With search engines playing a major role in present times, it has become quite important for the advertiser to understand the market trends and know where to head for a better return on their investment. Search Engine Marketing (SEM), the method of paid advertising to enhance the visibility of individual websites in search results, is all set to align with the increasing global advertising spend of total US$545 billion in 2015. While Google Inc. (NASDAQ:GOOGL) has been leveraging on this trend for a long time now, the new blue-eyed boy on the block is Yahoo!, whose partnership with Microsoft for its Yahoo! Bing search has garnered more interest among investors of late.
Search Engine Marketing (SEM) Trends in 2015
According to the recent Adobe Digital Index report, there has been a 6% increase in the worldwide SEM expenditure in Q2 2015. In comparison to the spending in Q2 2014, Asia-Pacific (APAC) and North America showed an increase by 8% while Europe, Middle East, and Africa (EMEA) had a 4% increase. This trend is fairly in line with that predicted by the early January report by MarketingProfs. As mentioned, Fast-track Asia (comprising of China, India, Indonesia, Malaysia, Pakistan, Philippines, Taiwan, Thailand, and Vietnam) has been on the rise since 2014 and continues to do so in Q2 2015 as well. As compared to the trends in Q1 2015, the increase in Q2 2015 has been marginal with the exception of APAC, where the huge increase seen during Q1 2015 is settling down this quarter.
Yahoo! Bing on the rise
Yahoo! Bing performed quite well with a 16% increase in SEM spending YOY, while Google had only 6% increase. This may be attributed to the Microsoft Corporation (NASDAQ:MSFT) and Yahoo! Inc. (NASDAQ:YHOO) alliance in the internet search domain. The regional trends for Yahoo! Bing shows a maximum increase of 24% in North America followed by 15% in EMEA while APAC remained flat. APAC showed a maximum increase in Google ad spending at 9% followed by North America and EMEA at 7% and 5% increase respectively.
The CPC decline on Google ads as compared to an increase in CPC on Yahoo ads might also explain this market behavior. In Q2 2015 Yahoo! Bing had acquired 33% of the American market share while Google had 61% share. A 4% decrease YOY was recorded for Google. The impact of Yahoo! Bing is clearly evident from the way it has been cutting into Google’s share of the market. However, Google ruled the global market with 65% share in Q2 2015 followed by Yahoo! Bing at 16%. It has now been four consecutive quarters with Yahoo! Bing registering a growth in SEM expenditure for the American market.
The data for Q2 2015 indicates that the advertisers are getting a greater value for their investment. The rise in Click Through Rate (CTR) by 23% YOY illustrates the fact that optimization in SEM has been well exploited. On the other hand, the Cost Per Click (CPC) has gone down by 10% YOY. The combination of these two factors clearly brings forward the case of display ads which are increasingly becoming a top priority in the digital ad space. On comparing CTR by search engine, Google was leading in Q2 2015 with an 11% increase YOY while Yahoo! Bing went down as compared to last quarter to settle at a 2% YOY increase. The CPC for Google and Yahoo! Bing ads showed quite a similar trend and recorded close enough increase of 7% and 4% YOY increase. Surprisingly enough, the desktops had the highest increase in YOY CTR for Q2 2015 as compared to smartphones. Desktops recorded a 7% increase while smartphones stayed flat. Also, the highest increase in CPC was recorded for smartphones at 16% YOY, while that of desktops was 6%. Globally, smartphone CPC was the lowest at only 79% of desktop CPC.
Mobilegeddon: initial effects
Zenith has already projected mobile advertising to grow by an average of 38% a year till 2017. This only means the increase in adoption of smartphones itself would influence the search habits of consumers worldwide pretty drastically. With Mozilla favoring Yahoo as its default search, the economies of scale have changed. Mozilla itself has been enjoying a share of 10.72% of all browser users (as of June 2015). And if the Mozilla OS kicks strong, Yahoo could be piggybacking to become a evident competitor to Chrome on Android which owns over 50% of the market share today.
An announcement from Google earlier this year put a lot of emphasis on website optimization for the mobile platform. As per the statement, Google intended to incorporate the mobile friendliness of a website as an important parameter in web ranking. As a result of the mobilegeddon, the mobile searches worldwide were expected to experience a great turnaround. The results as shown by the Q2 2015 report indicate quite a minimal effect of 10% decrease in organic traffic for sites with low mobile engagement. The trend of mobile CTR and CPC was in contrast to that of the global scenario with YOY increase in CPC (16%) and decrease in CTR (9%). The revenue per visitor (RPV) for a mobile page view is lagging behind that of a desktop page view.
The second quarter had been quite interesting with several twists being observed. An increase in global SEM investment led to a proportional increase in CTR. However, an increase in CPC is bound to pose some trouble. Google was successful in registering a growth in its market size, but the pace of Yahoo! Bing is alarming enough to cause some jitters in the coming quarters as well. The mobilegeddon was taken well, but its apocalyptic impact is yet to be observed. Mobile benchmarking needs to be modified in order to derive a better estimate of RPV that is independent of historical desktop results.
Needless to say, Yahoo! Bing might need to move more boulders and please more users to grow from the position it is today. Considering Google has a lot of applications like conversion calculators integrated into its SERPs intelligently, the way ahead for Yahoo is to not just become smarter, but also forging some more default inclusions into smartphones, we feel.