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Tech marketers ramp up paid-search spending

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High-tech and consumer electronics marketers are spending significantly more on paid search than they did a year ago, according to a new report, “Paid Search Spending Enters 2011 With a Bang,” released earlier this month by searchoptimization company Covario Inc. In addition, for the first time in the report's four-year history, marketers spent more on paid search in the first quarter than they did in the fourth quarter of the previous year.

Study data came from an analysis of Covario customers' spending, approximately $400 million in annual spending on paid-search programs. Customers are global advertisers and include high-tech companies such as Abobe Systems, IBM Corp., Intel Corp., Lenovo and NetApp.

Spending during the first quarter of this year was up 6.4% over the previous quarter, and up 26% year-over-year. The largest gains came from spending in Asia-Pacific and Europe/Middle East/Africa, which were up nearly 50% year-over-year, according to the report. U.S. spending was up a mere 4% between the fourth quarter of last year and the first quarter of this year, but the country still commands 60% of all customer spending. The biggest news, however, was that cost-per-click is inching up again, for the first time since 2007.

Some of the tremendous gains can be attributed to the end of the recession, said Craig Macdonald, Covario's CMO and senior VP-products. In 2009, advertisers cut back and “bought their brand,” focusing on cheaper, company-specific buys. Now, those same advertisers are jumping back into the mix purchasing larger category words and phrases, such as “cloud computing” and “laptops.”

Google Instant, the paid-search enhancement that debuted in September also contributed to the increase in spending, Macdonald said. “What it does, mechanically, is during the first three seconds of the search, Google pushes paid-search results, which pushes the organic listings off the page,” he said. “Before Google Instant, 18% of the clicks [generated from searches was] going to paid and 82% going to organic. After Google Instant, the ratio is 22% to 78%. To get those [organic] clicks back, I have to spend more money and be part of Google Instant.”

Finally, two changes in search strategy are adding to the sheer volume of search buys. “Marketers are buying at the top of the [sales] funnel and at the bottom,” Macdonald said. “They are getting much, much better at getting people during the research process as well as when they are ready to make a purchase.” They are also getting better at localizing content overseas—not just buying the same inventory that they do in the States, but working with local agencies to find which words and phrases work best overseas.

Corey Carrillo, senior global search manager at Intel, said he was “encouraged” by the findings of the report since it gives him data that he can bring back to his own management team during budget discussions. “Now I can say not only are we investing, but everyone else is, too,” said Carrillo, who added his company's spendinhg is up even more than the 26% Covario found. “I ran the numbers this morning and 26% is actually way low,” he said. “We increased 59% to 60%.”

Indeed, Intel's experience mirrors what the Covario study found. The company is seeing big growth in Turkey, the Middle East, Indonesia and Mexico, Carrillo said. “We started last year with 20 markets and ended it with 26,” he said. “And in China we're seeing that market grow, and grow and grow at unprecedented rates.”

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