The UK’s search marketing sector grew by 10 per cent over the last 12 months, however, cost-per-click (CPC) rates are still significantly reduced from the same period last year. These are the findings of the leading global performance marketing company, Efficient Frontier, which releases its Q2 Quarterly Search Report today.

Cost per click (CPC) rates are down on the same period last year by up to 20 per cent. However, for the first time in five quarters, all the major search engines saw a slight increase in CPC rates in the second quarter of the year over the first (between three and eight percent). Overall, search spend was flat in Q2 over Q1.

This indicates that the market is through the worst, according to Efficient Frontier’s Clients Services Director for Europe, Jonathan Beeston: “Annual grown in search advertising spend has been driven by an increase in consumers’ use of search. CPC rates saw a fairly dramatic drop last year, but the slight increase in the last three months indicates that the market is turning a corner. Search is faring well, despite this week’s Bellwether report, which showed a cut in overall marketing budgets during the second quarter of 2010.”

The rise in CPC costs could indicate that an increase in search advertising spend is imminent in Q3 this year, if the UK follows the pattern set by the US over the last six months. The US saw consumer demand rise, followed by advertiser demand, which pushed up CPC costs and search spend in Q2 this year.

Beeston says that Efficient Frontier expects annual growth to be between 10 and 15 per cent in 2010, but remains cautious about the outlook: “Economic conditions are still fragile in the UK and across Europe, and it remains to be seen what impact this will have on marketing spend. We are predicting a cautious 10 to 15 per cent growth again this year in spend. It is likely that while CPC rates will rise slightly they will still be subdued.”

The report can be downloaded here:

Published on: 6:06PM on 14th July 2010