Global Online Advertising Report

Q4 2011

A report by digital marketing firm IgnitionOne.

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2 CONTENTS

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Paid Search
U.S. Spend Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 U.S. Retail Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 U.S. Mobile Spend Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 U.S. Search Cost-Per-Click (CPCs) Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 U.S. Search Engine Market Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 Europe Search Spend Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Display
Year-over-Year Change in Display Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

About IgnitionOne . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

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3 EXECUTIVE SUMMARY

2011 closed out with a strong Q4 for online advertising. U.S. mobile search ad spending is up a huge 269% YoY for Q4, as smart phones and tablets opened new opportunities for growth. The importance of mobile was evident in U.S. retail where mobile search spending accounted for 14% of the overall paid search budgets. The holiday season was big for U.S. search advertising as a whole with total spending up 22% YoY and for retailers up an even higher 26% YoY.

U.S. Mobile search is growing at an enormous rate YoY mobile search ad impressions are
up 317% and spend is up 269%. Among retailers, mobile search ad spend accounted for 14.2% of total paid search budgets, compared to 5.2% last year. This spiked on Black Friday with 24% of retail search ad spend going towards mobile queries.

U.S. Search advertising has its best quarter ever It was a strong holiday season for search
with advertising spend up 22% YoY in Q4. Search advertising spend among retailers was up even higher at 26% YoY. There were also large YoY increases in impressions (42%), clicks (42%) and transactions (67%).

U.S. Search costs (CPCs) declining In total, Q4 CPCs are down -8.6% YoY and -2.3% compared
to last quarter. This trend benefits marketers as clicks cost less while monetizing at the same rate and benefits Google through expanding impression base and higher clickthrough rates pointing to revenue growth for Google. The trend is driven by Google, as Yahoo!/Bing saw a YoY 6.4% increase in CPCs.

Google retains U.S. market share lead In mid-Q4, Yahoo!/Bing held only a 16.6% share of
the search market, but as expected, given its retail consumer focus, it rebounded with a stronger holiday shopping season. However, by the end of Q4, search market share remained largely unchanged from the previous quarter, with Google commanding 81.8% compared to Yahoo!/Bing at 18.2%.

Europe search advertising also on the rise Q4 shows gains for European search advertising
as spend increased 14%, clicks increased 22% and Clickthrough Rate (CTR) increased 19%.

Google continues to grow in display U.S. spending on display was up 9.3% and impressions
were up 31.5%. The growth for Q4 came from Googles DoubleClick Ad Exchange, which saw a 105.5% increase in spend.

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4 PAID SEARCH
U.S. SPEND TRENDS
In a very strong showing, exceeding expectations, U.S. paid search spend grew 22.4% year-over-year in Q4 and 20.4% quarter-over-quarter. December, being the strongest month of the quarter, drove much of this growth. YoY there were also increases in impressions (20%), clicks (34%), and CTR (12%) in Q4.

2011 YoY US Search Spend Growth by Quarter

25% 20% 15% 10% 5% 0% Q1 Q2 Q3 Q4
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50% 40% 30% 20% 10% 0% Oct

Q4 2011 YoY US Search Spend Growth By Month

Change in Spend

Nov Total Spend Retail Spend

Dec

2012 IgnitionOne

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5
U.S. RETAIL SECTOR
For the retail sector, it was an even better quarter. Holiday shopping pushed search spending for the sector up 26% YoY. There was also a large YoY increases in impressions (42%), clicks (42%), transactions (67%), and revenue (43%).

Q4 2011 - YoY Retail Search Growth

80% 70% 60% 50% 40% 30% 20% 10% 0% Impressions Clicks Transactions Revenue
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6
U.S. MOBILE SPEND TRENDS
As mobile and tablet internet usage explodes, search advertising on these platforms is also showing huge growth. Mobile search ad spend is up 269% YoY and impressions are up 317%. Mobile search is becoming a more critical part of the retail experience, with consumers more comfortable shopping on mobile devices and comparison shopping while in stores. Mobile search ad spend accounted for 24% of retailers total paid search budgets on Black Friday, compared to 14.2% of the total during all of Q4. This represents enormous growth compared to Q4 2010, when mobile search spend accounted for only 5.2% of total retail paid search spend.

Q4 2011 - YoY US Mobile Search Growth

300%

200%

100%

0% Impressions Clicks Spend

2012 IgnitionOne

U.S. SEARCH COST-PER-CLICK (CPCS) TRENDS

CPCs dropped -8.6% on average YoY, and were down -2.3% compared to last quarter. However, impressions and clicks increased by 20% and 34%, resulting in a greater total search spend. This overall trend is a win-win for marketers and for Google as individual clicks cost less and continue to monetize at the same rate while for Google expanding impression base and higher clickthrough rates indicates top-line revenue growth. This trend does not continue to Yahoo!/Bing as the CPCs increased in Q4 by 6.4% YoY.

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7
U.S. SEARCH ENGINE MARKET SHARE
Search market share remains stable from the previous quarter with Google holding 81.8% and Yahoo!/Bing at 18.2%. As expected, given its retail consumer focus, Yahoo!/Bing posted a strong holiday shopping season, which allowed it to recover from a dip at mid-point of the quarter, where Yahoo!/Bing held only a 16.6% share of the search market. Search spend growth for Yahoo!/Bing topped Google in the last two months of the year (though off of a smaller base).

Q4 2011 YoY US Search Spend Growth By Engine

40%

Change in Spend

30%

20%

10%

0% Oct Yahoo!/Bing Nov Google

2012 IgnitionOne

Dec

Q4 2011 YoY US Search Spend Growth By Engine

40%

Change in Spend

30%

20%

10%

0% Oct Yahoo!/Bing Nov Google

2012 IgnitionOne

Dec

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8
EUROPE SEARCH SPEND TRENDS
European search advertising also showed a strong quarter, as search spend increased 14%, clicks increased 22%, and CTR increased 19%. This growth largely lags behind the U.S. market, but shows that the deceleration in search spend in Q3 did not carry over into Q4.

40%

Q4 2011 YoY Search Growth Europe and US

Change in Spend

30%

20%

10%

0% Impressions Clicks Europe Spend US

2012 IgnitionOne

CTR

DISPLAY
YEAR-OVER-YEAR CHANGE IN DISPLAY ADVERTISING
Growth in display continues in Q4. Spending increased 9.3% and impressions were up 31.5% YoY. Googles DoubleClick Ad Exchange captured the entire increased budget, and saw a 105.5% increase in spend on their platform.

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9 METHODOLOGY
This is one in a series of reports from IgnitionOne, which have tracked more than 79 billion impressions and more than 1.7 billion clicks on Google and Yahoo!/Bing search networks, Google AdEx, and other display networks from January 1, 2006 through December 19, 2011. Other reports can be found at http://ignitionone.com/en/about/research-white-papers.php

About IgnitionOne IgnitionOne is the worlds first closed

loop Digital Marketing Suite, offering multiple solutions to improve online performance within a single interface. Solutions include ad management and optimization (search, display and Facebook), cross-channel attribution and website optimization. IgnitionOne currently powers more than $30 billion in revenue each year for some of the worlds leading online marketers, including General Motors, Chicos, Ann Taylor, Fiat and advertising agencies such as MRM Worldwide, CyberAgent and more.

For more information, please visit www.ignitionone.com or follow the company on Twitter @IgnitionOne

www.ignitionone.com

1.888.744.6483 | copyright 2012 ignitionone, inc. all rights reserved.