January 13, 2011, 1:02 PM

Paid search pays off over the holidays

Budgets were up 52% during November and December, and related sales rose 69%.

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E-retailers spent more on paid search marketing this holiday season and got more sales in return. Search advertising budgets were up 52% during the holiday season from a year ago and online sales attributable to paid search were up 69%, according to a report.

The increased paid search advertising spending level, tracked from early November through Dec. 31, also helped lead to higher year-over-year click-through rates and conversion rates, according to Kenshoo Inc., a vendor of software that helps manage paid search and online marketing programs. The company’s 2010 Online Retail Holiday Shopping Report says the click-through rate was up 54% and conversions were up 21%. Kenshoo takes the measures from an index it maintains that gauges its clients’ performance.

The positive results means online marketers saw a good return on their paid search investments this holiday. Kenshoo says ROI was up 25% from a year ago and that marketers got a return of $10.60 for every $1 spent on paid search.

Similarly, SearchIgnite, a paid search optimization company, says that its retail clients’ search spending increased 36.6% during the fourth quarter. Click-through rates were up 17.9% and conversions were up 22.5% during the three-month tracking period.

“It was an extremely strong quarter across the board,” says Roger Barnette, CEO of SearchIgnite. “In the fourth quarter, spend was up, clicks and click-through rates were all up. It shows marketers and consumers are interacting more and engaging more.”

Unsurprisingly, Google, the world’s largest search engine, was the premier venue for paid search spending during Q4. Google increased its market share from Q3 to Q4, taking share from the now-combined Yahoo and Bing search engines. Google captured 82.6% of the paid search ad market versus 17.4% for Yahoo and Bing during Q4, according to SearchIgnite. During Q3 the comparable split was 80.2% and 19.8%. Yahoo and Bing finished combining their search operations in October, which may have had a direct effect on online marketers fourth quarter investment mix, Barnette says.

“Some of that increase might have to do with that in the face of uncertainty of how things were going to work, marketers just set their Q4 budgets and went with it,” he says.

SearchIgnite also says paid search spending for 2010 as a whole was up 18.5%. Barnette says he expects to see similar growth in paid search spending during 2011.

“People are spending more money and getting a higher return,” he says.

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