Global Paid Search Advertising Starts Year with a Bang
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1 / COVARIO / QUARTERLY GLOBAL PAID SEARCH SPEND ANALYSIS Global Paid Search Advertising Starts Year with a Bang First Quarter of 2013 Gets Boost from Recovering Regions By Alex Funk
2 Executive Summary Growth in global paid search advertising among Covario s high tech, CE and retail clients increased by 33% in the first quarter compared to a year earlier. Quarter on quarter growth topped 9% globally. CPC prices increased 7% driven by mobile CPC inflation and Product Listing Ads. Mobile search spend increased 51% as the market continues to mature rapidly. 2
3 First Quarter 2013 Global Spending Overview Spending on global paid search advertising in Q1 13 grew by double digits, improving by 9% quarter-over-quarter and 33% year-over-year. The CPC trend experienced over the last 6-plus quarters seems to have reversed and, after two relatively flat quarters, cost-per-click prices increased by 7%. Ad effectiveness measured through the click-through rate (CTR) metric also have improved dramatically in recent quarters, showing double digit growth both quarter-on-quarter and year-on-year. Regional investment improved as well, as we experienced paid search spend allocations tick up higher than previous quarters. The Americas, driven by the U.S. and Canada, saw noteworthy spending growth in the quarter up 7% quarter-on-quarter and 29% year-on-year. In EMEA, overall online spending trends showed life, recovering from a slowdown last year, recovering 20% quarter-on-quarter. For the APAC region the growth rate topped 24%. The year-over-year balance in clicks (+7%), cost (+33%), and CTR (+44%) demonstrates the growth in traffic volumes due to both increased investment and higher performing ad creative. This, in conjunction with the now rising CPC (up 23% year-on-year), shows a changing landscape where increased competition, tablet growth and popular ad formats like Google s Product Listing Ads have reversed the trend of limited CPC growth. The macroeconomic factors in EMEA and APAC, which had previously shown muted growth, now appear to be rebounding slowly. The following chart shows how global paid search activity was distributed across the major search engines in Q1 13. The following chart shows global paid search activity for Q
4 On a global platform basis, Google continued to dominate, commanding 86% market share in spend, as well as 86% in impressions and 62% in clicks. Advertiser increases in spending on Google were up 33% from a year ago. The Yahoo-Bing Network continues to grow at a solid pace with year-over-year spending up 23% with a modest 7% gain quarter-over quarter. Yahoo-Bing currently holds 7.2% global market share in paid search spend and equally 7.2% in clicks. Baidu, which commands the majority of market share in China (80% by some reports), saw media spend grow on its search platform by 152% year-over-year and 21% quarter-on-quarter. In Q1 13, Baidu accounted for roughly 5% of all spend, 10% of all impressions, and fully one quarter of all clicks globally. Regional Allocation Analysis Each year we provide guidance to our clients with respect to budget allocations for paid search spending for the coming year. We offer this information so our clients have an industry benchmark that they can use to ensure they are allocating budget appropriately to maintain their paid search advertising market share. Our regional planning assumptions, which have not changed since the beginning of the year, for the Americas, EMEA and APAC are listed below % growth in the Americas 10% growth in EMEA 25-30% growth in APAC Q1 13 spending in the Americas was up 29% from Q1 12. Year-overyear CPCs continue to show a rising trend attributed to several factors, including more tablet advertising, higher CPCs on Google s Product Listing Ads (PLAs), and seasonally driven competitiveness in markets such as high tech and consumer electronics. PLANNING ASSUMPTION AMERICAS: In 2013 we recommend that advertisers budget for an increase of 18-20% in paid search spending, emphasizing Latin America as the largest opportunity for growth. The Americas budget should allocate 83% of spend to Google, with roughly 15% to Yahoo-Bing. Secondary search engines should account for about 2% of spend overall in the region. 4
5 In Q1 13, spending in EMEA was up 20% from the previous quarter and 30% from a year prior, breaking the trend of several quarters of single digit growth. And while efficiency continues to be the main trend in EMEA with rising CTRs, the CPC prices have also jumped, increasing 13% over Q4 12. Google again commanded 90% of the paid search advertising budget share in the Americas in Q1 13, while the Yahoo-Bing Network market hovered at the 10% mark. PLANNING ASSUMPTION EMEA: Last year we revised our original budget forecast in EMEA at the halfway mark. For 2013 we recommend budget increases of 10%, understanding the macroeconomic conditions there and a slower recovery. We further recommend that 95% of this spend be allocated to Google, except in Eastern Europe where spending on Yandex should dominate budgets. 5
