Report: Retailers Spent Heavily on Search in Q4

The responsiveness of U.S. consumers to search advertising continues to reflect uneasiness about the economy and their personal circumstances, according to a report from Efficient Frontier.

Click-through rates on the three major engines — Google, Yahoo, and Bing — fell substantially during the fourth quarter 2009, according to the search agency’s client data, suggesting searchers are doing more comparison shopping and taking longer to transact. They were also skittish after the click: The overall transaction size for Efficient Frontier’s 15 retail clients included in the study was down 5 percent compared with the 2008 holiday season.

“Consumers are more in the mindset of comparison shopping,” said Justin Merickel, VP marketing and new product development for Efficient Frontier. “That’s good for queries, but yield-per-query is down [for the engines]…While impression volumes on all search engines have increased, the click-through rates have dropped. We think this is due to an increase in comparison shopping and longer buying cycles.

Despite people’s skittishness, retail advertisers loosened their purse strings considerably during the holiday season. Spend in the retail sector grew 17 percent year on year and 46 percent sequentially during the fourth quarter 2009, according to the report.

That strong spending growth did not extend to clients in other verticals. Efficient Frontier reported modest 2 percent year-over-year increases in both the finance and automotive verticals, while its travel sector clients spent 20 percent less in aggregate last quarter than they did in Q4 2008. Overall, the agency’s clients saw increases of 6 percent in both sequential quarterly and year-over-year spending.

Also, the rising search spend did not translate into higher click costs. The report found click prices at Google fell 13 percent in aggregate, while Bing’s cost-per-click shrank 15 percent. Yahoo alone saw a year over year increase of 8 percent, possibly because of its recently adopted network quality score.

“There just isn’t as much competition as there was a year ago for these clicks,” said Merickel.

Google benefited more from the boost in retail spending than did its rivals. In that category, it commanded 82.7 percent of ad spending, compared with Yahoo’s 12.5 percent and Bing’s 4.8 percent. By contrast, in the finance sector, Google drew only 60.1 percent of Efficient Frontier’s client spend, while Yahoo nabbed 35.2 percent.

Perhaps because of Google’s strong command of retail dollars, the agency noted Q4 2009 was a weak one for Bing. Microsoft’s search platform grew — barely — in terms of paid click volume, adding 0.1 percent of share to reach 4.6 percent. It lost spending share however, going from 5.3 percent to 5.1 percent.

Meanwhile Yahoo’s share of search spending fell more dramatically. During Q4 its paid click share hit 21 percent of all spending, down from 24.8 percent in the year-ago period. Continued declines could offset Bing’s gains, the company said.

Based on Q4 2009 results, Efficient Frontier believes 2010 spending growth will exceed earlier estimates of 10 to 15 percent.

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