Efficient Frontier Insights

Black is Back!

When we looked at the latest numbers for key metrics comparing the Black Friday weeks of 2009 and 2008, we were quite impressed. Every metric has shown a Year over Year (YoY) rebound. The biggest increase has been in the impression volume which has increased almost two fold YoY. Clicks have also increased by 18%. Both trends indicate that consumers are searching online for products much more than last year.
 
This year, advertisers spent 12% more than last year for 8% more revenue. While we have accounted for delayed conversions in our dataset, we have been conservative in our estimates. Hence, we expect the actualized revenue increase to be closer to 10-12%, in line with the increase in spend. In terms of orders, the average order size has increased by 3%, while the order volume has increased by 4%.

All in all, the trends are promising. More consumers are searching and buying online which has led to advertisers increasing their budgets to leverage the higher revenue opportunities.

We'll continue to watch these trends throughout December to see if black really is back.

Dr. Siddharth Shah

The Retail Resurgence

In our last quarterly report we had noted that with the economic recovery, advertisers in the retail sector had started to loosen their purse strings. Between Q2 and Q3, retail spending had increased 6.25%. Based on the numbers we were seeing, we had predicted double digit growth in SEM retail spend for Q4.

Our latest numbers show that this indeed might be the case. Between September and October, SEM spend in a subset of Efficient Frontier’s retail advertisers grew 24%. The biggest gainers were large advertisers spending more than $300,000 per month. Medium advertisers, who spend between $100,000 and $300,000 per month) and small advertisers (<$100,000 per month) also increased spend by 10% MoM. In contrast, spend grew by only 5% overall for the same period last year.

While the signs are very promising, the coming months will tell us whether this momentum can be sustained through the holiday season.

Dr. Siddharth Shah

Back to School – Back to Basics

It’s that time of year again; Back To School is about to hit its peak for retailers.

So, how do we maximise the return of seasonal campaigns, when the build-up is slow and steady, but activity balloons to a peak at the last minute?

It’s all very well to adopt a “make hay while the sun shines” strategy to seasonal campaigns, by increasing spend and hoping for the best in terms of conversion.  However, there’s a fine line between overspending and underspending when you’re trying to generate the optimal amount of sales without becoming unprofitable.  There is no reason why a seasonal campaign can’t be profitable/achieve its goals at every stage of its existence.

Here are some tips for getting the best out of seasonal campaigns:

1.       Look at year-on-year trends to work out when the peak will hit (but don’t depend too much on this) and devise your strategy.  The key levers are:

a.      Budgets
b.      Bidding
c.      Ad copy
d.      Monitoring performance.

2.       Be flexible about budgets when it comes to seasonal campaigns.  No two years are the same, so try to allow room for manoeuvre here.

3.       EF technology has configurable settings which make bidding more/less reactive to market shifts.  This is critical for seasonal campaigns.

4.       Monitor performance daily, and use what you see there to anticipate growth.  There is nothing worse than seeing a campaign which missed out on several sales simply because the bids were not high enough.

5.       Utilise first page bids to expose keywords which might generate sales at a time of elevated market demand.

6.       Use your ad copy to:

a.       Tell your audience you have exactly what they need at this time of year

b.      Inject a sense of urgency into the user as the peak gets closer,     especially if you are running a related promotion e.g. “free delivery on all orders received before...”

Charlotte Rogers, UK Account Director

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.

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.