6 search platform now should command more than 60% of the budget, while the rest of the APAC region should be allocated with budgets split 80% Google and 20% Yahoo. As we have seen across Western Europe in past reports, Google continues to dominate the region. In Q1 13, 93% of regional paid search budgets went to Google. Bing and Yahoo still only make up roughly 1% of the media spend in EMEA. The largest growth in the region has been with Yandex in Russia and Eastern European countries, where it now represents 6% of EMEA paid media budgets. This trend is in line with a Global comscore report that Yandex passed MSN/Bing as the fourth most popular search engine in December In APAC we experienced large click volume increases year-on-year (up 37%) and a 24% increase in media spend. At the same time, CPC prices continued to fall from the high of Q1 12. Superfluous impressions have been reined in, resulting in much higher CTRs on ad creatives both quarter-on-quarter and year-on-year. PLANNING ASSUMPTION APAC: We expect 25% - 30% search spending growth in the region this year with a focus in China, Korea, Japan, South APAC, and the ANZ markets. For 2013, Chinese search engine investments should focus on Baidu with about 85% of the budget. Japan s budget should be split 70/30 between Google and Yahoo. South Korea s homegrown Naver 6
7 across an ever-growing, multi-device landscape, we predict the consequence will be increased competition for mobile-device advertising, as well as increased CPCs across both smartphones and tablets at a higher rate than experienced in the last several quarters. The table below shows the recent trends in global CPCs for the major platforms. Cost-per-Click Analysis Search Engine Q1 13 Q/Q Y/Y Google $ % 39% Yahoo-Bing $ % 5% Baidu $ % 36% Yandex $ % 0% Baidu gained 21% click volume over the previous quarter driven by an equal 21% increase in budget. CPC trends were flat quarter over quarter. Ultimately China s own economic future is still very much an unknown, which could have much larger ramifications for advertising investment in the region and ultimately globally. The State of Mobile As mobile advertising continues to be a topic of high interest, we have included data in this report that is specific to mobile trends, encompassing statistics for both smartphones and tablets. On a global platform basis, mobile advertising grew a substantial 51% in the first quarter when compared to Q4 12 and 124% year-over-year when compared to Q1 12. Mobile search advertising made up 14% of total spending (see graph below). The device breakdown of mobile ad spend was 36% for smartphones and 64% for tablets, a nearly identical split to what was reported in Q4 12. Search Engine Performance Comparison Google continues to adjust its ad formats and matching algorithms for paid search results. Q4 12 saw the launch of the paid format of Google Shopping, making its way into ecommerce advertisers media plans for the first time. Large changes to Google s platform followed in Q1 13 with the rollout of Google Enhanced Campaigns. In a move to consolidate keywords 7
8 CPC prices vary significantly, depending on the mobile platform. CPCs on smartphones remained at a 52% discount to desktop CPCs, but have increased nearly every quarter for the last five quarters with the exception of Q4 12. Tablet CPCs have closed the gap with desktop CPCs now actually more competitive in some industries. We found CPCs on tablets to be 6% higher than desktop CPCs in Q1 13, along with higher CPC prices recorded each quarter for the last six quarters. This can be attributed to several factors, including Google s advertising default opt-in to desktops and tablets, plus the higher user engagement, content consumption and purchase affinity experienced by many advertisers. About the Study This is the seventh year of Covario s quarterly Global Paid Search Spend Analysis. We now have 25 quarters of data on the spending patterns of Covario customers, which consist largely of global high-tech and consumer electronics firms, as well as ecommerce retailers. The purpose of this report is to share our expertise and knowledge of the spending patterns of our unique customer set to help our clients with their planning assumptions and budget management. Our global clients leverage paid search advertising in more than 45 countries on many different search engine platforms. This provides Covario with a view into how global advertisers are changing their allocations in search spending, as well as differences in the performance of their paid search programs in a way that allows planners to more accurately develop global marketing campaigns and budgets. This report is being provided for general informational purposes only. 8
9 About Covario Covario is the world s leading independent provider of SEO (search engine optimization) and SEM (search engine marketing) agency services and marketing solutions. The firm was selected by OMMA as both the 2012 and the 2011 Search Agency of the Year. Covario is the parent company of Rio SEO, the leading provider of SEO, social media, and content marketing software automation tools. Headquartered in San Diego, Covario has about 250 team members worldwide who are also concentrated in Beijing, Chicago, London, New York, Phoenix, San Francisco, Sao Paulo, Seattle, Singapore, Tokyo, and Toronto. The agency s growing customer base includes world leaders in technology, consumer electronics, retail, ecommerce, financial services, media, entertainment, publishing, and consumer packaged goods. More information is available at Towne Centre Drive, Stes 600 & 750, San Diego, CA / / covario.com 2013 Covario, Inc. All rights reserved. Covario and the Covario logo are trademarks of Covario, Inc. in the U.S. and various countries
Second Quarter Global Search Advertising
/ COVARIO / QUARTERLY GLOBAL PAID SEARCH SPEND ANALYSIS Second Quarter Global Search Advertising Gets Boost from Recovering Regionsjor search engines Global Paid Search Spending Accelerates in the First
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