As part of Covario’s mid-quarter checkpoint on the paid search spend by our global technology clients, we are seeing a number of growth trends:

• Projected growth in paid search advertising is up strongly in third quarter (Q3) – 33% over the second quarter (Q2) and 21% higher than a year earlier.  This is due to seasonal factors.  Our data set represents high tech and consumer electronics advertisers – who have very strong “Back to School” sales and advertising numbers in August.  Growth quarter-to-date is actually stronger if projected on a straight line. However, spending tends to slow in September.
• This brings year-to-date (YTD) growth to our target range of 14-18% for our advertisers.  So far, YTD growth is up 14.5% compared to a year earlier.  We expect to be at the high end of the range by year’s end, which would be 17-18%.
• Growth in Europe, the Middle East and Africa (EMEA) is trending strongest at 46%, while growth for the Americas is at 31%, and Asia Pacific (APAC) is up 20%.
• For the major search engines, standout growth numbers include Google at 27% growth in Americas in Q3 and Yahoo growing at 53%.  Bing continues to grow at a slower pace than its  competitors, with 14% growth at the mid-point of Q3 over Q2.  Bing, however, still shows an astounding 57% growth rate over Q3, 2009 – which is when we started to see their growth start to really explode on the back of a national advertising campaign promoting Bing. Also, we saw Baidu grow at 40% over Q2.

From a market share perspective, minor shifts continue.  Globally, Google market share is down slightly among our tech clients from 82% to 81%. This is due to a loss of market share in APAC related to the ongoing impact from the situation in China.  Overall APAC market share for Baidu was up 5% — from 22% to 27% — all at Google’s expense.  Bing (now with Yahoo) commands 16% of the spend with the rest going to ancillary engines.

We do expect Bing market share to increase slightly in Q3 and early Q4.  The reason is the impact of the algorithmic search switch that is taking place Sept. 1.  Many advertisers will see their organic rankings change – particularly on generic search terms.  For high-value rankings on Yahoo, where there are organic search ranking degradations, the advertisers will have to compensate in the short run with additional paid search budget, on those search terms, in order to maintain traffic and conversion numbers.  We are counseling our customers to build a 5-10% lift into their budgets for Bing in Q3-Q4.  But this lift will be transitory as advertisers adjust their SEO programs to meet the needs of the new Bing algorithm.

ACTIONABLE INSIGHTS:

Our annual projection on growth rates in paid search advertising is trending toward the higher end of the 14-18% range due to a very strong Q3, which so far has seen a 33% growth in spending from Q2.  This is due to cyclical increases in spending to match increases in demand around “Back to School” purchases of technology and consumer electronics. (Kids in college need new cell phones and computers.)

We recommend that advertisers plan to boost their Yahoo spend by 5-10% for the remainder of Q3 and early Q4 in order to maintain brand presence on the network due to changes that will occur to their organic rankings caused by the changeover to the Bing organic search algorithm.

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This week, Google made two (2) adwords policy announcements  that will increase competition in international markets.

Policy Update 1: Google is allowing advertisers to bid on all branded keywords across Europe, lifting restrictions on competitive bidding.

Policy Update 2: Canadian, English and Irish advertisers will be allowed to use trademarked terms in their ad copy.

This will be helpful for consumers, as it will give them more visibility to information that will assist in their research.

For advertisers, this will result in increased competition and a rise in CPCs. The Google algorithm is rather sophisticated, so we don’t anticipate that the brand owners will lose top positions, or see much of a change in CPCs for their brand terms. In any case, we recommend that the brand owners increase their bids to ensure they remain in top position.

Most of the impact of the policy changes will be felt from the third-party advertisers and resellers. They will experience dramatic increases in CPCs and fluctuation in positions, as more advertisers enter the space and fight for top position.

When the policy change was released in the U.S., several of our clients saw minimal if any fluctuation in their branded keywords.

Actionable Insight 1: Once the policy is executed, advertisers should increase their bids for their brand terms in Europe to remain in top position.

