Internet marketers descended on the 2004 holiday season armed with strategies to target consumers early and keep them buying until the day before Christmas.
Those efforts culminated in a surge of late buying activity that raised overall holiday online retail sales to $15.8 billion, according to comScore. That's a 29 percent increase over the $12.3 billion in purchases recorded in November and December of 2003.
That robust figure, which excludes online travel sales, exceeded comScore's projections of 23-26 percent, based on an unprecedented surge in last-minute online purchases.
According to the researchers, online holiday shopping was on pace to increase 23 percent over 2003 going into the last two full weeks of the year. During the weeks ending December 19 and 26, online sales increased 57 and 53 percent, respectively.
The final surge in buying activity was based partly on the success of last-minute sales offered to consumers online. In-store pick-up offers and local delivery services encouraged shoppers to buy gifts up until December 24.
Other factors contributing to the elongated buying cycle include online retailers' later shipping deadlines; the popularity of online gift-card purchases; and flower and gift baskets, the fastest growing products this holiday season.
In many cases, those last-minute incentives were the final salvo in campaigns that began with aggressive keyword search advertising in October.
According to Fathom Online, keyword prices were up an overall 24 percent to $1.70 in Q4, from an average $1.37 in Q3, driven by month-over-month increases of 50 percent in October and 25 percent in November.
Advertisers began decreasing their search ad spend in the second week of December, resulting in an overall 3 percent drop in spending on retail keywords for the month, said Chris Churchill, chief executive of Fathom Online.
|Fathom Online Keyword Price Index™|
|Avg of |
|Sept-Oct % change||-10%||50%||78%||33%||-9%||36%||-6%||-3%||13%|
|Oct-Nov % change||-3%||25%||32%||6%||6%||10%||-11%||3%||7%|
|Nov-Dec % change||4%||-3%||7%||8%||4%||1%||3%||0%||2%|
|Source: Fathom Online Corp.|
"Retailers begin tapering off their keyword buying starting December 10 because they are facing fulfillment and shipping problems, a lot of business in too short a time," Churchill said. "Similarly, online starts a month earlier because consumers are taking into account the shipping time. So it... is actually a longer buying season for e-tailers than for brick-and-mortars."
Search Engine Ad Efficiency Spikes
Those Internet campaigns' bottom lines were impressive for advertisers.
According to DoubleClick's "Holiday 2004 Shopping Report," the average number of daily ad clicks in December was more than double (144 percent) the Q3 daily client average.
Total gross revenues generated by merchant search marketing programs increased 375 percent above the Q3 average. The average return on investment (revenue/click charges) rose 58 percent compared to the average figure for the Q3.
Conversion rates, meanwhile, increased 124 percent, compared to the average daily conversion rate figures. Total conversions, meanwhile, measured by clicks resulting in purchases or other marketing objectives, increased 446 percent.
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