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Online Marketing Quarterly Benchmarking Report Key Trends & Insights

July September, 2011

Online Marketing Quarterly Benchmarking Report September 2011

Introduction
The third quarter of 2011 unveiled several important paid-search trends. On a year over year basis, advertisers increased click-through-rates (CTR), while reducing their overall costs-per-click (CPC). These trends point to advertisers realizing increased efficiencies from paid search, while growing their search programs. On the subject of efficiency, we also found that a larger percentage of advertisers were using Phrase and Exact type of keyword matching, and realizing strong performance gains as a result. Lastly, our data suggests that ad targeting on tablet devices (e.g. Apple iPad) is showing significantly better performance compare to desktop or mobile targeting.

Research Methodology
To uncover key trends for the third quarter of 2011, we sampled the Marin Global Search Index, which includes over 1000 advertisers and agencies that invest over $2.1 billion annually in paid-search. The Marin Global Search Index consists of enterprise-class marketers -- larger advertisers and agencies who spend in excess of $1 Million annually on paid-search, social and display. As such, our data sample and findings skew towards the behavior of larger organizations and more sophisticated advertisers. We kept the study longitudinal by focusing on a representative set of US based advertisers and measuring key performance indicators (KPIs) on a year over year (YoY) and quarter of quarter (QoQ) basis. Wherever possible, we used medians and indexed values to more clearly highlight overall trends instead of absolute values. This allows us to mitigate the effects of outliers, and make the findings more representative of the performance of the typical Marin client. One change we made in this study was to separate out any impressions and clicks generated from the Content networks (now known as the Display Network on Google). Unless stated otherwise, the data in this research brief pertains only to the Search network.

Copyright 2011 Marin Software Inc. All rights reserved.

Online Marketing Quarterly Benchmarking Report September 2011

Findings:
1. Growth in Click Volume and Overall Performance: On an annual basis, advertisers saw click volume rise by 22% without an accompanying increase in spend. In fact, improvements in click volume can be largely attributed to stronger CTR and a lower average CPC. The combination of improving CTRs and declining CPCs point to a significant efficiency gain for Marins clients over the past year.

Copyright 2011 Marin Software Inc. All rights reserved.

Online Marketing Quarterly Benchmarking Report September 2011

2. Improved Efficiencies on Google and Spend Increases on Yahoo! and Bing: According to Comscore, 64.8% of all US-based search queries were conducted on Google during August 2011. During this same period, Yahoo! was at 16.3% and Bing at 14.7%. Despite having 64.8% of the overall US search volume, Google monetized its searches much more effectively -- accounting for 80% of advertisers spend and 81% of all paid-clicks during the same period.

On Google, the story we saw was largely about advertisers becoming more efficient. On a year over year basis, we saw a 19% increase in clicks accompanied by 24% drop in impressions. During this time, our clients saw a 57% increase in click through rates (CTR) on Google, while cost per click declined by 18%. This set of trends can largely be attributed to Marin clients realizing efficiency and performance gains through improved matching and more effective bidding.

http://www.comscore.com/Press_Events/Press_Releases/2011/9/comScore_Releases_August_2011_U.S._Search_Engine_Rankings

Copyright 2011 Marin Software Inc. All rights reserved.

Online Marketing Quarterly Benchmarking Report September 2011

On Yahoo and Bing, the story was largely about increased investment. For the Search Alliance, we saw a strong increase in impression volumes, most of which we attribute to our advertisers building out more robust search campaigns and increasing spend on the combined marketplace. Specifically, our customers saw a 43% higher click volume at a 10% lower CPC. While, click through rates declined by 10% on a YOY basis, they did show a 9% improvement on a QoQ basis, implying improved ad matching and/or traffic characteristics.

The following charts outline how search performance characteristics differ across Google and Yahoo! and Bing.

Copyright 2011 Marin Software Inc. All rights reserved.

Online Marketing Quarterly Benchmarking Report September 2011

3. Match Type Optimization Creating Significant Performance Gains: Our analysis shows that gains in efficiency over the past year have been a result, in part, of advertiser efforts to refine match types. Refining match types from Broad to Phrase or Exact, increases relevance and click-through rates for keywords, thus improving quality scores and lowering costs. In the past year, search marketers have increased their use of Exact Match, growing their click-share by 6% while increasing share of spend by 2%. The following charts indicate year over year change in paid-search metrics by match type, and demonstrates the effectiveness of Exact Match from both a CTR and a CPC perspective.

