Paid Search Spending Grows in Q4 '08 but Slows for Global High Tech Firms, with Yahoo! and MSN Posting Slight Gains in North America
Fourth installment in Covario's analysis series shows 7.2% growth over Q3 spending and 43% growth from Q4 2007; high tech firms expect flat to modest growth in 2009
SAN DIEGO – January 20, 2009 – Covario, Inc., the leader in interactive marketing analytics, today announced the release of the Q4 2008 edition of its Global Search Spending Analysis series. Paid search spending was 7.2% above Q3 levels, and 43% above the same period in Q4 2007. The strong growth rate is the result of budgets that were already committed to Q4 spending before the deteriorating macro-economic environment impacted corporate budget allocations, and the reluctance of large advertisers to cut spending during the Holiday season. This analysis is based on paid search spending of twelve (12) of Covario's US-based high tech and consumer electronics customers, and spans Q1 2007 (Q1 '07) to Q4 2008 (Q4 '08). The combined paid search advertising spending of the analyzed brands represents more than $250 million annually.
"Paid search spending in the high tech and consumer electronics sector in the 4th quarter was still robust," said Craig Macdonald, VP of marketing and product management at Covario. "Large companies had pre-approved budgets from mid-year that were already allocated for the 4th quarter -- so the impact of the global economic crisis was muted during Q4."
Trends by search engine
• Google continued to have 80%+ share of spending for high tech customers globally, with spending growing at 56% between 2007 and 2008. Google's dominance with high tech firms in EMEA was even stronger in Q4 -- with 97.8% of spending in EMEA going to the platform.
• Yahoo!'s share of spending for high tech firms was slightly higher in the US, where for the 2nd straight quarter, its share of spend increased -- from 12.3% in Q2 to 14.6% in Q4. Yahoo!'s growth rate in spending from 2007 to 2008 was only 9.7%.
• MSN, the other major network in the US, has had strong year-on-year growth -- 45.7% -- but still commands less than 5% of the search spending in the US with 3.7%.
• Baidu, the dominant search platform in China, grew its share of spending with North America-based high tech firms -- from 5.6% in Q3 to 11.0% in Q4. Both Google and Yahoo! have slight decreases in share of spending in APAC region -- from 20.4% to 17.2% for Yahoo! and 73.9% to 71.7% for Google.
"Google's dominance in EMEA is really impressive. Outside of their spend on Google in Europe, most of our clients are unable to find significant quality or quantity of inventory from which to extract ROI. The most notable exceptions are the 'must-have' point platforms for specific geographies like Yandex in Russia," noted Macdonald. "Baidu has released improvements to its technology in the past 90 days which are breaking down traditional issues that made advertising very difficult. This is driving new advertising on the network."
Trends in keyword inflation (by search engine)
• Average cost-per-click (CPC) levels in the high tech sector continued to fall in Q4 on all platforms with the exception of MSN. Average CPCs were $.86 in Q4, down 17% from Q3. This decrease is led by reductions in CPCs on Google, which fell from $1.14 in Q3 to $0.89 in Q4.
• CPCs on MSN actually increased from $1.60 to $1.61 between Q3 and Q4, and are up from an average of $1.51 in Q2. Covario's media buying group notes that MSN appears to have relaxed some of the past restrictions on allowing advertisers to bid on branded keywords -- which have been driving CPCs up in the short term.
• CPC rates on Yahoo! declined, but not as steeply as Google. Average CPCs were $0.92, down from $1.03 in Q3. This continues a 5 quarter trend of reductions in CPC rates on the platform. In Q4 2007, average CPC rates were $1.72.
• Covario customers also saw their 6th straight quarter of reductions in the click through rates (CTRs) experienced on Google. In Q4 2007, the average CTR on the platform was 2.59%, and in Q4 2008 the average was 1.85%.
"The steep fall in CPCs in Q4 was a direct result of the macro-economic situation," notes Macdonald. "Large advertisers are migrating spend away from relatively high priced marketing terms that promote brand awareness toward terms which are about sales conversion, and tend to have lower CPC rates."
Covario's Global Search Spend Analysis series leverage the advanced analytics of Covario™ Paid Search Insight, which gathers and analyzes paid search advertising data for more than two dozen of the world's largest advertisers to determine global spending trends and performance. To download a copy of this or previous analyses, please visit www.covario.com.
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About Covario, Inc.
Covario, Inc. is the leader in Interactive Marketing Analytics (IMA) software. The Covario portfolio provides global organizations with robust interactive and search marketing analytics solutions for display advertising, paid search advertising and organic search engine optimization across the enterprise and throughout the channel. Covario enables complex and distributed organizations to control brand integrity, ensure budget transparency and deliver quantifiable results across business units, distribution channels and languages. Headquartered in San Diego, Covario’s growing customer list include some of the world’s best known brands in high tech manufacturing, financial services, electronics, media and publishing and consumer packaged goods.
For more information on Covario call (858) 397-1500