October 13, 2010
Because luxury marketers are experiences a recovery in demand and advertising more, their search engine marketing cost-per-click is expected to increase in the fourth quarter, according to Efficient Frontier.
The third quarter marked continued positive growth in the sector, with search spend rising across retail, finance, auto, travel and all major categories, which are expected to continue into the holiday season. Efficient Frontier has also seen early gains among marketers optimizing their campaigns across search, display and Facebook.
“We are seeing increased spend in retail across the board for both premium brands and non-premium brands,” said Dr. Siddharth Shah, director of business analytics at Efficient Frontier, Sunnyvale, CA. “CPCs have increased, too.
“The implications for luxury advertisers are that they are enjoying a recovery in demand and hence are advertising more,” he said. “However, as the market is lucrative again, there is increased competition among the advertisers and hence higher CPCs.”
In the third quarter, the search engine marketing sector showed 19 percent year-on-year and 6 percent quarter-on-quarter growth, according to Efficient Frontier.
The fourth quarter is traditionally a strong one for retail and the analyst expects to see strong year-on-year growth in advertising spend and ROI.
In the past year or so, retailers have increasingly seen the value of search as a truly measurable and accountable medium of advertising. As a result, Efficient Frontier is seeing very strong growth in advertising spend in SEM.
Retail led search growth during the first half of 2010. After growing 38 percent year over year in the year’s second quarter, retail posted another positive year-over-year growth rate of 20 percent.
In line with expectations, sequential quarterly growth in retail was 1 percent as summer slow season was offset by strong back-to-school consumer demand.
All sectors outside of retail also showed strength. Financial services posted positive spend gains for the first quarter in more than a year, rising 14 percent year over year and 20 percent quarter-over-quarter.
Consumer and advertiser demand in financial services lifted both clicks and CPC. Travel extended the strength seen throughout 2010 with an impressive 38 percent year over year rise and 8 percent quarter over quarter gain.
The automotive sector posted 20 percent growth year over year and 12 percent quarter over quarter gains.
In retail, spend was up 20 percent year over year on volume and CPC gains. In travel, spend was up 38 percent year over year on CPC and click through rate gains. In finance, spend was up 14 percent year over year on CPC and click through rate gains. In auto, spend was up 20 percent year over year on CPC gains.
Efficient Frontier said search will grow between 15 and 20 percent in the fourth quarter. The company is optimistic about the fourth quarter search because retail has led the way for search in 2010 with consistent growth.
The third quarter's growth in spend on more difficult comps and slight sequential rise is a positive signal. Strengthening ROI numbers with increasing CPCs bode well for overall advertiser demand.
Facebook has gained a lot of traction among advertisers and retail is no exception. With 25 percent of time online being spent on the platform, luxury marketers are paying more attention to the channel both for branding as well as performance marketing.
Facebook in particular offers a lot of opportunities. Micro targeting allows advertisers to target niche audiences. Consider females 18 to 24 who are interested in Gucci and Prada products only.
The "Mini-Michael Jordan effect," when an influential consumer with a lot of friends likes a product and influences many potential buyers. In other words, there is a viral element to it.
“When looked at in an integrated manner, Facebook and display should and is being used by luxury brands as brand advertising medium and search is used as an end of funnel medium of advertising,” Mr. Shah said.
“At Efficient Frontier we are taking it a step further by looking at performance across all channels in an integrated manner and using sophisticated mathematics to help CMOs answer media mix questions such as ‘what is the best way to allocate budgets across all media for maximum performance of my campaigns,’” he said.
Final Take
Kaitlyn Bonneville, editorial assistant at Luxury Daily, New York
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