-- Data Based on Efficient Frontier’s Q2 2009 UK Search Engine Performance Report --

While economic indicators provide mixed messages regarding possible green shoots out of the recession, search engine marketing is following other leading marketing indicators in the UK in continuing to show a downward trend.

The UK data in the Efficient Frontier Customer Index, a sample of Efficient Frontier’s advertiser base, saw cost per clicks (CPCs) fall dramatically year on year (YoY) – allowing advertisers to capture more volume at lower cost. CPCs across the engines decreased by 20-31% YoY; with the biggest fall being from Google with 31%, followed by Bing and Yahoo! with 30% and 20% respectively. Efficient Frontier advertisers capitalised on this price reduction and achieved more click volume while maintaining the return on investment levels of prior quarters. Return on investment (ROI) for advertisers remained stable with a 2% improvement YoY. Advertisers were still able to grow campaigns at a profitable return as dynamic search marketplaces adjusted to lower cost tolerances and less competition.
“We are seeing advertisers make their search marketing budgets work harder than ever before,” said Jonathan Beeston, Client Services Director for Europe. “Paid search is very closely tied to the state of the economy due to its immediate nature and as the whole marketplace deflates, search engine marketing is becoming cheaper. This is a great time for smart advertisers to take advantage of the opportunity and gain ground on their competitors.”
In addition, Search Engine Marketing spend for the sample fell by 11% when compared to the same period last year. The biggest drop came in the month of April, indicating advertisers revised Search Engine Marketing budgets for the quarter adjusting to more conservative forecasts for the new financial year. The data does provide a glimmer of hope for recovery in that advertisers, after the initial drop in April, increased month on month spending in May and June.

Search engine efficiencies varied significantly over the course of the year. While Google operated 7% more efficiently for advertisers YoY and Bing operated 16% more efficiently, Yahoo! Search was 5% less efficient than Q2 2008 at producing ROI for advertisers. Yahoo!’s lower efficiency, given stable click volume and lower CPCs, indicates a likely decline in quality. If left unchecked, it will drive spend allocation away from Yahoo! Search to the other engines in coming quarters.
The launch of Microsoft’s Bing in the U.S. and the analysis of its success provides an interesting preview for its launch in the UK. Bing only had a name change in the UK and no new features will be officially launched until 2010. Bing’s U.S. launch in June resulted in initial gains in market share. Bing picked up click share immediately upon launch and sustained share gains over the course of June with the strongest gains in the travel and financial services categories. It will be interesting to observe how Bing trends develop in the UK.
Key Findings:
- SEM is now much cheaper as CPCs decline by 20-31% YoY
- Spend is down for second consecutive quarter but recovery is in sight due to raised spending in May and June
- ROI is stable, showing a 2% YoY increase
- Yahoo! is less efficient at driving ROI for advertisers which may drive spend allocation to the other engines in coming quarters
- Spending on Google Content is up 71% YoY
- Bing’s U.S. launch in June resulted in initial gains in U.S. market share
- U.S. data shows that the recession has hit smaller advertisers the hardest
Research Methodology
This analysis was completed based on data from Efficient Frontier’s Customer Index, which represents a subset of Efficient Frontier clients who have spend data for six consecutive quarters or more, to shed light on trends in search engine spending and performance on a year-on-year (YoY) and quarter-on-quarter (QoQ) basis. The Efficient Frontier Customer Index consists of a fixed sample of large scale UK search engine advertisers across multiple sectors, including financial services, travel and entertainment, retail and telecommunications verticals. It covers over 6.5 billion impressions and 99 million clicks across an index of Efficient Frontier UK customers.

About Efficient Frontier
Efficient Frontier is the worldwide market and technology leader in providing search engine marketing (SEM) solutions for large advertisers and agencies. Founded in 2002, Efficient Frontier pioneered the application of modern portfolio theory to SEM and today combines its core predictive modeling algorithms and bidding technology with comprehensive strategic and tactical value-added services to manage more than $750 million in annual search spend globally. The largest and most sophisticated advertisers and agencies partner with Efficient Frontier to achieve and sustain optimal campaign performance and growth in highly complex and competitive search marketplaces. The company is headquartered in Sunnyvale, CA with offices in New York, the United Kingdom, France, Germany, and India, and technology licensing partnerships in Japan, Hong Kong and Australia. Efficient Frontier is a privately held company with funding from Redpoint Ventures and Cambrian Ventures. For more information, please visit www.efrontier.com , subscribe to the Efficient Frontier blog at blog.efrontier.com and follow us on twitter twitter.com/efrontier

For more information:

Merinda Peppard | European Marketing Manager
Efficient Frontier
www.efrontier.com | http://blog.efrontier.com/ | http://twitter.com/efrontier

tel: +44(0)20 7166 5220

Published on: 5:53PM on 23rd July 2009