Is This the “Year of Facebook”? Six Trends Set to Transform Search Advertising in 2011

Craig Macdonald

By Craig Macdonald, Chief Marketing Officer and Senior Vice President of Products, Covario

The last year showed a continuation of a number of key trends in the paid search advertising market. For search marketers, and digital advertisers in general, understanding these trends is key to planning for 2011 effectively. Here are the key trends:

1. Growth in paid search advertising is moving overseas. Paid search advertising grew at 26% in 2010 over 2009. This growth was fastest in Asia-Pacific region—where year-on-year growth was 53%, compared to 23% in the Americas. This was faster than the previous year—where growth was 18%—but much lower than the annualized growth rates from 2005-2007, which were nearly 50% for most advertisers. Search is growing up—at least in the US. Most advertisers have been optimizing their programs for years now and they have reached a stasis where the search inventory available in the market is saturated and advertisers are buying their share. This is not true overseas—leading us to predict that a larger and larger share of corporate paid search advertising budget will move overseas—to China, Japan, and Europe.

2. The Microsoft-Yahoo platform integration in the U.S. has not had a major impact on the market. The platform is impressive—simplifying a number of the processes across the two environments that plagued advertisers in the past. However, search advertising tends to come down to the comparative effectiveness of the spending, which is easily measurable. The audience for the combined entity has not changed in such a way that marketers are willing to increase spending on the network in any appreciable way.

3. Google’s dominance continues in the Americas and in Europe. However advertisers must use regional engines in Eastern Europe (Yandex) and Asia (Yahoo and Baidu). Google has 83% market share of spending in the U.S.—and 96% in Europe. Ninety-six percent! The big story of 2010, however, was the situation that Google ran into in China. Google briefly repositioned its service in China to Hong Kong in the second quarter in order to prevent censorship by the Chinese government. During this time, Baidu increased its in-country market share to nearly 80%, pushing Google to less than 20% in what is now the fastest growing world market for paid search advertising. Advertisers need to build expertise on these regional search engines in order to ensure quality global advertising deployment.

4. Google Instant and other new features will continue to change the game. Yet, Google is not worried about having saturated markets in the U.S. and Europe. No, their intention appears to be to monetize their inventory more effectively through features like Google Instant—introduced in September. And the ramification for search marketers is that they will have to pay more for the same amount of traffic as click costs increase. Google Instant, according to Covario research among our clients, is causing an increased proportion of search visitors to click on paid search ads at the expense of “free” natural search listings. As a result, in order to get the same number of clicks to a website, advertisers will have to pay for more of the overall traffic. Our estimates are that Google Instant is transferring 4% of all clicks from natural/organic search (SEO) to paid search.

5. Global budgets will jump up to 20% over last year. For 2011, we are advising our clients to plan for the following: 15-20% overall growth in global budgets. And we expect a greater proportion of spending to go to international advertising outside of the U.S. Growth is projected to be 10-14% in the U.S., 20-25% in Europe and 30-35% in Asia-Pacific.

6. Advertisers will allocate more of their budgets to Facebook. Last, we expect 2011 to be “The Year of Facebook” from an advertising perspective. Advertising on Facebook reached a tipping point in 2010—making it comparable to paid search in terms of effectiveness—and it will begin siphoning significant amounts money from ad budgets in 2011. Advertisers must plan on allocating budget to Facebook as part of their digital advertising market mix in this year. We recommend a Facebook budget totaling 10-20% of their paid search-advertising budget globally.

Craig Macdonald is responsible for the strategic direction, development and marketing of the Covario portfolio of solutions. Covario is Covario is a full-service search marketing firm that provides Fortune 500 companies with software and agency service solutions for paid search advertising (PPC), organic search engine optimization (SEO), display advertising and social media programs.

image_print

1 Comment

  1. cheap Jack and Jones Jeans on May 22, 2011 at 4:25 pm

    hallo,. I was told by one of my relatives to visit your website. I like the look of the site greatly. Your blog is very insightful. Please keep on the good work. I definitely will support it oftenly and tell it to my relatives.