Efficient Frontier Insights

Global SEM Breakdown: Mostly Google

Today Google is expected to report "stellar earnings," according to a Forbes article published this week. In Q3 2007, Google reported that 48% of its revenue came from outside the US, which leads the author to conclude "even a recession should not impede Google's growth." This week we reported that Google accounted for 77% of search spend in Q4 07, and captured 97% of the additional search marketing spend added by a fixed group of US clients this year. Analysis of data from our international client base shows that with the exception of Japan, where Yahoo dominates search, other markets lean even more heavily toward Google than the US.

Google search and content covers more than 85% of the marketplace in Australia, UK, and Europe. MSN adCenter is not operating in Australia, and has a presence in only some European countries.

Efficient Frontier CEO Ellen Siminoff recently wrote about the global opportunity for SEM in MediaPost's Search Insider. Google may not be able to take the majority of search share in China and Japan, but it seems as if world domination might be in its future, making "don't be evil" an increasingly important motto.

Search Engine Performance Report: ROI up 13% in Q4 07, 97% of Additional Spend Goes to Google

Today we released our Search Engine Performance Report: Q4 2007. We analyzed data across a fixed set of Efficient Frontier clients from Q4 2006 to Q4 2007 to find trends in search engine performance for spend levels, CTR, CPC, and ROI.

Overall spending was up 29% in Q4 2007 vs. Q4 2006, and ROI improved by 13%. Google gained a larger than proportional share of that additional spending: as I've reported before, Google's share of search spend was 77% in Q4 2007, but its share of the spend that clients added to their portfolios versus Q4 2006 was 97%. MSN gained 6% of the additional spending, consistent with its share of total spend, while Yahoo's share dropped by 3%.

Our ROI analysis shows that Yahoo's ROI improved by 39% in Q4 2007 versus pre-Panama Q4 2006, and MSN's ROI was 27% higher than the average ROI across the search engines in Q4 2007. While Google didn't make the largest gains in ROI, its ability to drive volume and consistent performance makes it the engine of choice for advertisers seeking to spend more on search advertising. Click here to download the full report.

Content Spending: How much is enough?

How do you decide how much of your search budget to allocate to contextual advertising? The quick answer: as much as your budget will allow that allows you to reach your conversion goals. However, data shows that content works better for some verticals than others. Businesses whose websites match the mindset of those browsing related content will generally have more success with contextual advertising.

The average Efficient Frontier client spends 3.4% of search budget on content, but that number varies widely by vertical. Because Efficient Frontier's portfolio optimization algorithms look at the entire portfolio of keyword bids across both search and content, where spend is allocated is an indication of the effectiveness of that channel.

Dating sites experience the most success with content advertising - in December 2007, 6.4% of Efficient Frontier client spend in the dating vertical was allocated toward content. it makes sense that content is a good match for dating sites, since users are generally in the mood to meet people when browsing sites where dating-related content ads appear, and thus more likely to take the time to fill out a registration form

Automotive advertisers spent slightly more than average on content advertising in December 2007, at 3.8%. Again, the mindset of those browsing auto-related content is similar to the mindset of those visiting an auto website.

Financial advertisers' allocation of spend toward content was about average in December 2007, while Travel and Retail advertisers spend less than average on content. It seems that content advertising works very well for advertisers that have content to offer, and not as well for those for whom a conversion is a purchase. Search and shopping engines are more targeted channels for advertisers seeking to increase purchase conversions, as the mindset of the purchase-driven user is much more focused than the content-browsing user.

To learn about best practices for content advertising, read this post.

Click Through Rates - Search vs. Content

How do click through rates compare across the search engines for search and content? Last month, Vividh wrote about best practices for content targeting, and the performance data below further demonstrates the need to manage search and content campaigns separately, due to significant variances in performance.

Analysis of CTR across a stable group of clients revealed that MSN has the highest CTR for search, at 2.49% in December 2007. In general, advertisers have seen high CTR and conversions on MSN, although CTR has declined over the past year, suggesting that MSN is becoming more competitive. CTR on Google search has remained fairly stable over the past year, and remains more than double Yahoo search CTR.