Actionable Insight 2: Advertisers should closely monitor the performance of branded terms for the first couple of weeks after the new policy goes into effect, and report ads that may be confusing or misleading to consumers/searchers.  Click to Report

Actionable Insight 3: An advertiser should establish rules of engagement with their affiliates and partners which clearly state what branded terms they are allowed to bid on and in what position.

SOURCES:

- Google AdWords Policy Page

- Google Inside AdWords blog

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Once again, we see how the world of technology and software development is influencing the world of marketers.

Here’s a competitive “tip of the hat” to Razorfish for leveraging the software world’s Agile Development Methodology to create a new offering for CMOs.

In my article on the “GenX CMO”, I covered how the new chief marketing officer is younger, more demanding and more financially and technologically oriented than CMOs of previous generations, and would demand a new kind of agency. In the companion article,  “The Agency of the Future” I discussed how the agency of the future would not be an agency, but a marketing solutions company that is focused less on creative and the “big idea” and more on strategy, structure, systems, processes and technologies.

The Agile software development methodology focuses on rapid iteration through cross functional and adaptive teams to quickly develop and evolve software, and even change requirements mid-stream based on the needs of the market.   This is a radical departure from the previous “big idea” linear, expensive and slow waterfall method that created “make or break” scenarios for product developers.

Razorfish’s offering is a great articulation of how the marketing process has evolved from the big idea with upfront buys of offline media and single make or break campaigns into smaller, quicker, leaner online campaigns that can be launched and iterated in real time, and much more precisely measured.

While these are certainly the processes we use at Covario for software development and the management of SEO and PPC campaigns, kudos to Razorfish for creating a clever offering for CMOs based on this methodology.

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Generally speaking, search engine queries can be classified into a specificity scale. One end of the spectrum consists of predominantly generic terms, like “shoes” or “cameras”. On the opposite end of the scale, search queries become more specific, like “womens mossimo vida peep-toe black patent leather pumps” or “canon powershot 12.1 megapixel digital cameras”. The more specific the phrasing, the greater the likelihood that the search query will be brand-influenced.

Because general search terms generate very broad-based results, search engines rarely return the exact content that would-be shoppers seek. Toward this end, Google has recently focused on leveraging brand preferences as a way to provide search engine users with one-click access to more specific subsequent search queries:

From the Official Google Blog – This Week In Search 5/1/10

“Sometimes when searching for product information on Google, you may not know some of the brand names relevant to your particular search. For example, if you’re taking on a new river-rafting hobby, it’s quite likely you don’t have a clue about kayak manufacturers just yet. So, we wanted to make it easier for you to find the brands other people consider useful for popular product searches. So this week we launched a search refinement that calls out brand names related to your query in a single line above the rest of the results. Determined algorithmically, these highlighted brand names may help you find what you’re looking for faster, and make your research and shopping experience all the more enjoyable.”

This is certainly not the first time that brands took center stage in refining Google search results. The “Vince” brand-influenced update (Mar. 2009) attempted to address the issue that Google’s algorithms allowed for the manipulation of branded rankings based on anchor text links. The problem is that a portion of the “Vince” update didn’t exactly work as intended. For example, insurance industry related search queries prominently still featured content that used brand-targeted text-link buys to inflate results for questionable landing pages, and for online retailers, affiliates could still edge their way into highly ranked results.

Google’s consequent focus on brands in May 2010 highlighted the issue when Google SEO Eric Schmidt said “Brands are the solution, not the problem … “Brands are how you sort out the cesspool.” (Reference: Ad Age Mediaworks article) Now, with Google’s “Jazz interface,” everyone wants to know how to get into Google’s brand listings:

Actionable Insight #1: It’s important to note that none of the brands listed in Google results point to a 3′rd party website: All links are refined Google searches, rooted in the original search query. For example, the “brands” presented for “digital cameras” includes Canon, Olympus, Sony, Nikon and Kodak. Subsequent Google brand search links are refined to connect with to refined search results for:

“Canon digital  cameras”
“Olympus digital  cameras”
“Sony digital  cameras”
“Nikon digital  cameras”
“Kodak digital  cameras”

In other words, Google’s focus on brand searches produce “brand” + “keyword” search refinements that could allow online retailers with a way to show up on 5x the search results pages if they carry all five brands. That does not mean that online retailers can make their way on to page-1 results for the original unbranded search query, without a little help from Google AdWords, of course. Initially, online retailers should focus on gaining page-1 results for the refined search queries.

