September 29, 2009, 12:00 AM

Paid search activity takes a sudden turn for the better, NetElixir says

In July and August shoppers were clicking on paid search ads more than they had from January through June, the search engine marketing firm says. As a result, it has revised its year-over-year holiday season click-through rate forecast to a 7-10% jump.

Beginning in July, online shoppers suddenly started clicking on paid search ads much more than they had from January through June, according to new research from search engine marketing firm NetElixir Inc. As a result, the firm is revising its holiday search forecast it issued in June, replacing it with new numbers that bode well for retailers.

In June NetElixir had predicted a 6-8% year-over-year increase in click-through rates for the holiday season; it revised its prediction today to a jump of 7-10%. NetElixir bases its predictions on regular monitoring of 32 retailer clients in seven product categories.

The click-through rate on paid search ads run by these 32 retailers increased 6% year over year in the first quarter of 2009. It grew only 2% in the second quarter. In July and August, it surprised NetElixir and its retailer clients by jumping 8%. This changes the search landscape today, and likely will translate into a similar jump during the crucial November and December holiday shopping season, says Udayan Bose, founder and CEO of NetElixir.

“Click-through rates have risen considerably in July and August, and this is a result of searchers clicking more prior to a conversion and the number of ads being clicked per search query having increased,” Bose explains. “People are clicking more advertiser listings on search engines-gathering information, comparing offers and then making a purchase. This will continue during the holiday season: more searches per conversion and a longer search cycle. The challenge for marketers is identifying the right products to advertise and creating efficient keyword funnels.”

However, an increase in click-through will come at a price: NetElixir predicts the cost-per-click during the 2009 holiday shopping season will rise 5-8%.

The first quarter of 2009 saw a decline in cost per click, which started rising again in the third week of May, the firm observed. The firm believes that Google’s decision to let any advertiser bid on trademarked terms, which went into effect in June, was one of the reasons behind the price jump. Because trademarked keywords and brand-name terms often account for a large percentage of clicks-35-65% for large brand retailers-the increase in the number of bidders on these keywords drove up the cost per click, Bose says.

To combat rising cost per click, NetElixir offers three recommendations. First, a retailer should keep close tabs on who is bidding on its trademark terms; a retailer can tell its affiliates not to bid on trademark terms. Second, test keyword mix regularly; separate the best-performing keywords from those with questionable returns on investment. And third, use day-parting, adjusting bids up or down according to the times of day deemed most or least advantageous.

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