RealTime IT News

Search Engine Marketing Ready to Rebound?

It appears that search engine marketing is stabilizing after a series of increasing quarterly declines, according to a report out this week.

The news comes at a time when marketers are trying to capitalize on the continued growth in performance-based advertising, or those in which advertisers only pay for measurable results. That trend has kept paid search among the few strong areas in online ads, since it's purchased on a cost-per-click (CPC) basis.

Spending on SEM quarter-over-quarter from Q1 to Q2 is down 3 percent, indicating stabilization, given the expected seasonal impact, according to SEM firm Efficient Frontier's "US Search Engine Performance Report: Q2 2009."

And while overall SEM spending was down 21 percent year-over-year, the drop is still a mild improvement from the first quarter's dip of 23 percent.

"The second quarter report indicates that the search marketing sector may have bottomed out as spending stabilized, which is good news for the industry. Additionally, with the launch of Bing and its early signs of promise, the battle between search titans is once again heating up," David Karnstedt, president and CEO, Efficient Frontier, said in a statement.

This aggregate market stabilization masks very different trends by advertiser size, says the report. Large advertiser trends matched the total market, showing a stabilization in spend. Medium-sized advertisers increased spend, capitalizing on the opportunity to grow share efficiently given less competitive marketplaces, as well as greater access to marketing resources compared to smaller advertisers. Smaller advertisers continued to cut spending on SEM.

Bing, the new search engine from Microsoft (NASDAQ: MSFT), increased the company's paid click share by 5 percent month-over-month since its launch in June, according to the report, which is based on a fixed sample of the overall Efficient Frontier U.S. customer base.

While Microsoft had already begun gaining momentum in April 2009, the launch of Bing regained the spend share that Microsoft had lost between Q3 2008 and Q1 2009.

Bing's paid click gains were most significant in finance and travel, increasing share by 17 percent and 10 percent respectively. Paid clicks for the retail category were flat.

Efficient Frontier expects advertising budgets to be in line with overall economic trends, and therefore, the company expects Q3 2009 to be similar to Q2 2009 in regard to spend and ROI trends.

Analysis for the Efficient Frontier report was based on data from a fixed sample of the overall Efficient Frontier U.S. customer base from Q2 2008 through Q2 2009, and covers nearly 81 billion impressions and 722 million clicks on search and content ads on Google, Yahoo, Microsoft Live Search and now Bing, according to the company.

Online search ad spending set to grow

Meanwhile, according to another study released Monday, by Interpublic, online search is the only major ad category expected to extend market reach for this year. The forecast, which calculates advertising revenue from media suppliers instead of estimating ad spending by media buyers, says online search ad spending will grow by 3.6 percent for 2009.

Overall online ad spending will decline 2.2 percent to $23 billion this year, but will grow at a compound average growth rate of 8.4 percent over the next five years, according to the "July Media Advertising Forecast."

A bright spot in the forecast, which mostly showed decreases for this year but some growth over the next five in most sectors, is the direct-response based online ad category, which includes "lead generation" and online directories. This is pegged to grow 2.9 percent to $13.9 billion in 2009, and to grow at a compound average annual growth rate of 10.2 percent through 2014.

Another sector that shows promise for the next five years is a new Interpublic category that includes online revenue from local TV stations, local radio and local newspapers, called Local digital/online. This area will decline 5.9 percent this year to $3.5 billion, but will grow at a compound average annual rate of 6.4 percent over the next five years.

National digital/online media, which includes rich media, online video, classifieds, e-mail, display and mobile, will decline 11.1 percent to $5.5 billion this year, according to Interpublic. Over the next five years, the agency projects the national category will rise at an average compound rate of 4.7 percent.