Actionable Insight #2: Understand how are Google brand listings chosen to determine if you get listed in Google’s subsequently synonymous search results.

Google has confirmed that the brands listed at the top of search results are generated by Google, as an “extension” to the organic results” and completely algorithmic in order to provide users with more suggestions on searches. (Resource: Google support forum) Furthermore, Google has noted that brand results are not related to Google AdWords in that these particular positions cannot be bought and sold.

It’s also been suggested that trademark ownership could be essential (Resource: Google support sktool)  for attaining “brand status” in Google. This particular observation is reinforced by brand results that include not only the manufacturer, but also a trademarked product line.  For example, Ugly Stick and Shakespeare are both listed as brands for a “fishing rod” search query. Shakespeare makes the Ugly Stick. Consequently, it makes sense that trademark ownership could be a core signal that Google leverages to make semantically disassociated search query phrases like Ugly Stick synonymous with “fishing rod”.

Actionable Insight #3: For other obvious opportunities to gain entry into brand results, just look to the left column of Google’s new “Jazz Interface.” Opportunities abound for going after “brand” + “keyword” rankings in image, news, video, and blog refined results. It just takes a well-rounded search engine optimization regimen to get there.

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Most have seen that Yahoo Japan announced yesterday its intention to leverage the Google platform to power its search operations now that the Yahoo Algo search and paid search platform are being sunsetted.  This makes sense. Yahoo has ~55% market share in the market, Google 35% and Bing <5% — so Yahoo Japan sees an opportunity to use the Google platform to drive huge synergies for clients. Covario’s man in Japan, Taro Kaji, provided more details:

• The partnership is for search engine and paid search covering images, video, web and mobile.
• This contract is for two years and may be extended.
• Timing of the transition from the existing Yahoo search, and its platform, to Google search, and its, to be determined.

All this from Google Japan’s blogspot.

In our  Q2 Global Paid Search Spend Report, we saw the following comparisons between Google and Yahoo in the market (where none of our customers are spending any money on Bing).

• CPCs on Google are 50% higher than Yahoo.  One would expect Yahoo CPCs to rise to the level of the overall Google CPC after the transition.
• Yahoo CTR was 2.5% vs. Google CTR of 2.0%.

A few other observations by Taro:

Paid search

• Google and Yahoo Japan will manage their client data separately.
• As has been the case, keyword bidding within Yahoo Japan’s market place will continue.
• Yahoo Japan’s content network “Interest Match” stays independent and will continue to use Yahoo Japan’s own proprietary platform.

Organic search

• Yahoo Japan’s current user interface will remain the same with Google search technology replacing Yahoo search technology.Yahoo Japan will directly provide Google with data improving speed and quality lifting the overall user experience.

Sources are listed below.

ACTIONABLE INSIGHT #1: Paid search advertising in Japan is going to get a lot easier.  For Covario clients, they will be doing 100% of their purchasing through the Google platform given current statistics. However, advertisers should expect an inflation in CPCs for bidding in Japan.

ACTIONABLE INSIGHT #2: This is a missed opportunity for Bing. Perhaps they can revisit in two years, however, the opportunity to make big market share gains in China and Japan seems to be waning as Google is re-gaining control of the market — both from their deal with Yahoo Japan and their settlement with the Chinese government for re-entering the Chinese market.

