Efficient Frontier Insights

UK Q3 Data Sees First Increase in Advertiser Confidence in Three Quarters

In addition to Monday's Efficient Frontier U.S. Search Engine Performance Report, we also released the Efficient Frontier UK Search Engine Performance report yesterday which takes a look at overall market trends from a fixed sample of our UK clients.
 
Performance on the whole is looking up for the UK and for the first time in three quarters we have seen an increase in advertiser confidence as advertisers from our UK Client Index start to spend more on Search Engine Marketing. In fact search spend was up 10% YoY and 11% QoQ which is a great sign for the imminent Christmas retail period.  
 
We expect that advertisers will jump at the chance to gain marketshare in the lead up to Christmas by capitalizing on lower CPCs and reduced competition. Incidentally, CPCs are starting to stabilise again after the yearlong tumble which should be music to the ears of the Search Engines. 
 
In the UK, we are continuing to see a strong demand for search and the news that was released by the IAB/ PwC (30 Sept 09) that online advertising has now bypassed TV to become the UK's single biggest advertising medium is an enormous symbol of confidence in the sector. We will have to wait and see whether online advertising continues to garner more media budget than TV when the economy improves. 
 
You can download our UK Search Engine Performance Report here.
 
Merinda Peppard
Global Marketing Manager

Q3 Data Provide Optimistic Signals for a Positive Q4

The last week at Efficient Frontier has been particularly interesting as we prepared and just released our Q3 2009 US Search Engine Performance Report. The U.S. Q3 data tells a variety of stories depending on the lens you apply. At the end of day, we believe search is on an upswing and, assuming our economy continues to stabilize, Q4 will produce growth that exceeds normal seasonal expansion. Let's take a quick look at how we arrived at our optimistic Q4 outlook.

On a Year on Year (YoY) basis, ad spending across our customer index fell by 5%. In contrast, and importantly for future trends, quarter on quarter revenue grew by 5%. So what is the net effect of 5% down YoY and 5% up QoQ positive? 
 


First, Q409 will be the first quarter where YoY comparisons will turn favorable. Q308 felt some of the effects of our economic turmoil. But remember, the Lehman Brothers failure that sparked the flames of decline hit in mid-September of 08. 
 
Next, a deeper look at trends by sector unveil an uneven pattern for spend. Travel continues to decline due to a number of factors including lower consumer demand and booking fee revenue. In contrast, spending in the autos category perked up as the Cash for Clunkers brought both consumer and advertiser demand to search. And most critical for the fourth quarter, retail showed positive spend growth QoQ and YoY as consumer search volume continues to expand in that sector.
 
Finally, advertiser sentiment is improving. The savvy marketers who make up our client base at Efficient Frontier see opportunity in the improved efficiency of search. Lower competition has helped each engine drive better ROI for our advertiser base. For example, Google is delivered 47% more ROI Q309 vs. Q308. Metrics may be loosening up with economic stability giving advertisers the power to capitalize on efficient sales volume in search.

We'll dive into more details in blog posts to come. And we welcome discussion on Q3. Are others seeing similar trends? How are advertisers approaching Q4? Leave a comment and join the conversation.

Justin Merickel
Vice President, Marketing and New Product Development

Efficient Frontier Search Theatre - AdTech London

Ad:Tech London 2009 is next week and this year we will be hosting our very own Search Theatre, nearby to the Google University.

Efficient Frontier will run seminars covering Search Engine Marketing on both days of the show and we invite you to join us alongside our special guests to hear about best practices, trends and future advancements. Plan your day below. 

We do hope you can join us!
Merinda Peppard, European Marketing Manager

Efficient Frontier Search Theatre
22nd September Timetable

10:30 – 11:05
What’s around the Corner? Trends in Search Engine Marketing
Merinda Peppard, European Marketing Manager, Efficient Frontier
Siddharth Shah, Director of Business Analytics, Efficient Frontier

As the largest search engine marketing firm, Efficient Frontier has access to tremendous amounts of search engine data. Join them for an overview of the most recent quarterly search engine performance report. Hear how the recession has affected consumer search trends and what we are likely to see in the future. 

