Global Online Advertising Trends

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1 WHITE PAPER Global Online Advertising Trends Quarterly Report July - September, 2012

2 Table of Contents Introduction 3 Research Methodology 3 US Findings 4 UK Findings 13 Eurozone Findings 15 Facebook Findings 17 Conclusion 18 About Marin 19 Copyright 2012 Marin Software, Inc. All rights reserved. 2

3 Introduction The third quarter tends to be fairly quiet in terms of paid-search trends. Previous years have shown that marketers use the third quarter to ramp up their efforts in preparation for the holiday rush. On a quarter-over-quarter basis, advertisers saw an increase in the click through rate and, in some markets, faced increased competition and higher costs per click. As previously noted in our mobile report earlier this year, we are seeing staggering growth around the adoption of smartphone and tablets for search advertising. We are well on our way to hitting our prediction that mobile devices will account for 25% of all paid search clicks on Google by December of this year. Lastly, there have been a number of headlines around Facebook enhancing its advertising offerings including new ad formats, view-through metrics, mobile-specific targeting and a number of other features. We ll continue to see a focus on Facebook as marketers begin to explore this social channel further. Research Methodology To uncover key trends for the third quarter of 2012, we sampled the Marin Global Online Advertising Index, which includes over 1,800 advertisers and agencies that invest over $4.0 billion annually in biddable media through the Marin platform. The Marin Global Online Advertising Index consists of enterprise-class marketers larger advertisers and agencies who spend in excess of $1 Million annually on paid-search, display, social and mobile. As such, our data sample and findings skew towards the behavior of larger organizations and more sophisticated advertisers. We kept the study longitudinal by focusing on a representative set of advertisers who have been active on Marin for the previous five quarters, and measuring key performance indicators (KPIs) on a year-over-year (YoY) and quarter-over-quarter (QoQ) basis. Unless otherwise mentioned, all of the analysis in this study refers to trends in the search (versus content) network. Wherever possible, we used medians and indexed values to more clearly highlight overall trends instead of absolute values. This allows us to mitigate the effects of outliers, and make the findings more representative of the performance of the typical Marin client. In Q1 2012, we rebuilt our client index data pool as part of an annual data refresh. This could result in slight variations in prior data that we ve reported previously, but will make the analysis and findings more representative. Copyright 2012 Marin Software Inc. All rights reserved. 3

4 US Findings: 1. Overall Performance: On an annual basis, US advertisers saw paid search click volume rise by 20% accompanied by a 21% increase in impression volumes. Cost per click (CPC) also decreased from $0.95 in Q to $0.82 in Q The lower CPC is indicative of a relatively stable third quarter pattern that we ve seen year over year. Overall, marketers maintained the click through rate (CTR) year on year versus Q Copyright 2012 Marin Software Inc. All rights reserved. 4

5 2. Google Maintains its Market Share for Search Spend: According to Comscore, 66.4% of all US-based search queries were conducted on Google during August During this same period, Yahoo! was at 12.8% and Microsoft at 15.9%. Despite having 66.4% of the overall US search volume, Google monetized its searches more effectively accounting for 81% of paid search spend and 79% of all paid-clicks during the same period. On a year-over-year basis for Google, we saw a 11% increase in clicks with impression volumes rising 19%. In addition, our clients saw a 4% decrease in CPC. 1: 5

6 On Yahoo and Bing, the story was largely about continued investment but higher CPC. On a yearover-year basis, advertisers saw 9% higher click volumes, coupled with a 24% jump in CPC and a 9% increase in CTR. The following charts outline how search performance characteristics differ across Google and Yahoo! and Bing. Copyright 2012 Marin Software Inc. All rights reserved. 6

7 3. Industry Specific Trends: While it s helpful to understand the broader context of how paid search is evolving at a macro level, the reality is different industries can demonstrate fundamentally different trends. To that end, we looked at the behavior of seven different industries and uncovered some varying trends. This section provides insights on representative values for CTR and CPC across seven verticals (Q3 2012), and industry-specific trends for key metrics. Copyright 2012 Marin Software Inc. All rights reserved. 7

8 Auto Paid-Search Trends B2B Paid-Search Trends Copyright 2012 Marin Software Inc. All rights reserved. 8

9 Education Paid-Search Trends Finance Paid-Search Trends Copyright 2012 Marin Software Inc. All rights reserved. 9

10 Healthcare Paid-Search Trends Retail Paid-Search Trends Copyright 2012 Marin Software Inc. All rights reserved. 10

11 Travel Paid-Search Trends Copyright 2012 Marin Software, Inc. All rights reserved. 11

12 4. Device Targeting & Performance: While Desktops and Laptop computers still command the vast majority of search spend, we are continuing to see positive trends as marketers explore new platforms to extend their reach. Device targeting, in particular, is showing that smartphones and tablets are becoming increasingly popular around the world. To provide context around usage patterns and spend allocation, the charts below show how click and spend share was segmented across our client base during the third quarter of Smartphone and tablet devices accounted for 19% share of clicks and 14% share of spend. Growth in consumer adoption has been a strong driver of click volume growth on mobile devices. Additionally, spend allocations on mobile devices are growing quickly as marketers realize solid performance across both smartphones and tablets. The following chart compares CTR and CPC across desktops, smartphones, and tablets for the third quarter of While device targeting may not be relevant for all advertisers, marketers should evaluate their target demographic, and where appropriate, leverage the performance and cost effectiveness of targeting ads to tablet or smartphone users. Copyright 2012 Marin Software Inc. All rights reserved. 12