Source links

• i.yimg.jp/images/docs/ir/release/2010/jp20100727_2.pdf
• i.yimg.jp/images/docs/ir/release/2010/jp20100727.pdf
• blogs.yahoo.co.jp/listing_ads/16807614.html
• www.sem-r.com/news-2010/20100727153000.html

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In our 10th quarterly global paid search advertising spend report for high-tech companies, which is coming out today and is available here, the following trends in spending are described:

• Paid search advertising spend was up 16.5% between the first and second quarters of 2010.  Spending in the Americas region was up 12%, while APAC spending increased 33% and EMEA by 25%.  Compared to the second quarter of 2009, global paid search advertising spend was up 35%.    With the quarter’s robust performance, Covario still expects spending to increase by 14-18% overall in 2010 for the year vs. 2009.
• The first quarter announcement by Google to re-approach its strategy in China by relocating its access point to Hong Kong has manifested itself into spending changes on the network.  There was also a large jump in spending on Yahoo Japan in first half of 2010.
• We continue to expect CPCs to increase by 10-12% in 2010, due to increases in spend in paid search advertising.  And based on our analysis, CPCs steadied in the second quarter, even though spend was up.

Growth was up markedly in Q2 2010 from Q1 2010 – particularly on Google and Yahoo.   We did see the second straight quarter of reductions in spending on Bing – where in North America market share fell from 13.7% in Q4 2009 to 9.9% in Q2 2010.  Yahoo market share has held steady.  The two platforms together, which will be officially merged on Sept. 1, will represent 17.1% of all North America spending by high-tech advertisers and 21.9% globally.

The challenge then for advertisers is how to balance global spending across the platforms in order to drive optimal paid search advertising performance.  Google will continue to be the primary engine – by far.  The only exception to this is Japan, Russia and China.  In China, we have been tracking issues around Google changing its platform entry point to Hong Kong and its impact on paid search spending. The impact in Q2 2010 is that we’ve seen Baidu market share increase in APAC region – from 13.8% to 22.2% over the past 90 days. In China, the market penetration for Baidu with high tech advertisers has gone to ~75% — all at Google’s expense.  We expect there to be continued erosion in Q3 2010, then stabilization.

ACTIONABLE INSIGHT: We continue to counsel our customers to expect 14-18% increases in overall annualized budgets, and 10-12% increases in CPCs paid for traffic to site due to the engine dynamics.

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Gartner Group, the syndicated research firm, published a classic research report in the 1990’s called “If SAP is the answer, what was the question?”  The report was about how the concept of Enterprise Resource Management (ERP — where SAP was the leader) had become a catch all term for a series of programmatic workflow issues facing large enterprises.  If the system didn’t work – buy some ERP software.  If the financials were not up to par — buy some ERP software.  If the coffee didn’t taste just right — buy some ERP software.

In the past six months, the concept of attribution modeling has aspired to reach similar heights in the advertising and marketing space.  If media programs are not performing — do some attribution modeling.

So what question should attribution modeling be trying to answer today?  How to optimize marketing? How to give appropriate credit for various media channels?  And, what is attribution modeling?  The point of this article is to provide Covario’s point of view on attribution modeling; the various techniques that advertisers, agencies and vendors are espousing; and where we believe this conversation will end up in the next few years.

However, here are the major findings in the analysis:

Covario’s view is that the attribution modeling discussion is a red herring.  Like ERP before it, it has become a buzz word that vendors and marketers use to describe a class of problems — and depending on whom is discussing the issue, can mean very different things.  It can refer to a web analytics stacking process, to a testing methodology, or to an econometrics problem.  Attribution modeling has to be viewed a  potential tool to answer various types of questions – but it is, at best, a “weigh station” on the road to the ultimate question — “where should an advertiser spend its money?”  Being good at attribution modeling is not an end state — it is a middle state on driving budget and allocation decisions using data continuously.

I believe that media mix modeling and econometric modeling is the answer to the question “where should an advertiser spend its money?” and this is the key question most advertisers really want answered.  They want an operational model that will allow them to predict outcome based on different media budget combinations.  If so, then the issue becomes how does an advertiser break down the traditional barriers to doing econometric modeling at a more affordable level, on a more continuous basis than annually or semi-annually (which is how these projects are conducted now), and with better efficiency.  This requires a data aggregation system — aka The CMO Dashboard — which most of our customers are trying to build now, or starting to build.  I will be publishing a report on our findings and thoughts on CMO Dashboards in the next blog post.

