Paid Search Trends

According to a new study by Kenshoo, “Global Search Advertising Trends,” paid search budgets are significantly higher in 2012 but the effects of seasonality are less pronounced. Last year, there was a large ramp-up in Q3, but this year, advertisers increased their budgets early and consistently throughout the year.

The report examined the performance of paid search ads by analyzing aggregate campaign data across global search engines including Google, Yahoo!, Bing, Baidu, and Yahoo! Japan based on more than $3 billion in annual paid search budgets.

In the U.S. over the past 6 quarters, the Yahoo! Bing Network (YBN) has delivered sequential increases in search ad click through rates in every quarter except Q1 2012, in which click through rates were flat.

  • Meanwhile, Google AdWords CTR has oscillated, hovering near 1% with a significant uptick to 1.25% in Q3 2012.
  • 6 quarters ago, the gap between Yahoo and Google CTR was miniscule. Today Yahoo CTR is 29% higher than Google.
  • Similarly, the 2 engines were very close in cost per click back in Q2 of 2011 but now there is a considerable gap with Yahoo CPC 46% higher than Google.
  • During that time, Yahoo CPC increased significantly from Q2 to Q3 2011 and then remained relatively flat, while Google CPC has come down from an 18-month high of $0.61 to $0.45 in Q3 2012.

While Google delivers more overall traffic (684% more in Q3 2012), the Yahoo! Bing Network drives online sales revenue at a more efficient rate. Specifically, the return on ad spend of paid search on YBN was 28% higher in Q3 than that of Google, and the Yahoo click-through rate was 29% higher. As a result, advertisers increased their Yahoo ad spend 10% quarter-over-quarter and 35% year over year, representing a faster rate of growth than Google.

Product Listing Ads have gained significant traction and outperformed paid search text ads in click through rates (68% higher), conversion rate (38% higher) and return on ad spend (25% higher). Google Shopping moves to an all paid model in the U.S. in October, 2012, meaning only merchants who leverage product listing ads will be present in the search results, making these findings especially notable. 

Product Listing Ads vs. Text Search Ads (U.S. Google Campaigns; Q3 2012)


Product Listing Ads

Text Search Ads

Average click-thru



Average conversion



Average return on ad spend



Source: Kenshoo, October 2012

Representing 13% of total U.S. paid search spend, mobile phones and tablets generated 21% of all U.S. search advertising clicks. While mobile phones accounted for 11% of all search ad clicks and six% of all spend, these devices returned just 0.6% of all conversions. Meanwhile, tablets generated 8.8% of all conversions and 10% of total clicks while accounting for only 7% of total ad spend.

US Spend and Clicks by Device (Q3, 2012)


Ad Spend















Source: Kenshoo, October 2012

These converging trends illustrate the impressive performance of tablet paid search for top advertisers, as well as a move toward differentiating paid search campaigns on mobile phones to better accommodate mobile searchers and achieve complementary conversions that aim for something other than direct online sales.

Aaron Goldman, CMO of Kenshoo, says “... through the first three quarters of 2012, we’ve seen strong growth in paid search budgets... this report identifies a number of specific opportunities... “

The report concludes with these “Insights and Implications:”

  • Search advertising already represents the biggest share of digital marketing spending but has not reached its peak. With annual growth rates in the 24-52% range each quarter in 2012, paid search marketing continues to create opportunities
  • With average paid search cost per click rising in each region during each of the past two quarters, the trend is likely to continue through the competitive Q4 holiday shopping season
  • With Yahoo! Bing Network consistently delivering better ROAS and advanced technology tools across multiple search engines, the new imperative for marketers is to be active on YBN, if not make it the first place resources are allocated and maximized
  • The economic hardships plaguing members of the European Union are clearly impacting the search advertising market. However, with a more conservative marketplace and cost per click rates below that of the U.K. and U.S., the E.U. represents a great market for global advertisers to generate targeted traffic
  • With a richer format including images, product listing ad units perform better than text ads on all key metrics. Key to success for marketers is leveraging a paid search technology platform that can create and manage PLA, while tracking clicks, conversions and revenue
  • Tablets boast a bigger screen and more affluent user-base than mobile phones and, as a result, represent a very lucrative targeting opportunity for marketers. With tablet CPCs 33% lower than computers, it’s also a best practice to create separate SEM campaigns targeted at different devices with unique keyword bids

To sign up to access the Kenshoo PDF report, or free Executive Summary, please visit here.


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