11:50 – 12:25
Bada Bing: The new Microsoft with Marks & Spencer
Craig Brown, Search Media Analyst, Microsoft Advertising
Charlotte Rogers, Account Director, Efficient Frontier

Master search marketing with the experts. Join Microsoft and Efficient Frontier as they present a best practice guide to optimising Microsoft (Bing). Walk through a Marks & Spencer case study with Efficient Frontier and hear how best to use Microsoft’s functionality. Find out if Bing is right for your business. 

13:10 – 13:45
The Road Ahead: The Future of Biddable Media
Jonathan Beeston, Client Services Director, Efficient Frontier

Search engines are rapidly becoming a “one-stop platform” where marketers can bid on, manage and track all of their advertising campaigns – including paid search, display and video ads. What are these Ad Exchanges and what does advertising in a biddable marketplace mean for advertisers?

13:50 – 14:25
Quality Score and best practices with Google
Siddharth Shah, Director of Business Analytics, Efficient Frontier

Quality Score is incredibly important but is also difficult to handle. Join Efficient Frontier as they present a best practice guide to optimising your Google search campaigns. Also Learn how you can optimise each component of the Quality Score and ensure the ad reflects user intent. 

14:30 – 15:05
Google Content – are you missing a trick?
Phil Dance, Client Development Manager, Efficient Frontier

Users now have more control over which sites they target on Google’s contextual advertising product, Google Content. Gain insights into the inner workings of Google Content and learn how to get the best out of the Adsense platform. Find out why Efficient Frontier advertisers have increased spend on Content by 71% year-on-year.

15:50 – 16:25
In-house or Agency? A frank guide to your SEM options
Toby McAra, Manager, Efficient Frontier

Feeling the budget squeeze and thinking of going inhouse? Efficient Frontier takes a look at the benefits of taking your search marketing in-house and using a specialist agency. We dissect the UK agency and technology landscape and simplify the different services on offer. When is implementing fancy technology simply a waste of money? 

16:30 – 17:05
The Science of Integration: SEO & PPC
Jane Copland, Senior SEO Consultant, Ayima Search Marketing
Jonathan Beeston, Client Services Director, Efficient Frontier

During this session, Efficient Frontier team up with search engine optimisation experts Ayima Search Marketing to highlight the practical, actionable techniques that will make an immediate difference to your sites' placement in organic search results and how to connect your dynamic PPC activity to receive optimal return on your search investment. 

View the timetable for day two here: 23rd September Timetable

Google Moves Sponsored Links Closer to Organic Results

The keen observers out there will have noticed that Google have started displaying their sponsored ads much closer to the organic listings and away from the right hand scroll bar. Google has always expanded the results pages to fit the full width of the browser. As computer display resolutions have become larger, the sponsored ads have drifted further away from the main results. 

At first, this looked like part of an ongoing test to determine the effect on their revenues of moving the sponsored links away from the edge of the page. However given the scale of the change we have observed, it is likely that Google are already very confident about the impact this change will have. 

Changing the location of the ads has almost certainly been done to increase the number of clicks on the PPC ads but the question remains "What does this mean for advertisers?"

It will be interesting to see just how much of an increase in traffic advertisers experience and more importantly how this affects the quality of the traffic they receive. It's reasonable to expect that click-through rates for the top 3 paid listings to be unchanged, but for ads down the side to receive a boost. Of course, the data will tell us what the actual impact is.

It will be essential for advertisers to closely monitor any change in click through rates and the total traffic that they receive from their AdWords campaigns over the coming days and weeks. The important thing is then to react to these changes in the right way. Advertisers working to fixed monthly budgets may need to reduce bids to control spend levels however advertisers working towards some kind of performance goal may find that there is no need to make changes if conversion rates are unaffected. If however conversion rates do take a hit from this change then it will be crucial to adjust bids across your keyword portfolio to make sure your advertising budget is getting spent in the best way possible.  

We will be monitoring this change across our client base at Efficient Frontier and we will share any findings as soon as we have the data.

Phil Dance, UK Account Manager

Is Bing on a Roll?

As the industry comes together this week at the Search Engine Strategies conference in San Jose, we thought it was appropriate to take another look at Bing trends to see if they were holding, folding or on the uptick.

We last reported a 13% increase in paid click share for Microsoft. Our data now shows that as of the first week in August, Bing has lifted their click share 44% since the beginning of June.  