4. Industry Specific Trends: While its helpful to understand the broader context of how paid search is evolving at a macro level, the reality is that different industries can demonstrate fundamentally different trends. To that end, we looked at the behavior of seven different industries and uncovered some new and unexpected trends. This section provides insights on representative values for CTR and CPC across seven verticals (Q3 2011), and industry-specific trends for key metrics.

Copyright 2011 Marin Software Inc. All rights reserved.

Online Marketing Quarterly Benchmarking Report September 2011

Paid Search Trends Auto

Paid Search Trends B2B

Online Marketing Quarterly Benchmarking Report September 2011

Paid Search Trends Education

Paid Search Trends Finance

Copyright 2011 Marin Software Inc. All rights reserved.

Online Marketing Quarterly Benchmarking Report September 2011

Paid Search Trends Healthcare

Paid Search Trends Retail

Copyright 2011 Marin Software Inc. All rights reserved.

Online Marketing Quarterly Benchmarking Report September 2011

Paid Search Trends Travel

5. Device Targeting & Performance: While Desktops and Laptop computers still command the vast majority of search spend, we are starting to see positive trends as marketers explore new platforms to extend their reach. Device targeting, in particular, is showing promise as smart phone and tablets become increasingly popular around the world. To provide context around spend allocation, the chart below shows how ad spend was segmented across our client base during the third quarter:

Copyright 2011 Marin Software, Inc. All rights reserved.

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Online Marketing Quarterly Benchmarking Report September 2011

Though 7% share across platforms isnt very large, its growing very quickly and marketers are realizing solid performance across both mobile and tablet devices. Tablet devices, as the below chart illustrates, are providing higher click through rates for a lower average cost per click in comparison to both desktop and mobile devices.

While device targeting may not be relevant for all advertisers, marketers should evaluate their target demographic, and where appropriate, leverage the performance and cost effectiveness of targeting ads to tablet or mobile users. 6. Facebook Ads: With approximately 700 million users around the world, Facebook has become an invaluable part of the online marketing mix. This report marks our first time at reporting performance numbers for Facebook. Given Facebooks dual-use as both a brand and performance channel, we wanted to report Facebook as its own category. Presented below are Facebook metrics for the third quarter:

Copyright 2011 Marin Software, Inc. All rights reserved.

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Online Marketing Quarterly Benchmarking Report September 2011

Conclusion
On a year over year basis, click volume increased by 22%. Additionally, increases in clickthrough rates, as well as lower cost per click prices indicate that advertisers have increased their efficiency and performance in the past year. Google continued its search dominance by garnering 80% of US spend share and 81% of US click share, while controlling 64.8% of overall US search volumes. Yahoo! and Bing are continuing the transition to the Search Alliance, with the combined marketplace showing a strong growth in impression volumes and spend. The past year has also seen advertisers improve efficiency by increasing usage of exact and phrase match keywords. Tools like Marin greatly simplify the process of keyword expansion and automated bid calculation for large keyword sets, and enable search marketers to focus on more strategic objectives such as keyword refinement. Lastly, we found that tablet and smart phones, while still in early stages of adoption relative to desktop computers, are showing strong gains in search share, while delivering quality performance at a lower average cost per click. As these devices become more widespread, and marketers develop smarter targeting strategies, we expect to see a larger percentage of ad spend funneled towards smart phones and tablets.

About Marin Software

Marin Software is a leading provider of online advertising management solutions, offering an integrated platform for managing search, display, and social marketing. The company provides solutions for advertisers and agencies of all sizes, enabling them to improve financial performance, save time, and make better decisions. Marin Enterprise, the companys flagship product, addresses the needs of online marketers spending $100,000 per month and greater on biddable media. Marin Professional delivers the same power and ease of use as Marin Enterprise, through an application designed for marketers spending less than $100,000 per month. Headquartered in San Francisco, with offices worldwide, Marins technology powers marketing campaigns for over 1000 customers managing more than $2 billion of annualized ad spend in more than 160 countries. For more information, please visit: http://www.marinsoftware.com.

(415) 399-2586 info@marinsoftware.com Copyright 2011 Marin Software, Inc. All rights reserved. www.marinsoftware.com
2011 Marin Software. All rights reserved. Other trademarks belong to their respective owners.

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