August 25, 2009, 12:00 AM

Reversing course, retailers increased search ad spending in July

Performics says its retailer clients increased their spending on paid search ads by 13% in July, the first increase this year. That could represent a shift toward increased investment in search marketing for the holiday season, the marketing firm says.

After keeping paid search spending in check for the first half of the year, retailers increased their spending on search results page advertising in July for the first time in 2009, says search marketing firm Performics.

The 13% increase in paid search spend in July among Performics’ retailer clients could signal a shift toward great investment in paid search as the holiday season approaches, Performics says.

“In July, we saw a shift in strategy to loosen cost containment efforts and go after transaction volume and market share,” says Nick Beil, CEO of Performics. “A key question for search advertisers for the balance of ‘09 is whether to focus on efficient sales or sales growth. Consumer demand will drive this decision and, as the recent back-to-school numbers show, folks are still watching their dollars carefully.”

While retailers spent cautiously on paid search in the first six months of 2009, they increased their return on investment from that ad spend by 8.8% during that period, largely as a result of a drop in the average cost per click of 5 cents, or 8%, Performics says. In addition, average order value from paid search clicks went up 3.3% during the first half of the year.

Performics also noted in July an increase of more than 40% over June in retailer spending on Bing, Microsoft’s newly launched search engine. This increase in spend came from a 19-cent increase in average cost per click, reflecting increased competition for keywords on the Microsoft search engine.

“With Bing, we saw some increased advertiser demand taking advantage of the engine’s favorable performance metrics, including higher click-through and conversion rates, as well as their Cashback program,” Beil says. “With the Microsoft-Yahoo agreement recently announced, we are eager to see the benefits and effects of this combined scale on our advertisers’ programs.”

Microsoft’s Cashback program allows web retailers to offer money back for purchases made through Cashback. Microsoft and Yahoo announced last month a 10-year deal that would make Bing the search engine on Yahoo sites; that deal is expected to take effect in 2010, if it passes regulatory approval.

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