Growth in Digital Marketing Continues Strong Comeback for the Sector

Retail, Travel, Finance and Auto All Up; Positive Trends Expected to Continue into the Final Quarter of the Year

Data Based on Efficient Frontier’s Q3 2010 U.S. Digital Marketing Performance Report

Sunnyvale, Calif. – October 12, 2010– In Q3 2010, the digital marketing industry and, in particular, Search Engine Marketing (SEM) posted solid year on year (YoY) growth of 19% and 6% quarter on quarter (QoQ) growth.   This is according to Efficient Frontier, a leading performance marketing company managing more than $1 billion on behalf of clients worldwide on an annual basis.   This data and specific industry trends were released today in the company’s Q3 2010 U.S. Digital Marketing Performance Report.

 

“The third quarter continued positive momentum as we saw search spend rise across all the major categories including retail, finance, auto and travel and we expect these trends to continue into the traditionally strong holiday season,” said David Karnstedt, President and CEO, Efficient Frontier.  “More importantly, we are excited about the early gains we’re seeing among marketers that are optimizing their marketing campaigns across search, display and Facebook.   We believe this is where the industry is heading and where marketers should be investing.”

Report Highlights:

Search Gains Continue

In Q3 2010, the SEM sector extended its 2010 growth streak. Year on Year (YoY) spend was up 19% with a solid 6% sequential Quarter on Quarter (QoQ) growth.  The important metrics of CPC, clicks, and impressions all rose indicating both strong advertiser and consumer demand. Overall return on investment (ROI) in search is up 8% YoY, a critical factor driving the rising CPCs and overall advertiser demand.

Broad Based Search Growth Across All Sectors

Retail led search growth during the first half of 2010. After growing 38% YoY in Q2 retail posted another positive YoY growth rate of 20%. In line with expectations, sequential quarterly growth in retail was 1% as summer slow season was offset by strong back-to-school consumer demand.

 

Importantly, all sectors outside of retail also showed strength. Financial services posted positive spend gains for the first quarter in more than a year, rising 14% YoY and 20% QoQ. Consumer and advertiser demand in financial services lifted both clicks and CPC.   Travel extended the strength seen throughout 2010 with an impressive 38% YoY rise and 8% QoQ gain. The automotive sector posted 20% growth YoY and 12% QoQ gains.

 

• Retail: Spend was up 20% YoY on volume and CPC gains

• Travel: Spend was up 38% YoY on CPC and click through rate (CTR) gains

• Finance: Spend was up 14% YoY on CPC and CTR gains

• Auto: Spend was up 20% YoY on CPC gains

 

The Bing-Yahoo! Integration Begins

The early winner from the Bing-Yahoo! integration appears to be Google. Google’s share of paid search spend rose from 75.8% in Q2 2010 to 77.9% in Q3 2010. In our last report, Efficient Frontier addressed the potential Bing-Yahoo! share loss that could come as a result of integration due to the variant return- on-investment metrics that the separate platforms deliver (for example, Bing’s ROI is far superior to Yahoo!’s ROI).   As Bing began to pick up Yahoo!’s less efficient volume, the spend trend in Google’s favor may mean Efficient Frontier’s ROI driven spend shift is playing out.

Outlook for Q4 2010

 

Bright Holiday Season for Search

Efficient Frontier believes search will grow in the range of 15-20% in Q4.  Efficient Frontier’s reason for Q4 search optimism is built on the following three reasons.  First, retail has led the way for search in 2010 with consistent growth. Next, Q3’s 19% YoY growth in spend on more difficult comps and slight sequential rise is a positive signal.            Finally, strengthening ROI numbers with increasing CPCs bode well for overall advertiser demand.

 

Google Grabs More Share

Google will likely see relatively significant gains in the fourth quarter as both seasonality and the Bing- Yahoo! integration skew spend in their favor. The seasonal retail focus of Q4 typically favors Google in spend as they over-index in retail at over 80% share.  The changing efficiency of the Bing-Yahoo! integration will likely see some additional, although likely temporary, spend shift in Google’s favor.

 

Demand Accelerates for Facebook and Display

Due to their earlier development stages, we have yet to see prominent pricing and spend trends emerge in the display ad exchanges or Facebook.  However, overall advertiser interest going into Q4 2010 for both of these channels is high. We expect significant test budgets, particularly for Facebook, to emerge in Q4 across our client base.

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, whose resulting SEM metrics are then normalized to average industry category contributions established by multiple third party data providers.  The Efficient Frontier Customer Index consists of a fixed sample of large scale U.S. search engine advertisers across multiple sectors, including finance, travel, retail and automotive.  The Efficient Frontier Customer Index sheds light on trends in search engine spending and performance on YoY and QoQ basis. 

The complete U.S. Digital Performance Marketing Report: Q3, 2010, is available for download from the Efficient Frontier website at: http://www.efrontier.com/research/search-engine-report/Q3-2010

 

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About Efficient Frontier

Efficient Frontier is a leader in online performance marketing managing search marketing, display and social media campaigns for advertisers and agencies around the world.   Efficient Frontier currently manages more than $1 billion in annual marketing spend on behalf of their clients globally.  Founded in 2002, Efficient Frontier pioneered the application of modern portfolio theory for search engine marketing and today combines its core predictive modeling algorithms and bidding technology with comprehensive strategic and tactical value-added services.  The largest and most sophisticated advertisers and agencies partner with Efficient Frontier to achieve and sustain optimal campaign performance and growth in highly complex and competitive marketplaces. The company is headquartered in Sunnyvale, California, with offices in New York, the United Kingdom, France, Germany, and India, and technology licensing partnerships in Japan, Hong Kong and Australia. Efficient Frontier is a privately held company with funding from Redpoint Ventures and Cambrian Ventures.  For more information, please visit http://www.efrontier.com and subscribe to the Efficient Frontier blog at blog.efrontier.com

 

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