Paid Search Advertising Spend Rebounds for High-Tech Advertisers in Second Quarter

by Craig Macdonald | July 13, 2010

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.