Efficient Frontier Insights

Efficient Frontier & Context Optional release first joint quarterly State of Digital Marketing Report for Q2 2011

Today marks an important milestone for Efficient Frontier and Context Optional with the release of our first joint quarterly State of Digital Marketing Report for Q2 2011. While Efficient Frontier’s quarterly reports have long been a trusted source of data in the digital marketing industry, we are excited to add even more valuable insights to our social media analysis, using data gleaned from Efficient Frontier’s clients as well as Context Optional’s client index representing more than 15 advertisers and 20 million fans from a multitude of verticals including retail, entertainment, CPG and finance.

Many key findings this quarter indicated how competitive Facebook is becoming in the digital marketing sphere, and show that the longer brands take to engage on Facebook, the more it will cost them in the long run. We also found that advertisers are focusing more on Return on Investment (ROI) than on volume, which resulted in slower growth compared to Q1 of last year. In addition, Bing/Yahoo’s ROI continues to improve, resulting in them gaining a percentage of Google’s coveted spend share. 

Key highlights in the Q2 report include:

• Search spend growth slowed to 8%, down from 17% year on year in Q1 of last year. We believe this is due to advertisers focusing on ROI instead of volume, as well the slower than expected economic recovery.
• Facebook advertising continues to get more competitive, with CPCs increasing 22% from Q1. This means that the longer brands wait to engage consumers on Facebook, the more expensive it will become to acquire fans.
• Brands are increasingly focused on fan acquisition and engagement on Facebook. Between October 2010 and 2011, brands in our index are on track to double their Facebook fans. Consumers on Facebook are also increasing their engagement with brands. Our analysis reveals that one post made by a brand leads to 100 comments from consumers on average.
• Bing/Yahoo! gained 3.4% points of spend share from Google since Q4.

For the 2011 outlook, we predict:

• Facebook CPCs will continue to rise at a double-digit pace, and as a result, brands should not waste any time increasing their understanding and use of the channel, acquiring new fans and exploiting new ad formats such as Sponsored Stories.
• Continued testing and investment in Facebook will see advertisers evaluate and likely increase their spend. Looking ahead, we believe that advertising dollars will shift from offline media to search, Facebook and display. While we believe all online advertising channels will continue to grow, the Facebook channel will show the strongest growth in the months ahead.
• Bing/Yahoo! will benefit if ROI improvements continue.

To get the full story, download our State of Digital Marketing Report for Q2 2011.

Dr Siddharth Shah
Sr. Director, Business Analytics

 

 

SMX München 2011

SMX (Search Marketing Expo) took place in Munich last week, this time in the Hilton Hotel Munich near Englischer Garten. Niels Jensen, Efficient Frontier’s own Account Director for Germany presented alongside Phillip Arnold from TUI Interactive on the panel "Search & Beyond". TUI is one of the largest travel brands in Europe with more than 10,000 hotels in its portfolio. The topic of the presentation was "The Adwords Strategy at TUI" and both presented insights and best practices from TUI Interactive’s Hotel Names Campaign. Efficient Frontier’s objective was to build up a search campaign for hotel names only, which are part of TUI’s hotel portfolio, without being over-reliant on TUI’s brand. 

Niels and Phillip discussed how the set up of the long tail was constructed and how the bid management for nearly 100,000 keywords was put into place. In addition, they discussed an A/B landing page test set up and how the dynamic ad copy was handled by Efficient Frontier. A key strategic decision by TUI Interactive was to replace the hotel pages of “Traveltainment” they used previously, with their own landing pages, in order to get better information to users.

Later in the presentation Niels and Phillip uncovered the results of the campaign. The overall Quality Score was increased to factor 7 and the key figures for the click through rate, conversions and return on marketing investment were increased substantially. On the whole, TUI Interactive is excited about the results they achieved with Efficient Frontier. Both Niels and Phillip were mobbed by the 80 strong audience after the presentation with many interesting questions which tells us that the topic was greatly received.