ACTIONABLE INSIGHT #1: Attribution modeling, as a concept, is a red herring.  It is being peddled to solve a problem — allocation of credit to various media touch points. However, the approaches being espoused by the vendors in the market — from agencies to technology firms — are difficult to implement, difficult to analyze, do not scale, and yield equivocal value in the face of the high implementation costs.

ACTIONABLE INSIGHT #2: The question advertisers are trying to answer is “How should advertising budget be spent in order to maximize return?”  (Return can be online sales, online brand interaction, and/or online-offline interaction, etc.)  To solve this problem — the traditional approach of media mix modeling is best suited.

ACTIONABLE INSIGHT #3: The largest barrier to executing media mix modeling with digital is the data warehousing cost of getting the data integrated.  This and other problems are being solved by organizations like Covario — through its CMO Dashboard — which will be discussed in the next POV.

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Mobile web usage is in undeniable growth as more and more people adopt the use of smart phones.  With the continuous sophistication of mobile applications, users are accomplishing more of their tasks on-the-go and not in front of a desktop or laptop.  Online marketers will need to adapt to their audiences’ web behaviors.

At the recent Google I/O keynote, Vice President of Engineering Vic Gundotra addressed the future of Google’s Android platform.  Among several new releases to the general public, Gundotra also addressed AdSense for Mobile Apps (AFMA).  Unlike the fierce battle currently taking place for the mobile market, Google is the undisputed king of paid media advertising.  This year, Google is celebrating its 10th year of providing advertising solutions.  Gundotra touted the lessons learned from a decade of being in the ad management space: inventory of advertisers, flexibility of ad units, dependable analytics, and constant innovation.

Google’s reach and inventory of hundreds of thousands advertisers simply cannot be matched on a global scale.  AFMA will show its flexibility by offering several different ad units to satisfy advertisers managing toward a variety of end goals.  Also, advertisers will have access to the full suite of Google products, including: Analytics, DoubleClick, Adsense, and AdWords.  Despite having a smaller application base than their competitor Apple, Google will be ahead of the game by offering their services on a familiar platform with an existing user base.

The new AFMA platform will offer many innovative and open formats for advertisers to reach their audience.  Gundotra demonstrated several different ad units within popular Android applications.

Text Ad: This is the standard unit that scrolls through different lines of ad copy.  The call to action can direct users directly to an application download.  Compared to Google Search and Content, shelf space appears to be higher as the demos showed one ad per page.

Pull Down: This ad unit flies down to expand from the standard text size, giving the advertiser more creative space.  At the same time, it allows users to stay within the context of the application.  Gundotra showed off a variety of rich media types that will be supported, including animated images and videos.

Geolocation: One example of a local advertising unit integrated Google Maps to show the advertiser’s location, directions to the business, and a click to call telephone number.  It really demonstrated the innovation in creative that cannot be achieved on a standard desktop.

Open Market: Gundotra demonstrated a beautiful full screen ad for the movie “Splice”.  It had several interactions including a gallery, trailers, and direct access to purchase tickets through Fandango.  The interesting thing is that it was not a Google ad, but one delivered by MediaLabs.  Developers will be able to utilize DoubleClick to serve the most relevant ad, which may or may not be Google’s.

Google will continue to have a tough time fighting for dominance in the mobile marketplace, but having a pre-existing, market-leading, user-friendly platform for advertisers to use may be one of the keys to success.  Mobile application usage will continue to grow in the future, and Google will continue to sophisticate the mobile advertisement market.  Advertisers will need to keep up with internet user’s behavior patterns by strongly considering mobile application advertising for their paid media campaigns.

Actionable Insight #1: Like existing Google advertising, AFMA will be based on a CPC/CPM/CPA model.  Leverage the experts in this field to create a program that is well managed and continuously optimized.  Ensure that your analytics is fully implemented in order to track and benchmark this program against other advertising avenues.