13 UK Findings: 1. Overall Performance: On an annual basis, UK advertisers saw paid search click volumes and impressions remain relatively flat. Meanwhile, both CPC and CTR increased versus Q The increase in CPC could indicate increased competition for paid search advertising in the UK. 2. Device Targeting & Performance: Whereas the US shows comparable spend on smartphones and tablets, UK search marketers are spending more on tablet devices as a percentage of their total budget. Mobile devices accounted for 19% share of clicks and 13% share of spend for the third quarter in the UK. Copyright 2012 Marin Software Inc. All rights reserved. 13

14 The following charts compare CTR and CPC across devices for the third quarter of Overall, the CTR for smartphones remains in the lead followed by tablet devices. In regards to CPC, smartphones are in lead as well in terms of offering the lowest CPC. Copyright 2012 Marin Software, Inc. All rights reserved. 14

15 Eurozone Findings: 1. Overall Performance: Over the last year, advertisers in the Eurozone saw paid search click volume rise by 20% accompanied by a similar increase in impression volumes. This trend indicates the continued growth of search advertising for marketers in the Eurozone. Meanwhile, CPC rose from 0.27 in Q to 0.34 in Q3 2012, implying increased competition and opportunities for optimization. 2. Device Targeting & Performance: The Eurozone shows a lower share of spend and clicks on mobile devices as compared to the US and UK. However, search marketers in the Eurozone are aligned with their counterparts in the UK in regards to spending more on tablets versus smartphones. Copyright 2012 Marin Software, Inc. All rights reserved. 15

16 The average CTR for campaigns on smartphones is on par with that of tablets a slightly different trend than what we ve seen in the US and UK. The CPC for clicks coming from tablets in the Eurozone is on par with that of computers while in US and UK advertisers realize lower costs per click for ads on tablet devices. Copyright 2012 Marin Software, Inc. All rights reserved. 16

17 Facebook Findings: Across geographies, CTR on Facebook remains low, with US and Eurozone advertisers seeing the highest CTR on Facebook. In regards to cost, US and UK advertisers experience higher CPCs than their Eurozone counterparts. Compared to the average CPC of paid-search advertising, Facebook is seemingly a less expensive alternative offering creative advertising options outside of the traditional search and display. Additionally, with the recent release of mobile-specific targeting for Facebook ads, advertisers are starting to see a higher CTR for mobile ads versus desktop ads. We ll be continuing to monitor this trend as more advertisers adopt the mobile-placement option on Facebook. Copyright 2012 Marin Software, Inc. All rights reserved. 17

18 Conclusion: As we head into the fourth quarter of 2012, we expect budgets and volumes to increase seasonally as marketers begin the push toward the holidays. The third quarter has traditionally been relatively stable with no major fluctuations in performance aside from the continued growth of paid search advertising. In the US, Google continued its search dominance by garnering 81% of US spend share and 79% of US click share while controlling 66.4% of overall US search volumes. Despite falling behind in overall click share, Yahoo! and Bing are continuing to show solid growth in aggregate click volume. Lastly, we found that ads shown on tablets and smartphones, while still in early stages of adoption relative to desktop computers, are showing strong and accelerating gains in search share, while delivering quality performance with higher than average CTR. As these devices become more widespread and marketers develop smarter targeting strategies, we expect to see an ever increasing percentage of ad spend funneled towards smartphones and tablets. Online advertising is continuing to shift and change as new and enhanced features become available. With tools such as Marin Software, marketers can take advantage of the benefits of online advertising such as mobile-specific targeting for Facebook ads, mobile-specific paid search campaigns and automated bid calculation for large keyword sets. Copyright 2012 Marin Software, Inc. All rights reserved. 18

19 About Marin Software: Marin Software provides the leading digital ad management platform, with over 1,800 brands managing more than $4.0 billion in annualized ad investments on Marin. Offering an integrated platform for search, display, social, and mobile marketing, Marin helps advertisers and agencies improve financial performance, save time, and make better decisions. Headquartered in San Francisco with offices worldwide, Marin Software provides technology that powers marketing campaigns in more than 160 countries. For more information, please visit: United States San Francisco 123 Mission Street 25th Floor San Francisco, CA Tel: +1 (415) EMEA United Kingdom 1st Floor, Orion House, 5 Upper St Martin s Lane, London, WC2H 9EA Tel: +44 (0) APAC Singapore One Raffles Quay North Tower, Level Tel: New York 215 Park Avenue South Suite 1801 New York, NY Tel: +1 (646) Chicago 140 S. Dearborn Street Suite 300-A Chicago, IL Tel: +1 (312) France Actualis Level 2 21 and 23 Boulevard Haussmann Paris Tel: Germany Am Kaiserkai Hamburg Tel: Japan 3rd Floor, Sanno Park Tower Nagata-cho Chiyoda-ku Tokyo Tel: Australia Level 31 RBS Aurora Place 88 Phillip Street Sydney NSW 2000 Tel: +61 (0) Copyright 2012 Marin Software, Inc. All rights reserved. WP221_

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