Q3 paid search spending is up almost 8%, with 10-15% growth forecast for 2010

SAN DIEGO — October 6, 2009 — Covario, Inc., the leader in paid and organic search services and software, today announced the release of the Q3 2009 edition of its Global Search Spending Analysis series.  As September and October are budgeting periods for most large advertisers, the new report has a special section on budgeting projections for 2010 which counsels clients to plan for 10-15% increases in paid search spending in order to maintain their market share in the interactive advertising space.  This is based on the finding that, for the first time since Q4 2008, spending on paid search increased in Q3 – by 7.8% — well in line with the projected 5-10% increased predicted by Covario in Q2.  The report also showed that Google gained additional market share in Q3 – from 81% to 83% of all spending – and Covario expects this to increase even more in 2010, particularly in mobile search.

Report highlights include:

• Growth in spending on paid search grew 7.7% from Q2, while growth on Google was up 10.9% and Bing was up by 9.2%.  Growth in paid search surged the most in the Americas region, 14.3%, largely due to the cyclical “back to school” campaigns that drive the consumer aspects of the high tech market.

• The “costs per click” realized by the search engines reached a 2-year low in Q3 – as the trend towards improvements in campaign optimization tactics and less buying of relatively expensive  brand building keywords drives improved traffic to sites at much lower cost.  CPCs are down almost 40% from their 2008 average and are at parity across the major engines in the US.

• On a “cost per acquisition” basis, Google is now the most effective search engine – replacing Yahoo over the past two quarters.

"Most of our Fortune 500 advertisers are knee deep in 2010 budget planning processes right now and we are letting them know that the expectations for budget growth in paid search advertising are 10-15% next year in the high tech sector” noted Craig Macdonald, Chief Marketing Officer and Senior Vice President of Covario. “The business case for this increase is quite powerful, as we have seen ROI on paid search increase by 11% across our customers since the beginning of the year, confirming the importance of search in the advertising ecosystem.”

The impact of the Bing launch in June and the Bing/Yahoo deal in Q3 has had some impact  – we saw the market share of Bing increase in the US in Q3 by 5%.  Google, however, continues to command the lion's share of search spend with high tech firms, garnering about 80% of spending globally.  “We do not expect there to be a large switch in Q4 2009 or the first half of 2010 in spending away from Google, particularly given the improved performance of the network on a CPA basis since Q1," Macdonald added. "However, when the integration is executed in 2011, we expect market share to increase with Bing and we are counseling customers to plan for this in their 2010 budgets."

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 to Q3 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 is deployed to 20 different Fortune 500® firms, mostly in the high tech and consumer electronics sectors in the US, Canada and Europe.