They did particularly well in both the Travel and Finance categories showing an 11% and 22% click share lift in these categories. Microsoft's new category focused Bing features may have helped them capture more of the seasonal summer travel searching and the additional query volume related to the stock market recovery. Furthermore, the announcement of the Yahoo!/Microsoft deal may have promoted additional searches on Bing as users check out for themselves the new service.

We'll need to continue to monitor their progress but the current trends are boding well for Microsoft.

Justin Merickel
Vice President, Marketing and New Product Development

Yahoo! Gives French Advertisers a Reason to Rejoice - Part 1

Have you heard the news? Yahoo! has decreased the minimum bid for keywords for French advertisers from 0.15 € to 0.10 €. This means 0.10 € is now the absolute maximum French advertisers have to pay for any keyword to participate in Yahoo!. We saw the first changes to French accounts on the 30th July 2009. For advertisers that are working against very low margins, this will certainly have a positive impact. Let us look at the historical changes to Yahoo’s minimum bid.

Before October 08 – Minimum bids were static

Yahoo! used static minimum bids that varied from 0.05€ to 0.15€ depending on the keyword. For those advertisers that were working against very low margins, it was difficult to justify paying 0.15 € per click given their business model. 

October 2008 – Minimum bids are dynamic

Minimum bids were changed to update regularly based on factors such as CTR and relevance. This was a very positive move from Yahoo! as French advertisers were forced to be more targeted with their campaigns, which resulted in an improved user experience.

Initially advertisers and agencies expected to see the 0.15€ minimum bid decrease for a large number of keywords but in reality, lots of cheaper keywords actually saw their min bid increase to 0.15€. French advertisers were impacted by this change which resulted in eroded performance and budget cuts.

The example below shows anonymised data from one of our French clients that has a high ROI target and is working against a low margin. The table below compares the average CPC of the client’s top keywords on Google against the keywords minimum bid on Yahoo! after the October 2008 changes. This client clearly couldn’t afford to buy any of its top keywords on Yahoo! anymore. This resulted in a strong decrease in investment.

July 2009 – Minimum bids reduced further

At the end of last month, Yahoo! brought the highest min bid down to 0.10 € which will be hugely beneficial for those French advertisers like the example above that were impacted by the October 2008 changes. The July reduction will help more advertisers bid on all keywords, allowing some advertisers to get back in the game. If we look at the example above, our client is now able to bid on all of its top keywords. I expect this client and all those in similar situations to see an increase in performance on Yahoo! in the coming months.

Time will tell how much this change will help low margin advertisers increase their performance on Yahoo! I will publish part 2 of this post in a few weeks to discuss the real effect on our French client base.

Olivier Lemaire – FR Account Manager

The Microsoft/Yahoo! Deal - Open Questions and Implications

History was made today with the partnership between Yahoo! and Microsoft but as with most things, the devil is in the details and open questions still remain.

First, let me start by saying that overall, I think the deal is good for the industry because a combined Yahoo!-Microsoft will allow them to compete more effectively. Search requires a huge capital and talent investment. In recent years, Yahoo! has not been able to make the required investments in either area so the deal makes sense from this perspective. Clearly, this will also help Yahoo! from a capital expenditure stand point but there will be people implications as a result. 

From a marketers perspective, they want access to high quality leads in the most cost efficient way. If a Microsoft-Yahoo! deal allows them to get that through one channel with increased liquidity, we will see more marketers invest resources into the combined entity.   

But there are still a lot of open questions that remain including how specifically will data be shared between the two companies for targeting purposes? How do Microsoft and Yahoo! both tell the combined search and display story? How will they address the market share issues in Europe? What is the timing on when this will be implemented?

It will be interesting to watch how this unfolds in the coming months. The key will be for Yahoo!-Microsoft to make the buying process for both search and display as easy and painless as possible. If done right, it has the potential to be a huge boon for marketers but if this new agreement is implemented poorly, it could have disastrous consequences.  

Time will tell and those of us with a clear stake in the game on the side of marketers will be watching.

David Karnstedt, President and CEO

UK Search Engine Report Findings

CPCs down

Last week, we released our UK Q2 2009 Search Engine Performance Report which is available for download here. Our UK data indicated that advertisers are seeking efficiency as cost per clicks (CPCs) fell dramatically year on year (YoY) – allowing advertisers to capture more volume at lower cost. CPCs across the engines decreased by 20-31% YoY; with the biggest fall being from Google with 31%, followed by Bing and Yahoo! with 30% and 20% respectively. Efficient Frontier advertisers capitalised on this price reduction and achieved more click volume while maintaining the return on investment levels of prior quarters. Return on investment (ROI) for advertisers remained stable with a 2% improvement YoY. Advertisers were still able to grow campaigns at a profitable return as dynamic search marketplaces adjusted to lower cost tolerances and less competition.

