining as more inventory floods the market, making it an increasingly more cost-effective channel for advertisers' budgets.

The study points to the rise of RTB as a factor for adoption and increase in demand by publishers and marketers. Publishers now recognize effective auctions through the RTB market, and have become more comfortable with the sales channel.

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