Actionable Insight #2: Ask the right questions.  With so many innovative ad formats, make sure your ad campaign is personalized for your advertising goals.  Whether it’s branding, local, lead generation, or direct marketing, there is a format and audience that will yield the best results.

Actionable Insight #3: Keep up on the latest news.  Although there have been basic advertising options for mobile devices for awhile, this is an industry in rapid growth.  In fact, the FTC just approved Google’s acquisition of online mobile ad space leader AdMob.  This will allow advertisers even more avenues for delivery.  Keeping up on new innovations will ensure your campaign gets maximum exposure.

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How Search Marketing Can Lead the Integration of SEO & Social Media

If an SEO ‘Wizard’ and Social Media ‘Socialista’ hooked up at a party, they’d make strange bedfellows. But in a corporate structure, bedfellows are exactly what these two groups must become, if their respective channels are to reach their full potential within Google’s new time-delimited landscape. Paid Search’s ‘21st Century Madmen’ can provide insights into how organizations can effectively manage these fledgling marketing programs.

As the digital version of AMC’s take on 1960’s advertising industry, 21st Century  Madmen/ women are the proven organizational leaders who cut their teeth on Paid Search’s prime directive, which is that marketing is a measureable investment and not a cost center. Managing investments requires business acumen, relationship management and analytical rigor – disciplines that organizations can leverage to integrate SEO and the marketing aspect of Social Media, two seemingly disparate, but fundamentally complementary, advertising channels.

It has become very fashionable to state that Search and Social must somehow be integrated, as both advertising channels are used in the dual role of promoting brands and measuring consumer activity surrounding brands. Every self-proclaimed ‘expert’ in the online ad space has championed this integration. But all this lip service has added up to no more than educated conjecture until last month when Google launched its ‘Latest’ search filter link, along with other time-delimited filters. That move made every would-be Search-Social pundit proud to be part of the visionaries’ caravan. Their prognostications have been validated, because now search engine optimization is no longer just about linking, crawl-ability and content. It is also about recency (so recent a term that it’s not even in Webster’s Dictionary yet) – or how Social Media is driving the most recent content, which now appears, for all intents and purposes, on ‘Page 2’ of Google’s results.

So now what?

Now large organizations know undeniably that, at least for a certain percentage of Google searchers, ‘Page 2’ will be ‘Page 1’ filtered by time – its rankings will be driven by the most recent tweet, social network comment or blog post containing the appropriate search term.  So logically, it’s a good thing to somehow align the activities of the light and chatty Social Media in-crowd with the activities of the dark and brooding SEO folks in an attempt to own part of the two most valuable pieces of virtual real estate in the Search landscape.

So how does an organization go about doing this?

Although Social Media and SEO are culturally different, they are both resigned to a nomadic space within their organizations, straddling functional core competencies and never truly, completely claimed by one department. Depending on whom you ask, SEO is either in IT or Marketing. Social Media is ingrained in multiple aspects of an organization – Customer Service, Supply Chain, Training & Education, Recruiting, Marketing and Public Relations. But strictly in terms of the Google landscape, both Social Media and SEO are burgeoning marketing programs that provide downstream value as forms of branding, as well as upstream value as online channels that measure the efficacy of branding campaigns through offline and other online advertising channels.  Another commonality is that neither likes to measure itself, nor is either naturally prone to doing so, except on metrics situated higher up the sales funnel (traffic/ tweet volume), amorphous metrics (sentiment), or strict yet volatile metrics (page rank). In order to get the Socialistas and the Wizards to play nicely together toward a common purpose, what’s needed is an objective framework to measure the success of each activity on its own and how each one influences each other as well as the other marketing activities. Covario’s name for this framework is the ‘Digital Center of Excellence’.

An organization’s 21st Century Madman/woman, regardless of whether their background is specifically in Paid Search, is the best candidate for leading the DCoE. While it is not necessary that Socialistas and Wizards report directly to the Madman/woman, they should be required to follow the DCoE’s common success metrics and ‘flighting’ schedules. Down the road, the Madman/woman can lead further coordination amongst Social Media, SEO, Paid Search and Display campaigns – measuring cross-media effectiveness, tweaking campaigns, adjusting spend and finding inefficiencies to exploit.

