/ 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 Half By Alex Funk
Executive Summary Quarter-on-quarter growth in global paid search advertising among Covario s high tech, CE and retail clients topped 22% globally. Global PPC spending increased by 23% in the second quarter compared to a year earlier. CPC prices increased 10% during the quarter driven by market and platform changes. Mobile search spend increased 39% over the first quarter. 2
Second Quarter Global Spending Overview Spending on global paid search advertising in Q2 13 grew by 22% quarterover-quarter and 23% year-over-year, an acceleration from a year ago when quarter-on-quarter growth hit 9%. Cost-per-Click (CPC) pricing continues to rise, increasing 10% quarter-on-quarter and 24% year-on year. Ad effectiveness, measured through the click-through rates (CTRs), remains high performing at 27% better than the same quarter a year ago. The year-over-year growth in PPC budgets and improvements in CTRs was muted by the 24% higher CPC, yielding essentially flat (-1%) click volume. The following chart shows how global paid search activity was distributed across the major search engines in Q2 13. Globally, regional investment improved substantially in that all regions grew quarter-on-quarter and year-on-year to varying degrees. The Americas, driven by the U.S. and Canada, saw noteworthy spending growth in the quarter up 8% quarter-on-quarter and 17% year-on-year. In EMEA, large gains helped the region regain pace after a very slow 2012, with 43% quarter-on-quarter and 73% year-on-year improvements. For the APAC region the growth rate topped 55% over a softer Q1, but was down 1% over the same quarter a year ago. The following chart shows global paid search activity for Q2 13. On a global platform basis, Google continued to dominate with 86% market share in spend, 86% in impressions, and 62% in clicks. Advertiser spending increases with Google were up 13% 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 6% global market share in paid search spend and equally 6% 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 22% year-over-year and 70% quarter-on-quarter. In Q2 13, Baidu globally accounted for roughly 7% of all spend, 11% of all impressions, and 27% of all clicks. 3
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. 18 20% growth in the Americas 10% growth in EMEA 25% growth in APAC Second quarter spending in the Americas was up 17% from Q2 12 and 8% quarter-on-quarter. CPC trends were a mixed bag in Q2 13 in that quarteron-quarter CPCs showed a rising trend, while the actual CPCs year-onyear were down 1%. Mobile advertising growth at lower CPCs, increased investment in Product Listing Ads, as well as the advent of Google s Enhanced Campaigns Platform, could be at play when looking to read the tea leaves of CPC predictability. PLANNING ASSUMPTION AMERICAS: For 2013, we stand by our original recommendation 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. Google again commanded 92% of the paid search advertising budget share in the Americas in Q2 13, while the Yahoo-Bing Network market hovered at the 8% mark. 4
PLANNING ASSUMPTION EMEA: For 2013, we continue to recommend budget increases of 10%, understanding the macroeconomic conditions there and a slower recovery. We further recommend that 95% of this spend should be allocated to Google, except in Eastern Europe where spending on Yandex should dominate budgets. In Q2 13, spending in EMEA was up 43% from the previous quarter and 73% from the year prior, a trend that was first reversed in Q1 13 after several consecutive quarters of anemic growth. And while CTRs have leveled out to their previous numbers, the CPC prices have jumped, increasing 29% over Q2 12. As we have seen across Western Europe in past reports, Google continues to dominate the region. In Q2 13, 93% of regional paid search budgets went to Google. Bing and Yahoo still make up only about 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. 5
PLANNING ASSUMPTION APAC: We still expect 25% search spending growth in the region with that growth spread among 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 search platform now should command more than 60% of the budget in that country, while the rest of the APAC region should be allocated with budgets split 80% Google and 20% Yahoo. In APAC, we experienced quarter-on-quarter media spend growth of 55%, which led to 71% more impressions and 31% greater click volume. CPC prices have also increased during that time, up 18% quarter-on-quarter and 31% year-on-year. Baidu gained 34% click volume over the previous quarter driven by a 71% increase in budget. CPC trends showed a 27% increase over last quarter. We expect sustained paid search growth through the second half of the year with consumer product interest peaking as it usually does in the fourth quarter. 6
Search Engine Performance Comparison Google continues to adjust its ad formats and matching algorithms for paid search results. Google s Enhanced Campaigns Platform has been rolling out since January 2013 and will be complete by July 22. In a move to consolidate search marketing keywords across an ever-growing, multi-device landscape we predict the consequence will be increased competition for mobile-device advertising, as well as increased CPCs for 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. Search Engine Q/Q Y/Y Baidu 27% 42% Google 16% 13% Yandex 10% - 47% YBN 4% - 24% Naver 32% 25% CPC prices varied significantly, depending on the mobile platform. CPCs on smartphones remained at a 40% discount to desktop CPCs, but have increased nearly every quarter for the last five quarters with the exception of Q4 12. Tablet CPCs fell below desktop pricing for the first time in several quarters and sit at a 12% discount to desktop CPCs. The State of Mobile As mobile advertising continues to be a topic at the forefront of the search marketing industry, we have included data in this report that is specific to mobile trends. This encompasses statistics for both smartphones and tablets. On a global platform basis, mobile advertising grew a substantial 39% in the second quarter when compared to Q1 13 and 132% year-over-year relative to Q2 12. Mobile search advertising made up 16% of total spending (see graph below). The device breakdown of mobile ad spend was 40% for smartphones and 60% for tablets. 7
About the Study This is the seventh year of Covario s quarterly Global Paid Search Spend Analysis. We now have 26 quarters of data on the spending patterns of Covario customers, which consist largely of global high-tech and consumer electronics firms, along with last year s addition of ecommerce retailers. The purpose of this report is to share our expertise relative to the spending patterns of our unique customer set to help our clients with their paid search 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. 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 http://www.covario.com. This report is being provided for general informational purposes only. 9255 Towne Centre Drive, Stes 600 & 750, San Diego, CA 92121 / 858.397.1500 / 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. 06.09.13