Q3 Search Trends: Conversion, Clicks & Costs Up

Q3 2006
Search Trends

Advertisers bid aggressively on more expensive keywords in Q3 as pre-holiday positioning began a bit earlier this year, according to the Q3 Search Trend Report, an analysis of the Performics 50 Index released quarterly by Performics, a division of DoubleClick

Q3 2006 Search Trends:

Marketers Continue To See Payoffs from Increased Spending in Search

  • Nearly three-quarters of the Performics 50 marketers have increased their quarterly spending on paid search marketing by over one-third in Q3 over the previous quarter. 

  • The majority of Performics 50 (63%) marketers have also seen an average increase in their paid search revenue of 33%. This is commensurate with the larger budgets marketers are allocating to their search engine marketing activities.

Cost per Keyword Can Be Used to Monitor Overall Campaign Performance During the Holiday Season

Cost per Keyword (CPK) measures how much it costs to own a keyword over the course of a month. Traditionally, the run up to the holidays begins in October for paid search marketing as illustrated by the Cost per Keyword metric. This year, however, initial data suggest the  run began in August.

  • Conversion rates and total clicks have both increased over last quarter; up 4% and 3%, respectively. These increases were driven, in large measure, by higher visibility of critical search terms on search engines. 

  • The average rank of higher-priced keywords (those over $1 per click) has jumped two full positions to an average rank 2.87. Given the intense competition among marketers for these terms, the two point improvement is very significant. 

Aggressive Bidding Pushes Cost per Keyword Up

In August, aggressive bidding on expensive search terms started pushing CPK higher. 

  • CPK was actually less than that of one year ago in July; $30.74 compared to $32.33.

  • However year-over-year numbers for August and September are up to $5.76 and $3.78, respectively.

  • Average CPK at the end of the quarter grew 20% over the end of the previous quarter, rising over the 3 months from $29.23 in June to $34.98 in September. 

  • Projections estimate December 2006 to reach a high of $68, an 18% increase over last year, compared to a 52% year-over-year increase in December of 2005.

High-priced keywords dominate budgets, but ROI continues to improve

In the third quarter of 2006, keywords priced at more than $1 made up more than half of the overall search spend, This is the first time in the history of the Performics 50 that this class of expensive keywords has comprised the majority.

Growth In Spend Is Fairly Widespread

In August, 37 out of the 50 marketers in the Performics 50 Index increased their overall search spend, in July, by an average of 33%; this is an indication of the continued growth of search marketing. However, this year’s growth is somewhat slower than the growth witnessed last year. By October 2005, search spend rose to the level of December 2004 whereas this year, click charges may not overtake last December’s total until November.

Search Engines:

More than 30% of clicks on Google came from keywords that are priced at 10 cents or less per click and still hold the top position. Much of this can be attributed to brand keywords which hold a prohibitive advantage in relevance over the competition, particularly in markets where there are many resellers of that brand.

Source: DoubleClick Performics 50 Search Trend Report Q3 2006

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