Paid-Search Spend Rises, But Marketers Pulling Out Of Partner Programs

by Laurie Sullivan , June 30, 2014

U.S. marketers spent 9% more on paid-search advertising campaigns in Q2 2014, compared with the prior year. Impressions fell slightly to 24%. The IgnitionOne Q2 2014 marketing report points to contributors like innovations in ad extensions, image ads, and advertisers pulling out of search partner networks, secondary partner sites showing the search providers’ results and ads, such as AOL.

Overall, impressions on Google rose 12% in Q2 2014; clicks, 25%; click-through rates (CTR), 12%; and cost per click (CPC), 18% on about 48% more advertising dollars compared with the year-ago quarter, among IgnitionOne clients. Impressions on the Yahoo Bing network rose 19% in Q2 2014; clicks, 45%; CTR, 22%; and CPC, 6% on about 53% more advertising dollars compared with the year-ago quarter.

Marketers spent nearly the same amount for smartphone paid-search campaigns as they did on tablets. Both mobile devices now contribute about 27% of total U.S. search spend. Marketers spent 47% more on tablets in the quarter compared with the year-ago quarter, but spending to run campaigns on smartphones rose 173%.

Smartphone impressions jumped 166% and clicks reached 138%, but click-through rates fell 11%. The cost per click (CPC) rose 15% compared with the year-ago quarter. Tablets didn't fluctuate as much. Impressions rose 7%; clicks, 28%; spend 47%, CTR, 19%; and CPC, 15%.

The Yahoo-Bing network saw CPCs on smartphones fall 6% in the quarter, YoY, while Google rose 27%. IgnitionOne attributes the decline to "search queries growing faster than advertising dollars, resulting in too few ads for queries."

Product listing ads (PLAs) made up 24% of all clicks in Q2 104, 27% of all impressions and 32% of all search spend. They garnered 41% higher CTR than paid search and 11% lower cost per click (CPC).

The IgnitionOne study notes a rapid move away from advertising on search partner sites because advertisers have found that it is less efficient with fewer, more expensive click-through rates. "The difference in efficiency on Google is likely due to how quality score is calculated separately for their partner sites," per the study. "The lower CTR causes a drop in quality score, which in turn causes an increase in cost."

Performance impressions on partner sites fell 37%, followed by clicks at 27% YoY due to the decrease in efficiency with almost all metrics down when compared with the main search sites. Search network average CTR was 7.0% with a $0.61 CTR, compared with partner sites at 0.8% and $0.75, respectively.

Facebook Exchange (FBX) took about 18% of display ad spend in the quarter, up from 8% in Q2 2013, per the report. FBX served about 42% of programmatic display impressions, generating 66% of clicks and 36% of conversions. The social site also continues to grow tighter with search companies, such as Kenshoo, which Facebook named a winner in its innovation competition honoring Preferred Marketing Developers.

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2 comments about "Paid-Search Spend Rises, But Marketers Pulling Out Of Partner Programs".

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Terry Whalen from Sum Digital, June 30, 2014 at 9:19 p.m.
Hi Laurie,
You say that Search Partner (SP) network advertising is on the decline "...because advertisers have found that it less efficient with fewer, more expensive click-through rates." I think folks may be advertising less on the search partner network because it has poor ROI for many advertisers.
When you refer to "fewer, more expensive click-through rates," I'm wondering if you mean that SP does not scale well due to low CTRs and low click volume, relative to Google.com.
You also say: "The difference in efficiency on Google is likely due to how quality score is calculated separately for their partner sites," per the study. It's true that quality score is calculated differently on the Search Partner network, but I don't think a difference in the method of QS calculation on the SP network brings about worse efficiency (lower ROI) on SP versus Google.com. The main driver for worse SP efficiency is that the ad inventory found on the SP network is just much worse than Google, and it drives much lower-value traffic.
This next point seems to be at odds with QS being calculated separately on the two networks: "The lower CTR causes a drop in quality score, which in turn causes an increase in cost." Again, QS is calculated separately on the SP network. So, it doesn't make sense to talk about quality scores on the SP network *relative to Google network quality scores.* (QS on the SP network is calculated at the site level, since the sites that make up the SP network are so heterogeneous. For example, Aol.com will perform differently than much of the trash Google lets onto the SP network.)
I think another factor for low CTRs and poorer traffic quality on the SP network is that much of this ad inventory and its traffic is not really search(!) Folks don't talk about this too much, but the Search Partner network is a bit miss-named, because the name implies that the traffic is all search traffic, just as Google search network traffic is search traffic. But actually, it includes all sorts of very-poor-quality, non-search traffic from folks clicking hyperlinks rather than actively typing in a search query.
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Laurie Sullivan from lauriesullivan, July 1, 2014 at 12:18 a.m.

Terry, thank you for taking the time to comment and provide insight. Stop by any time.