UK Search Marketing Sector Shows Signs of Growth in Q2 2010

Data Based on Efficient Frontier's Q1 2010 UK Search Engine Performance Report

London, April 15, 2010 – In Q1 2010, the UK Search Engine Marketing (SEM)  industry posted solid year on year (YoY) growth of 21%.  This is according to Efficient Frontier, a leading performance marketing company with more than $900 million in global client spend annually.   This data and specific industry trends were released today in the company’s Q1 2010 UK Search Engine Performance Report.

“Search marketing trends are a good indicator of the health of the overall economy and this looks like a good start to the year. The political party that is elected next month will certainly have some economic momentum behind them,” said Jonathan Beeston, European Client Services Director.  

Report Highlights:

Q1 2010 Executive Summary

Spend Growth Exceeds Expectations
In Q1 2010, the search marketing sector roared back building on a fourth quarter 2009 that posted solid sequential and year on year growth. Year on Year (YoY) spend was up 21%. There was however a light seasonal pull-back in Quarter on Quarter (QoQ) spend of 6%.  Query and click volumes are up substantially YoY and Cost per Clicks (CPC) continue to decline.  Overall return on investment (ROI) in search is up 6% YoY as consumer’s return to purchasing with a more favourable economic outlook. Strong consumer demand is driving search marketing growth above the expected 10-15% 2010 outlook.

Is Bing about to Bang?
Bing is starting to see the effects of its Q1 offline advertising campaign in the UK as it gained spend share this quarter from Google while Yahoo! remained flat. Spend share in Q1 2010 increased to 4.7% which represented YoY and QoQ gains of 9%. Bing also saw the highest increase in impressions and clicks QoQ out of the search engines and saw a 9% increase in click share on last quarter. Although improving, click share is still down 38% when compared to the same period last year.  It is interesting to note that Bing’s gain in spend share is at a much slower pace than in the U.S.

In contrast to Bing’s growth in spend and click share, their future partner Yahoo! saw further losses in market share across both clicks and in spend.  Yahoo!’s share of clicks fell to 10.3% from 12.8% in Q1 2009.  And Yahoo!’s share of spend fell to 8.1% from 9.8% in Q1 2009.  Yahoo!’s Q1 2010 numbers represent a 19.5% YoY click share loss and 17% YoY spend share loss. However QoQ they have stabilised their spend share and improved their click share, indicating that Yahoo!’s traffic quality initiatives of the last few months are taking an effect.

Despite losing some quarterly click and spend share to Bing and Yahoo! it was only Google who gained in share YoY. Google strengthened its dominant position by increasing spend and click share to 87.2% and 86% respectively in Q1 2010. This demonstrated a YoY increase in spend and click share of 5.7% and 1.5%.

Google’s ability to deliver Return On Investment (ROI) for advertisers has remained stable over the last year while it has dropped on both Yahoo! and Bing by 9% and 23% respectively. When compared to last quarter, Bing improved in delivering ROI by 5.5% while Yahoo!’s ROI deteriorated 6.2%.

Outlook for 2Q10 and 2H10

Advertiser Spend Trends
Q1 2009 posted a weak quarter in terms of SEM spend trends resulting in a favourable YoY comparison for Q1 2010. The result is that we will likely need to temper our enthusiasm and expectation coming out of the strong 20% Q1 YoY growth.  That being said, there are several reasons to be optimistic. One, impression volumes are higher across all engines than a year ago indicating greater consumer interest. Second, the broader economic conditions appear to have stabilised overall, a trend that will result in a lift in consumer purchasing and companies advertising online. In light of these trends, we maintain the outlook stated in the Q4 2009 report: SEM growth will exceed the current 10-15% growth expectations and approach 20% YoY spend expansion in 2010.

Search Engine Landscape
The search engine landscape is experiencing small sequential shifts in both click and market share at the expense of Google however there is no sign of Google’s growth abating YoY. Perhaps the broader Yahoo! and Bing partnership will uncover a stronger competitor to Google in time.

Research Methodology
This analysis was completed based on data from Efficient Frontier search engine marketing customers and the resulting Efficient Frontier’s Customer Index.  The Efficient Frontier Customer Index represents a subset of the company’s clients with spend data for six consecutive quarters or more.  The Efficient Frontier UK Customer Index consists of a fixed sample of large scale UK search engine advertisers across multiple sectors, including finance, travel, entertainment, retail and telecommunications verticals.

The Efficient Frontier Customer Index sheds light on trends in search engine spending and performance on a year-over-year (YOY) and quarter-over- quarter (QOQ) basis.