Efficient Frontier Insights

Seasonal SEM Shift - from Retail to Travel, Finance Growth Slowing

As the new year begins, it's no surprise that online retailers cut back search engine spending as the shopping season wanes. The US retailers among Efficient Frontier's client base decreased spend by 31% from December 2007 to January 2008. Travel, on the other hand, receives a huge surge in consumer interest, and therefore ad spend, in January - our travel search engine spending was up 64% from December 07 to this January.

Search spending from finance, auto, and dating advertisers increased slightly from December to January. The news here is that the December - January growth in the finance sector was much slower this year than last. Financial advertisers spent 24% more in January 2007 vs. December 2006, while this year spend grew only 3% in that period. It seems the economic slowdown, particularly in the mortgage space, could impact the search engines.

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.

Financial Services - not feeling the pinch yet

Today I spoke on a panel at the Search Insider Summit called "Managing Search in an Uncertain Economy" (Lee Odden liveblogged the session here) I specifically wanted to look at trends among our financial services clients, which would be the first to react to market conditions and could indicate how the search engines might be affected if an economic downturn might occur.

It turns out that spend has grown 35% from November 2006 to November 2007 among the financial services clients we have had at least a year. Spend normally drops for many of these clients between October and November due to decreased consumer interest. A quick look at Google Trends shows this seasonal decline. Our financial services client spend was down 12% from October - November this year. Similarly, it dropped by 14% from October to November last year. That similar seasonal decline combined with the 35% overall growth rate leads me to believe that we don't need to worry, at least not yet.

What lenders and other financial companies are doing though, is getting smarter about where they put their dollars, and monitoring their campaigns more closely. One way Efficient Frontier helps clients increase revenue is by optimizing where they are spending their dollars. Not surprisingly, it's headed toward Google, as you can see on the chart below. Year over year (November 06 vs. November 07) spend on Google was up 55%, MSN up 13%, and Yahoo down 6%. In November 07, Google accounted for 74% of our financial services search engine spend, up from 63% in November 06. When will this growth slow down??

Motley Fool UK Case Study at SMX London

Last Friday Jonathan Beeston, our UK Director of Client Services, presented a financial services case study at SMX London. Fool.co.uk started optimizing (or optimising, as they write in the UK) their search campaigns using Efficient Frontier's bid management technology in April 2007, and within two weeks experienced a significant increase in volume and decrease in CPA. After just one month volume had increased by 83% and CPA had dropped by 43%.

We didn't stop with just bid optimization for Fool.co.uk - we also helped expand their keyword list into the long tail, restructured the campaign, and expanded the campaign from just credit cards to loans, mortgages, insurance, and banking. We also refined ad copy, conducted keyword testing, landing page optimization, and match type expansion, and made use of our simulations and forecasting. 

Fool.co.uk is one of the leading finance sites in the UK, with over 2 million members and 600,000 monthly visitors. Their search marketing efforts are helping to increase value for partners and grow the site even more. The past six months of algorithmic campaign optimization combined with smart search marketing practices have resulted in an overall drop in CPA 86% and an increase in click-out value of 320%.

This example is what makes search engine marketing so interesting - it's not very hard for an advertisers to cost-effectively acquire new customers through search, but the additional investment in optimization can produce results that far exceed expectations.