As 2008 came to a close, many businesses were reeling as their stock prices fell, marketing budgets slashed, hundreds of thousands of jobs shed, and continued reports of doom and gloom across nearly all industry sectors. Even Google’s share price wasn’t impervious to the economic crisis. Research from the Efficient Frontier suggests there are some bright spots in the search engine marketing (SEM) channel.
The Efficient Frontier Customer Index is a fixed sampling of U.S. search advertisers across industry verticals including financial services, travel and entertainment, retail and automotive.
Highlights from the Efficient Frontier – U.S. Search Engine Performance Report Q4 2008:
- 8% decrease in paid search spending year-over-year
- Google leads U.S. search engine market share with 76%, though down 2% YOY
- Yahoo gains 3% YOY to close 2008 with 20% of U.S. search engine market share
- Finance sector paid search spending drops 25% YOY. 16% Q/Q drop occurring in Q4
- Retail sector sees a 9% increase in spending year-over-year
- Automotive sector paid search spend declines 15% YOY. Weak consumer demand as impression volume plummets 37% YOY, with 30% Q/Q occurring in Q4.
- Travel and entertainment sector sees its search traffic deflate by 18% YOY (Q/Q -29% in Q4) and its spending nose dive 24% YOY (Q/Q -26% in Q4).
Larger advertisers, those with paid search budgets of $200,000 or more decreased spending by only 9%. Medium advertisers, budgets between $50,000 and $200,000 increased their spending by 15% in Q2 but otherwise their spending patterns were consistent with previous levels. Small advertisers, $50,000 or less, felt the impacts of the economic downturn the most on their marketing efforts as they cut spending by 23% YOY.
Clicking Our Way Out of Recession
Click-Through-Rates (CTR) increased across the Google Search, Google Content, and Yahoo Search networks by 4.84%, 11.11%, and 6.42% respectively. On average, Microsoft LiveSearch maintained a higher CTR than the other search engines but saw its CTR decline by 30.47% falling behind Google Search for the first time since Q4 2007.
Overall cost-per-click (CPC) is down 5% YOY. Google Search’s CPC fell 8%, while Microsoft LiveSearch declined by 3% and Yahoo Search declined by only 1%. A weaker CPC suggests less competitiveness as marketers react to the economic crisis by tightening their spending. Although Microsoft LiveSearch lags behind in search market share, it still commands a higher premium CPC of $0.76 compared to Google Search’s $0.66, and Yahoo Search’s $0.63 suggesting advertisers are willing to seek out smaller volume for higher ROI.
As the economy continues its downward spiral, marketers will need to focus on strategies that minimize costs while continuing to deliver measurable results. SEM is the most accountable marketing and acquisition channel and has consistently proven its value. The research put forward by the Efficient Frontier indicates that search marketers are adjusting their spend to ROI trends within their given industry. Spending levels rise and fall depending on ROI suggesting that marketers will rely on paid search even in a recessionary economy, so long as it continues to prove itself as an invaluable marketing channel.
