Efficient Frontier Insights

Spend Trends in the United States

The analysis of spend trends in a sampling of our clients reveals the impact of the weak economy in the United States. We divided our client sample into (a) Large Spenders who spend more than $200,000 per month, (b) Medium spenders who spend between $50,000 and $200,000 per month and (c) Small spenders who spend less than $50,000 per month. Next, we compared the change in spend between Q3 and Q2 for 2008. The results are shown below.

The chart reveals that:

1. On average large spenders have increased spend by 5%, medium spenders have decreased spend by 4% and small spenders have decreased spend by -15%.
2. The standard deviation of the spend change was larger (by 20%) for the small spenders than it was for the large spenders. In other words, small spenders have responded more diversely on than the large spenders. While on average they have reduced spend, many have also increased their spending quarter over quarter.

The data shows that small spenders are being significantly affected by the current economic situation. Medium spenders have seen a slight decline in spend. The large spenders are bucking the spend trend perhaps with the aim to consolidate their current market positions.

Method of Analysis: We divided our client sample into three types based on spend levels. Next, we calculated the histogram of spend changes for all clients in each spend category. Empirical observations revealed that the distribution of spend changes was approximately a Normal distribution. With the calculations of mean and standard deviation, normal distributions were fitted to the histograms as seen in the chart.

UK and Europe Q3 2008 Search Engine Performance Report Released

Efficient Frontier’s UK and Europe Search Engine Performance Report: Q3 2008 was released this week. The report analsyes data for the UK and Europe (excluding UK) separately, and shows that Google picked up one percentage point of share of search engine spending in the UK and 0.4 percentage points of share in Europe. UK CPCs dropped on all engines from Q2 to Q3, while UK CTR improved by 41.6%, likely a result of Yahoo’s improved syndicated traffic quality.

Average CTR for Google in Europe, at 3.54%, was considerably higher than in the UK, at 1.99%, and in the US, at 2.25%. This indicates that there is less competition for advertisers in Europe, and speaks to the more nascent nature of the European search marketplace. European CPCs on Google, at an average of €0.36, were 36% higher than CPCs on Yahoo, at €0.23 in Q3 2008.

For more detail, check out the press release or download the report.

Improving ROI by implementing Geo Targeting

There has been a lot of talk about geo-targeting. Google recently announced a Geographic performance report that makes it easier to look at where your traffic is coming from. Efficient Frontier is able to provide reports with Geographic traffic and conversion rates for all pixel clients through its Analytics systems.

While implementing Geo-targeting it is important to understand the reasons for doing so. There are a few major reasons for implementing geo-targeting:

1. If your product or service is only available in certain geographic regions it is better to target those regions only to improve the quality of traffic. For example, if are a local car dealership you might want to only target ads to users in that metropolitan area or city.
2. Some advertisers have variations in conversion rates across different geographic regions. Splitting out traffic by region, helps advertisers bid differently in different regions based on conversion rates. So for example, if an advertiser had a higher conversion rate in California than in Texas for the same keyword, the advertiser could bid higher in California to get a higher average position (given the same cost). The map shown below shows a sample advertiser that has different conversion rates by state. The states in blue have the highest conversion rate while the states in yellow have the lowest. The advertiser could group states with similar conversion rates together to simplify campaign structure.
   
   
3. Geo targeting helps advertisers show localized ad copy. For some advertisers, it might makes sense to use localized ad copy. For example, saying "Find Low Rates in California" might have a higher Click-Through Rate than just saying "Find Low Rates".
   For some advertisers we have seen that implementing Geo-targeting has improved ROI by up to 25% by improving the quality of traffic and improving bidding efficiencies.

Google Gains 2 Points of Search Share in Q3, CPCs rise on Google Search and Content

Today we released the Efficient Frontier Q3 2008 U.S. Search Engine Performance Report. which analyzes the performance of Google, Yahoo, and Microsoft Live Search on search engine spending, CTR, CPC and ROI from advertisers in the Efficient Frontier Client Index. Because conditions in the finance sector have been so volatile over the past year, trends were reported separately for financial services advertisers and non-financial services advertisers.

Google continued to gain share for all advertisers over last year, capturing 76% the share of total search engine spending in Q3, up 2.1 percentage points from Q3 2007. That gain in share was largely due to growth in Google content spending, which increased from 2.6% to 4.6% of spending from Q3 2007 to Q3 2008. Content spending increased by 82.8% YOY  in Q3 2008 for non-financial services advertisers, and by 16.6% in financial services.

A look at trends in CPCs across search and content gives an indication of why advertisers are investing more in Google content and continue to spend on Yahoo and Microsoft Live Search. On a YOY basis CPCs on Google search increased by 8.3% and 4.7% respectively for financial and non-financial services advertisers. CPCs declined YOY for Microsoft Live Search and Yahoo Search, with the exception of CPCs on Microsoft Live Search for non-financial services advertisers, which were up 6%. Google content CPCs increased by 20% for non-financial services advertisers, but at $0.28 a click, Google content is still 53% cheaper than Google search, which averaged $0.61 per click in Q3.