To attain and maintain a highly visible presence on Google’s Page 1 and the new Page 2, a 21st Century Madman/ woman is needed to get the Socialistas and Wizards to stop looking down their respective noses at each other by creating common goals, a digital roadmap and clear success metrics.

Actionable Insight 1: Find a digital leader that takes a financial approach to marketing in order to connect the SEO and Social Media groups.

Actionable Insight 2: Create a Digital Center of Excellence that provides a framework for all online media groups and efforts.

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As predicted in our first quarter (Q1) Global Paid Search Spend Analysis, spending by high-tech and consumer electronics companies is rebounding in the second quarter (Q2), from its 11.9% quarter-on-quarter decline between the 4th quarter (Q4) 2009 and the 1st quarter (Q1) 2010.

Our mid-quarter Q2 analysis projection shows that paid search spending in the high-tech and consumer electronics sector will be up an estimated 24.9% over Q1 – with Google leading the way with 29.9% increase, Yahoo up 11.3% and Bing down 13.3%.

There are three (3) main stories in second quarter that are of interest to paid search advertising professionals.

1. The impact of the decision by Google to reposition its China business.
   There is a large amount of interest on the part of our customers on how the market is reacting to Google’s Q1 announcement that due to privacy restrictions by the Chinese government the platform would relocate its Chinese business to Hong Kong.  With several months of data now, what we are seeing is that overall paid search spending in China is up nearly 85% from Q1 — with spend on Baidu up nearly 210%.  Spending from Q1 to Q2 on Google is up — but far more modestly — around 43%.  Overall strong growth aside, it appears that the prognostications of massive defections from Google are unfounded — the spending on the network in China remains robust. However, this strategy by Google clearly is a boon to Baidu — whose spend is up markedly.
   
2. What happened to the “Cha-Ching” in Bing?
   In Q3 2009, we saw huge growth in usage of the Bing network — 3-4 months after the official “re-launch” from the MSN platform.  Since then, growth has lagged.  Why?  CPAs on Bing have remained higher than Yahoo and Google in the US — about 50% higher than Yahoo and 2X higher than Google.  It seems that marketers, after giving Bing a chance — have slowed growth and are approaching the network more tepidly.  We have received briefings over the past few weeks from the teams at Yahoo-Bing — and the integration is proceeding on plan. However, the fundamental dynamics of the networks have not changed.  In Q2 of this year, we are projecting that after three quarters of modest market share losses to Bing (5-6%), Google is going to take about 1-2% of those market share points back.  Budget planners at advertisers should react accordingly.
   
3. Transactional Costs Go Up.
   As is always the case with our analysis, given that spend in Q2 grew faster than inventory, transaction costs went up.  With the strong growth in Google spend, clicks per conversions (CPCs) on the platform were also up nearly 12% and clicks per accounts (CPAs) were up 23%.  This is something that marketers need to monitor in order to ensure their ROI goals are being met as the spend levels increase throughout the year.

 
In our Q1 2010 report, Covario predicted that spending in 2010 would be 14-18% above 2009 levels.  With the strong rebound in spending in Q2, we hold to this projection and recommend that search marketers plan on similar average budget increases in order to maintain online market share.
   

ACTIONABLE INSIGHT 1: Strong growth on Baidu necessitates that marketers executing search program in the China should increase spending to maintain market share for branding purposes. However, the traditional issues with the system (very poor information system) continue to plague marketers, making reporting and performance management problematic.

ACTIONABLE INSIGHT 2:  The growth in Bing spend seems to be subsiding.  We are projecting reductions in spend on the network between Q2 and Q1 (unless something changes in June). This is due to steadily higher CPAs advertisers are experiencing on the network.

ACTIONABLE INSIGHT 3: Spend in Q2 is projected to be 25% higher than Q1.  So our forecast of budget increases of 14-18% to maintain market share looks solid.

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