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By: Scott Shabott

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Tuesday, 29-Dec-2009 13:19 Email | Share | | Bookmark
Paid Search To Continue To Increase In Importance

Budgets for paid search are expected to be up by 18-20% next year in the sector. However, the predication is right in that the majority of the spending is taking place in Asia-Pacific region – specifically China. So salvation may just reside there after all.

Covario recently published a study on expectations for budgets in 2012 from its high tech and consumer electronics client base, and made the following recommendations for next year.

Overall growth in paid search spend will grow 18-22% in 2012.
North America growth will be 18-20%, Europe will be 15-20%, and Asia-Pacific will be 30-35%

Google will continue to command the majority of this spend — with 75% of the market share. The Yahoo-Bing Search Alliance will be 15% — focused on the US.

Mobile will account for no more than 3-5% of the overall market share In paid search. Most organizations, if they are executing focused mobile strategies in search, are doing so in SEO and web development.

There is some trepidation about the impact of a potential market slowdown, in Europe and perhaps the United States, and its impact on paid search budgets. Most advertisers believe a slowdown will have muted impact on paid search. In the huge market shock in 2008, budgets went down by 10-15% for paid search in 2009, and quickly rebounded, while overall advertising budgets were cut by 30-50% in some cases. Paid and organic search’s measurability and position at the “bottom of the buying funnel” make it quite resilient to market gyrations. The impact tends to be on CPCs — which go down faster than decreases in growth rates on impression volume. But as more budget moves to digital, and does so at a higher rate, we did not see ANY advertisers thinking of reducing paid search budgets next year.

The one other observation made by Covario in planning for 2012 is around social media spending, specifically Facebook advertising spend. Covario ran a survey recently of how organizations allocate their budgets for paid social media. The thinking was that social media budgets were run by either and independent group, the Public Relations department, or the display advertising group. The answer to the survey was surprising.

In 34% of the cases, the budgets are run by the search marketing managers as part of an integrated search and social media budget. As such, we are starting to track Facebook budgeting processes and performance dynamics.

In 2011, we saw the following

55% of our customers are doing Facebook advertising in some way.
Those budgets totaled ~10-20% of the annualized paid search advertising budget. They did not come out of the paid search budget, but rather, this is a benchmark. If the paid search budget Is $10 million In 2011, the Facebook budget is between $1-2 million.
We have seen that budget grow by 130% over 2010.

In only 35% of the cases are the goals to drive commerce through the Facebook page, and that only through promotions in the consumer electronics space — usually for lower prices products. In the other 65% of the cases, the objectives are “soft” — making ROI ill-defined.

As such, we are seeing continued investment in Facebook, but not revolutionary increases in spending. Our understanding from our customers is that their Facebook advertising programs in 2012 will look something like this.

Budgets will be 15-20% of paid search advertising budgets
Approximately 75% of our customer plan to engage in Facebook advertising programs
Overall growth will be in the 50-75% range over 2011 — targeted on Sponsored Stories and targeted banner ads.
One key aspect of the programs is that the budgets are global. Facebook, with the exception of China, is ubiquitous. And the budgets tend to be the same for high tech. We will continue to track this progress through the future reports.

So Armageddon is off the table for next year. Search and social media marketers will continue to advertise, with a focus on international markets, specifically In Asia Pacific. And social media is becoming a more important part of the fabric of all media and advertising programs. Mobile — though it continues to be a hot topic, is not being backed up by any noticable increases in media spend next year.


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