March 2011 CPCs: A strong month for Finance, but weak for Travel

CPC (cost per click) trends in March were mixed. Increased acquisition activity from financial institutions contributed to a sharp rise in CPCs in March. In contrast, CPCs in travel fell both MoM (month over month) and YoY (year over year), indicating weakness in the sector. Retail CPCs continue to increase as automotive CPCs fell slightly.

Our latest numbers also reveal that spend in both finance and retail have increased substantially YoY. We will report in detail on these trends in our upcoming quarterly report.

Dr. Siddharth Shah
Sr. Director, Business Analytics

 

February 2011 CPCs: Robust YoY increases in most sectors as Financial sector sees increased competition

 

CPCs in February, increased more than 15% YoY in the Finance, Travel and Automotive sectors while they remained relatively flat in retail. We are seeing increased competition in the financial sector which drove up spend by 15% YoY in February, primarily driven by CPC increases. On a MoM basis, Finance saw a 9.1% seasonal decline which was lower than the 16% decline in the same time frame last year.

Dr. Siddharth Shah,
Sr. Director, Business Analytics

CPC - January 2010

On a monthly basis, we will now be publishing our monthly CPCs by category along with some trend analysis. For January we have the following numbers:

The above table shows the CPCs that we saw among our advertisers in 4 verticals. The trends in CPC broadly reflect the seasonality in these marketplaces. Finance dropped slightly as automotive CPCs dropped 10%. A big CPC drop was seen in retail due to the after effects of Christmas. Travel bucked the seasonality trend. Traditionally, travel picks up strongly in January and we see an increase in CPC. However, this year we are seeing a CPC drop indicative of the continuing weakness of this sector.

UK Travel Report: Travel Advertisers seeing an increase in ROI

As the recession continues, Return on Investment (ROI) in Search Engine Marketing (SEM) in the Travel sector has shown a significant increase, a testament to the continued strength of the channel, according to the Efficient Frontier UK Travel Report: Q1 2009. The report, is based on an analysis of 4.9 billion impressions and 65.7 million clicks across a portion of Efficient Frontier's travel clients.

 

The results above show that Advertisers in the sector are continuing to invest in Search Marketing as a way of maximising revenues. Despite the economic downturn, impression volume increased by 32% from Q1 2008 to Q1 2009. There are two main reasons for this. 

Firstly, in an attempt to offset the overall decline of CPCs, Google have been able to optimise their unused inventory by removing minimum bids which brought a large number of previously inactive keywords into play. By using Efficient Frontier's portfolio bid optimisation techniques, Advertisers have been able to effectively mine this longer tail of keywords and generate significant volume and ROI. Although search spend in the travel sector dropped a mere 1% Y/Y, ROI actually increased for Advertisers by 11% Y/Y.  

Secondly, the recession has caused cost conscious consumers to search longer and more carefully for a better deal online. This has not only triggered impressions to increase, but it has also caused a decrease in click-through-rates (CTRs) by 28%. 

What's more, although the Efficient Frontier Q1 Search Engine Performance Report for all sectors (17 April) saw cost-per-clicks (CPCs) drop as the overall market deflated, CPCs in the travel sector have actually increased by 4% Y/Y indicating there is still a high level of competition amongst advertisers.

This is an interesting anomaly we see in Travel when compared to the overall market. On the one hand, overall Advertisers are cutting budgets resulting in cheaper clicks, on the other hand Travel Advertisers are seeing CPC inflation as competition in the space heats up. This situation indicates Travel is very much reliant on search. In the current economic environment, ROI will continue to be a priority as Travel Advertisers trend towards the efficiency model in an effort to reach a higher ROI as a buffer against economic uncertainty.

The Efficient Frontier Q2 Search Engine Performance Report for all sectors will be released July 13th.

Jonathan Beeston
Client Service Director - Europe

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.