Bing Cuts into Google Market Share in the US

For the second straight quarter (Q3 &Q4’09), paid search advertising in the high-tech and consumer electronics sectors grew by double digits.  In fact, growth between Q3 and Q4 was a very robust 16%, far beyond previous expectations. This was due in large part to a growing demand for ad space by consumer electronic companies during the holiday season.

The report also showed that the marketing programs being executed in the US by Yahoo and Microsoft, for its Bing platform, are working.  Bing more than doubled its US market share from Q3’09, and has quintupled its market share in the US over the course of the year.  And in Q4’09, this growth came at the expense of Google, which recorded its lowest market share in the US in the 3 years of the study – 72%.

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Here are the major findings from the report we put out this week:

  • Paid search advertising spend was up 16.6% between Q3 and Q4 of 2009.  This is a significant increase — far beyond Covario’s projected 10% increase.  Advertisers have been reinvesting in paid search advertising after pulling back on their spend during the first half of the year. Spending is expected to increase by 14-18% in 2010.
  • The Q3 announcement of the Bing/Yahoo deal, coupled with large marketing programs by both search platforms are paying dividends.  Bing more than doubled its US market share in Q4, now at 13.3% of all spending in the quarter.  Google growth has slowed in the US — and it has the lowest US market share in 3 years — 72%.  However, Google continues to dominate foreign markets, particularly EMEA where it recorded a 97% market share in the high tech sector.
  • With the large increases in spending, cost per click (CPCs) has increased as expected — by nearly 15% in the quarter.  CPC increases are expected in 2010 as additional spending is allocated to higher cost keywords.

The growth rates seen in Q4 were surprising.  In the first half of 2009, there was a 12-15% contraction in paid search advertising spend across the high-tech sector, and we expected a rebound in the 5-10% range in the second half of the year. In actuality advertisers have increased their spending by more than 30%. The high-tech sector is now spending about 12% more than they were a year ago on paid search advertising globally.  At the beginning of the year, we expected the entire year to be flat compared to 2008.

The big news of the year was the launch of Bing by Microsoft, and the Yahoo-Bing technology deal, which was announced in August and appears to be working for the search platform.  Large scale consumer advertising programs by Yahoo and Bing have kept Yahoo’s market share stable for the past 2 quarters, and more than quintupled  Bing’s market share since its launch.  Advertisers have been looking to expand their reach and inventory beyond Google, and Bing appears to be convincing them that it has a potential alternative – at least in the US and Canada.  Outside of the US, it is still all about Google.  No one has made a dent in their market share in EMEA.

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The Covario Global Paid Search Spend Analysis is based on paid search spending from US-based high tech and consumer electronics customers, and spans Q1, 2007 through Q4, 2009. The combined paid search advertising spending of the analyzed brands represents more than $250 million annually.  All data is measured using Covario’s Paid Search Insight technology, which has been deployed with 20 different Fortune 500 firms, mostly in the high-tech and consumer electronics sector in the US, Canada and Europe.

> To download a copy of this analysis

ACTIONABLE INSIGHT #1: Expect spending in paid search advertising in the high-tech sector to rise by 14-18% next year, and CPCs to go up by 10-15%.