The report also found that, in an increasingly unstable economic environment, ROI improved on all three major search engines in Q3 2008 on a YOY basis. Google search ROI for non-financial services advertisers increased by 11.3%, Yahoo search by 19.7% and Microsoft Live Search by 29.9% YOY.

For more findings from the report, read our press release, or download the full report here.

Visualization of Data through Motion Charts

One of the key advantages of SEM is that data can be measured at several points in the sales funnel. For example: Impressions measure the degree of user intent, Click Through Rates (CTR) measure the effectiveness of your ads in capturing that intent, Cost Per Click (CPC) measures the price you are paying to capture intent and finally the ROI measures the rate of return on investment in this marketplace. While this multi-dimensional measurability of data is a key asset to the search advertiser, the complex interactions of the metrics can be daunting to analyze without the right mathematical and analytical tools. Visualization techniques such as treemaps, which was discussed in a recent post, can help capture several dimensions of data successfully and make the data meaningful. In this post, we present another very powerful tool called Motion Charts that can capture 5 dimensions of data in an extremely effective manner. Whats more these charts are fun ! Before, delving into these charts, a bit of history. Motion Charts were first presented to a large audience by Dr Hans Rosling in a famous TED talk where he discussed global health in an extremely engaging manner. The tool he used was called the Trendalyzer developed by a non-profit Gapminder.org . Google later acquired the Trendalyzer and developed this technology into the Motion Charts. It is now part of the Google Docs suite of visualization tools . As an example, we will analyze the performance of a hypothetical SEM campaign with this chart.

The two bubbles represent 2 portfolios of campaigns managed by Efficient Frontier. One bubble represents Google campaign and other represents the Yahoo campaign. If one moves her mouse over the right most bubble, 4 dimensions readily become apparent. The horizontal axis captures weekly spend, the vertical axis captures weekly account signups, the size of the bubble is proportional to average conversion rate (free registration to paid subscription rate) for the Google portfolio and the color of the bubble is proportional to the CPA of this portfolio (note the color specturm on the right side of the chart). The paramters to be tracked can be interactively changed by selecting the drop downs on the axes and on the right side of the chart. Finally, note the date on the right side of the chart. This is the fifth dimension. So, to interpret: on Week starting May 1 the Google portfolio generated 800 registrations at $1000 spend with a conversion rate of 9.4% at a Cost Per Registration (CPR) of $1.25. Moving the slider, will change the time and will display the locations of the 3 portfolios on that week. Hitting the play button will play the "movie" of your quarterly performance. Trails are a very powerful feature in the motion chart. To enable trails, check the trails box on the screen (it defaults as already checked), change the size parameter of the bubbles (in the drop down) to "same size", and click on the Google portfolio bubble again. You would now see a name tag pop up next to it. On pressing play again, the Google portfolio is "tracked" over the quarter and one can clearly see the change in performance over time. In this example, the Google portfolio is seen to be 25% more efficient from week 2 i.e. the weekly account signups have increased by about 25% at close to the spend on week 1. Also note that since week 2, the portfolio has clustered at its "sweet spot" i.e. while there are week to week fluctations in performance, i is always better than the performance on week 1. An analysis of several accounts managed by EF reveals a similar pattern i.e. while performance fluctuates on a weekly basis, the portfolios cluster around a region of higher efficiency due to optimization.

Q2 Search Engine Performance Report: Google gets $1.10 of Every New Search Dollar

Today our US Search Engine Performance Report: Q2 2008 was released. Analysis of data from our client index showed that Google took more than its fair share of the overall increase in search spending: for every new dollar spent on search in Q2 2008 versus Q2 2007, $1.10 went to Google. Yahoo lost $0.09, and Microsoft lost $0.01. In other words, advertisers are putting all of their new search dollars into Google, and pulling money out of Yahoo Search and Microsoft Live Search.

On a quarter to quarter basis, however, the allocation of search marketing dollars did not fundamentally change, which is an interesting point in light of the heated negotiations among Yahoo, Microsoft and Google over the past several months. Google maintained its 77.4% share of US search marketing dollars, while Yahoo captured 17.8% of spending and Microsoft Live Search maintained its 4.8% share. Microsoft Live Search and Yahoo Search still have good ROI in comparison to Google, which makes them essential marketplaces for advertisers that need to meet their increasingly scrutinized revenue targets.

Average CPCs for non-financial services advertisers on Google were up 14% from Q2 2007 to Q2 2008, while CPCs on Microsoft Live increased by 5.6% and Yahoo CPCs dropped 7%. We track financial services CPCs separately, since they are so much greater, as you can see here, and have behaved differently over the past year given the turmoil in the mortgage sector and other financial markets. Financial services CPCs increased 19% on Google over the past year, but declined significantly on the other engines. Bloomberg has a more detailed analysis of CPC trends here.