Spend down

In addition, Search Engine Marketing spend for the sample fell by 11% when compared to the same period last year. The biggest drop came in the month of April, indicating advertisers revised Search Engine Marketing budgets for the quarter adjusting to more conservative forecasts for the new financial year.  The data does provide a glimmer of hope for recovery in that advertisers, after the initial drop in April, increased month on month spending in May and June. Econsultancy gave an interesting analysis here.

Engine Efficiencies

Search engine efficiencies varied significantly over the course of the year. While Google operated 7% more efficiently for advertisers YoY and Bing operated 16% more efficiently, Yahoo! Search was 5% less efficient than Q2 2008 at producing ROI for advertisers. Yahoo!’s lower efficiency, given stable click volume and lower CPCs, indicates a likely decline in quality. If left unchecked, it will drive spend allocation away from Yahoo! Search to the other engines in coming quarters.

by Merinda Peppard, European Marketing Manager

Interesting Trends Hide Beneath a Stabilizing Search Marketing Marketplace

 Yesterday, we released our Q2 2009 Search Engine Performance Report which is available for download here. Generally, our data indicate that search marketing in the U.S. has stabilized, which is good news for the industry. While year-over-year spending remains down significantly, quarter-over-quarter and month-over-month spending is relatively stable while taking into account seasonal changes.

But a deeper examination of the data reveals varied impacts to advertisers and engines beneath the overall stabilization trend. Large advertisers, which are defined as spending more than $200K per month, are in line with the general market stabilization.  However, medium sized advertisers, defined as those spending $50-200K per month, are increasing their spend to capitalize on better efficiency in keyword marketplaces and gain share. Smaller advertisers, on the other hand, those spending less than $50K per month, continue to reduce spend adding immediate savings to their bottom lines. In the finance category, advertiser spending bounced back as the stock market improved while travel advertisers, faced with consolidation and lower revenue per sale, maintained a trend of lower spending. And the efficiencies of the engines themselves, a measure of the returns advertisers generate for their search marketing investment, varied greatly with Google and MSN rising while Yahoo! fell.

We also found that search is operating at a 30% higher efficiency - that is, advertisers are using more aggressive ROI and CPA targets than they did a year ago. This is good news for marketers because it means they are getting a bigger bang for their buck. But there is a reason that search has become more efficient. Businesses demand higher returns today as compared to this quarter last year. As a result, while finding an opportunity to grow campaigns is likely easier today than in the recent past, finding an opportunity to grow share efficiently remains a challenge.

These variances in engine efficiency highlights the need for marketers to implement is cross-engine optimization. While each engine represents a certain click opportunity, marketers are best served by allowing their goals to dictate where the next click and the even more efficient click should come. Mandating engine spend allocations will result in a less efficient and lower scale campaign. And in today’s business environment, finding efficient scale is most often top priority regardless of the advertiser category.

by Justin Merickel

Bing Gains More Ground

Almost two weeks ago, we reported that Bing's first week lift in Microsoft's share of paid clicks was up slightly more than 8% compared to the week before the launch of Bing. While Microsoft's click share remains at less than 5% and continues to lag Yahoo! and Google, the gains for Bing were a positive step forward. 

Having seen Comscore's release that Bing's searcher penetration rose again in the 2nd week after launch, we were curious if our data would show Bing's click share gains expanding, holding, or falling back to previous levels.

Efficient Frontier's latest analysis is good news for Microsoft. According to our data analysis, Bing expanded its share of paid clicks for the two weeks post launch. Bing's share of paid clicks is up 13% for the second week post launch as compared to pre-launch. And, it represents an incremental 5% lift over the first week. 

As we mentioned in our last post, if Bing's click share gains hold we expect advertisers to allocate additional budget to Microsoft. However, as Danny Sullivan rightly cautions in a recent blog post on Bing, two weeks does not make a trend.  

The coming weeks and months will tell a more complete story on the success of Bing. We will continue to monitor our data closely and keep you updated on our findings.