October 12, 2012, 1:06 PM

Paid search spending rises 33% globally, but Google’s growth slows

However, the search engine still takes in 87% of all paid search spending, reports say.

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Worldwide paid search spending increased 33% in the third quarter this year compared to the same period last year, with the strongest growth in the Americas—led by the U.S. and Canada—at 39% year over year, according to an analysis of client data by search marketing agency Covario Inc. A similar report  released yesterday by Kenshoo showed its clients spent 24% more in the third quarter.

While Covario also reports that 87% of all paid search is spent on search engine Google Inc., another study by digital marketing agency Rimm-Kaufmann Group (RKG) shows a slowing of its clients’ growth in spending on Google’s search ads in the third quarter. Advertisers increased spending on Google 18% in the third quarter compared with Q3 2011, down from 34% more in the second quarter this year, RKG says, despite the search engine’s push to monetize its previously free Product Listing Ads on Google Shopping

The slowing may be influenced by the lower prices for now of ads that appear in the new Google Shopping area of Google search results pages, RKG says. The ads in that area, which Google calls Product Listing Ads, cost 15% less per click than comparable ads in search, the agency reports. “Advertisers are also seeing considerably higher return on investment, largely due to the immaturity of the Product Listing Ads marketplace, which drove 20% of Google clicks,” says Mark Ballard, senior research analyst at RKG.

Across all search engines, click-through rates increased by 4%, but cost-per-click went up 12% in the third quarter compared to the second quarter, says Alan Funk, global performance media strategist at Covario. That suggests the paid search spending increases are the result of keyword pricing and better-performing ads, more than a growing volume of consumer clicks on ads, he says.

Covario reports that paid search spending on Yahoo Inc., which uses Microsoft Corp.’s Bing search engine and paid search service,  increased 25% in the third quarter year over year and 5% from the second quarter. Bing, which Microsoft also uses as the search engine on its own web sites, accounted for 7% of global paid search spending in the third quarter, Covario says. Additionally, the report says paid search spending on top Chinese search engine Baidu increased 55% year over year, but decreased 20% from the second to third quarter. In the third quarter, Baidu accounted for 4.5% of global pay-per-click spending and 26% of all the planet’s clicks, Funk says. Besides Google, Bing and Baidu, other search networks accounted for the remaining 1.5% of paid search spending.

Meanwhile, paid search spending for mobile devices grew 90% year over year in the third quarter, and 17% from the second to third quarter, Covario says. And tablets became the priciest device to advertise on for the first time, Funk adds, with the cost per click on those devices up one percentage point over desktop prices; cost per click on smartphones is about 63% of that on desktops, he says.

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