Our report also shows that Google  dominates the western character set of search advertising: Efficient Frontier places ads in the US, UK, France, Germany, Italy, Spain, Brazil, Mexico, Argentina, India, and Australia, and accounts for 75% or more of search dollars in those countries. We began placing ads in China this year, which is dominated by Baidu. Historically within Efficient Frontier's client base Yahoo has been the leader in Japan, but in Q2 Google picked up 7 percentage points of share, and accounted for a majority 56% share of search adverting spend in Japan.

June CPC data on Search Engine Watch

Today Search Engine Watch published June's average search CPC data by vertical. This week, we will publish our US Search Engine Performance Report, Q2 2008, which will show the difference in average CPCs across Google, Yahoo, and Microsoft Live Search, as well as trends in share of spend, CTR, and ROI.

Google Content Network Success Story - MySpace Converts!

Lifescript, an Efficient Frontier client, recently published a case study on its success with the Google Content network. It shows how Aloke Fernandes, our account manager, worked with Lifescript and used Efficient Frontier's and Google's reporting tools to identify high converting sites within Google's content network. To Aloke's surprise, one of those high-converting sites happened to be MySpace. The case study goes on to discuss how Lifescript went on the leverage the effectiveness of social media advertising.

Brian Hogan, SVP of Marketing and Business Development at Lifescript, is quoted in the case study (PDF available here )

"By scaling and managing large sets of keywords, Efficient Frontier has not only allowed us to reach relevant users on search, content, and social networking sites, but has also helped us grow our search revenues three-fold over one year."

These posts on content advertising show the differences in CPCs and CTR on content versus search and demonstrate how content adverting can be a valuable source of revenue, especially for certain business types. This post by Vividh Chaudhary discusses some best practices for setting up content campaigns.

Treemaps: SEM Campaign Visualization Tool

In a presentation at SMX Advanced earlier this month, Sid Shah, PhD, Sr. Business Analyst at Efficient Frontier, introduced two useful tools for visualizing campaign performance. Histograms were shown to be useful for setting performance goals for head keywords versus tail keywords. Treemaps were the second visualization tool Sid presented and will be explained here.

Treemaps were developed in the early 1990's by professor Ben Shneiderman at the University of Maryland. He sought a way to visualize directory tree structures on his hard drive in order to find large files that could be deleted or identify which users consumed the largest amount of disk space. Eventually treemaps were developed into a usable software product and the version we use at Efficient Frontier is available as an Excel add-in from Microsoft Research.

Good examples of treemaps in action are SmartMoney's Map of the Market and this news map. Looking at the Map of the Market is a quick way to see how certain sectors have performed, and which stocks in those sectors are performing well or poorly. Each rectangle represents a company, and the size of the rectangle represents the company's market cap, while the color shows price performance. Mousing over the rectangles shows the name and data for the individual stocks, and clicking allows you to drill down further on each sector and view sub-sector performance.

Similarly, treemaps can be applied to your search campaign. In the fictitious example used here, the smallest rectangles represent individual keywords, and the size of the rectangles indicates spend. The keywords are grouped by campaign, and finally by search engine. The color indicates ROI, with red representing poor ROI, and purple representing positive ROI. The shade of the color indicates how negative or positive the ROI is, with white representing average ROI. You could also use revenue, CPA, impressions, CTR, CPC, or any other metric to size or color your rectangles.

In the fictitious example above, we can see that Google accounted for about 60% of spend, with the "gift baskets" and "flowers" campaigns about equal in spend. Since this retailer, called Flower Express, does not have a very strong brand, its brand terms account for a small portion of spend. The keywords "flower delivery" and "flower arrangements" are among the best performing on Google, while it appears "florist shop" and "floral shop" performed poorly on both Google and Yahoo. This could indicate that those searchers are seeking local shops rather than an online shop, and investment in those terms should be reduced. Non product specific terms "gifts for men" and gifts for women" did not perform well, and perhaps spend could be shifted to high ROI terms like "plant arrangements." Like SmartMoney's Map of the Market, search engine or campaign rectangles can be clicked on to drill down, which can be helpful when examining data sets larger than the one shown.

For those of you who spend the day poring through spreadsheets containing rows of numbers in an effort to measure and improve campaign performance, treemaps can be a refreshing way to visualize data. They can help you spot opportunities as well as eliminate poor performers. They can also help you determine the level of risk in your campaign by showing just how dominant a head term might be. At Efficient Frontier, treemaps provide our business analysts and account managers insights about our accounts to help grow them for the future, and further improve the high campaign performance provided by our bid management technology.

 

Average CPC Trend by Category

Search Engine Watch just posted our average CPC data by category for May 2008. Below is a trend chart of CPCs by vertical since December, when SEW began publishing the data.

CPCs have increased since December in all of the categories tracked except for automotive. CPCs for mortage and auto finance advertisers were 21% and 32% higher respectively in May 2008 than in December 2007. This is most likely due to seasonality. Retail and dating category CPCs were up less than 5% in that period, while travel was up 16%.