October 17, 2011, 3:59 PM

Paid search spending increases 7% in Q3

But retailers are experiencing lower conversion rates and average order values.

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U.S. spending on paid search ads increased 7% in the third quarter compared with the same period a year ago, according to IgnitionOne, the digital marketing company formerly known as SearchIgnite. Spending increased 4% quarter to quarter.

Paid search spending increased even as retailers realized a smaller return on investment for search marketing. The report blames consumer cutbacks in spending for a 15.7% decline in conversion rates and a 5.1% decline in average order values in the third quarter.

In Europe, spending on paid search ads increased 20% in the third quarter compared with the same period in 2010, the report says.

In the United States, 81.6% of paid search spending went to Google Inc., up slightly from the same period last year. Spending on Yahoo/Bing dropped slightly to 18.4% for the third quarter of 2011. “As the Yahoo/Bing alliance approaches its one-year anniversary, it shows little impact on the search engine landscape,” the report says. Yahoo Inc. scrapped its own search engine last year and now uses Microsoft Corp.’s Bing to provide search results on Yahoo sites.

IgnitionOne did not release actual spending figures.

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