Content advertising, as most search marketers know, is less targeted and thus has far lower click through rates. In December 2007, CTR on Google search was 31 times greater than on Google's content network (AdSense), at 2.14% for search and 0.07% for content. The AdSense network has grown substantially over the past year, with the addition of MySpace in December 2006 and the continuing explosion of blogs, many of which run AdSense. It's not surprising then, that CTR on AdSense has dropped by 75% over the past year, even while content spend grew 39% among the same group of clients.

The clickable area change in mid-November may have contributed to the 15% drop in AdSense CTR from November to December 2007, but if it it did, it will only serve to increase ROI by reducing accidental clicks.

Given that content and search are so different from a behavioral, monetary, and performance perspective, it is important to organize campaigns and set bids accordingly to maximize return on each channel, as outlined here.

SEM Tools: Risks, Limitations & Best Practices - Part III: Demographic Targeting

In the previous two posts in this series, I discussed key elements to pay attention to in geo targeting and content targeting. In the final post in the series, I will discuss the risks, limitations and best practices in using demographic targeting.

Part III: Demographic Targeting

Demographic targeting is a relatively new tool currently offered by MSN AdCenter and Google Adwords (for limited site targeted content campaigns). Through demographic targeting you can target your audience based on gender, age, ethnicity, family income and even whether they have children at home or not. This would be one of the greatest tools for search engine marketing if completely accurate, since you will be able to show your ads to the preferred demographic. However, there is still room for improvement.

1. Inaccurate User Information

Search engines base demographic targeting on the information users enter at the time of signing up for any of their products. MSN AdCenter, for example gets this information from MSN Hotmail and Microsoft Windows signups. It’s a common knowledge that people give inaccurate information during signups and there is no shortage of fake Hotmail and Gmail profiles on the internet. Search engines base their trends on this information which is perhaps not entirely accurate.

For example, a 50 year old man in Canada can easily create a user profile of a 27 year old woman in San Diego, California. Thus a cosmetics ad intended for women in their 20s would not reach its intended audience in this case.

2. Again, know your business

Just like , demographic targeting would be applicable only for certain businesses and not for others. If your product is targeted towards a particular demographic, it may make sense to use this tool.

When I looked at the demographic report for the keywords "evening gown" and "tuxedo" from MSN AdCenter’s new MS Excel Add-in "Ad Intelligence", I could see very clear gender-based search trends. If you are a business which aims to sell evening gowns and tuxedos, you should keep two sets of keywords, one targeted towards men and the other towards women. 

Similarly, if you look at the demographics for the keyword "baby clothes," the majority of searches are from women between the ages of 18 and 50. 

On the other hand, if you look for demographic trending of electronics related keywords like "hdtv" and "digital camera," the search volume doesn't skew strongly towards one gender or age group. In this case demographic targeting would limit your reach more than necessary and is not recommended.   

All said, you should have enough data and proof to determine which demographic group is more likely to buy your product before you use this feature.

Unlike geo and content targeting, demographic targeting is relatively new. I am still not completely confident of its accuracy as many web users likely enter incorrect information. I am positive though, that the tool will become more robust in future. If you decide on using this tool, I would strongly recommend conducting research on demographic trends in your business from both internal and external sources.

Holiday Retail Daily Trends - the Spend/CTR Correlation

Before the holiday season is forgotten, it's worth taking a look back at daily trends in season performance to keep in mind for next year. In 2007, the top 5 days in search spending for Efficient Frontier's US retail clients were early on in the season, with November 26 marking the high point. The Mondays of December 3 and 10 also showed strong spending.

The chart below shows that CTR is loosely correlated with spend, justifying the increase in spending on those days. Spending was justifiably low on the days leading up to Christmas as ship by Christmas dates had passed. It should be noted that average position remained stable throughout this period, at between 5 and 5.5 for this group of clients.

In looking at data by search engine, CTR was highest on MSN adCenter Search, averaging 3.6% throughout the holiday period, compared to Google at 3.2% and 1.3% on Yahoo! Search. Google's CTR was impressive given that 85% of Efficient Frontier's retail spend was on Google, versus 3.3% on MSN and  12% on Yahoo!. This foretells yet another strong quarter for Google, and the continued wish for advertisers for increased search volume on MSN/Live.