Q4 ’08 Revenues Total $6.1 Billion; Growth Continues Despite Difficult Economy

NEW YORK, NY (March 30, 2009) – Internet advertising revenues in the U.S. remain strong, topping $23 billion, according to the 2008 Internet Advertising Revenue Report, released today by the Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers LLP (PwC). Despite a difficult U.S. economy, interactive advertising’s continued growth, albeit at a slower pace, confirms marketers’ increased recognition of the medium’s value in reaching consumers online where they are spending more and more of their time.

• Full-year 2008 revenues totaled a record $23.4 billion, exceeding 2007’s performance, itself the former record of $21.2 billion, by $2.2 billion or 10.6%. By comparison, a variety of sources indicate weakness in overall advertising spending. The Nielsen Company, for example, reported that U.S. advertising for the full year 2008 was down 2.6% compared to the full year 2007.
• Fourth-quarter revenues of $6.1 billion mark the first time the interactive advertising industry achieved, and surpassed, $6 billion in a single quarter. The figures represent a $154 million or 2.6% increase from 2007’s fourth quarter, which had revenues of $5.9 billion.
• This is the fifth consecutive year of record results.

“We are seeing an ongoing secular shift from traditional to online media as marketers recognize that ad dollars invested in interactive media are effective at influencing consumers and delivering measurable results,” said Randall Rothenberg, president and CEO of the IAB. “In this uncertain economy, where marketers know they need to do more with less, interactive advertising provides the tools for them to build deep, engaging relationships with consumers—the experience marketers gain from this will deliver dividends especially after the economy turns around.”

Search remains the main driver of revenue growth according to the report, showing a 19.8% increase over 2007. Digital video, though still a small overall contributor, more than doubled its revenue with an increase to $734 million from $324 million in 2007, demonstrating how both marketers and consumers are embracing this dynamic platform.

As in 2007, retail, financial services, computing and automotive remained the four largest verticals among Internet advertisers in 2008. Consumer packaged goods, an industry vertical historically slow to embrace interactive advertising, notably increased its share of total Internet ad revenues by 60 percent over 2007. The Internet is now the third largest ad-supported medium, marking its increasing significance to marketers and consumers.

“Though some categories in the fourth quarter slowed or even dipped, reflecting the current economic challenges, the overall performance is up, confirming interactive’s ever-growing importance to the successful marketing mix,” said David Silverman, Partner, Assurance, PricewaterhouseCoopers.

The following chart highlights full-year revenue data breakouts; dollar figures are rounded.

Conducted by the New Media Group of PricewaterhouseCoopers LLP, the Internet Advertising Revenue Report was launched in 1996 by the IAB, and aggregates data from all companies that report meaningful online advertising revenues. The results are considered the most accurate measurement of interactive advertising revenues with the data compiled directly from information supplied by companies selling advertising on the Internet. The survey includes data concerning online advertising revenues from Web sites, commercial online services, ad networks, free e-mail providers, and all other companies selling online advertising. First and third quarter revenue reports are estimates, with the actual figures being released along with second and fourth quarter data respectively. PwC does not audit the information and provides no opinion or other form of assurance with respect to the information.

A copy of the full report is available at: http://www.iab.net/AdRevenueReport

SUMMARY: You have a solid SEO strategy. So, is bidding on your branded keywords for these affordable and flexible ads a waste of money?

Branded pay-per-click keywords can offer great ROI, push down competitors’ ads and present some challenges as well. Includes exclusive data from MarketingSherpa’s 2009 Search Marketing Benchmark Guide.
A solid SEO strategy often will get your website to the top of results pages for searches containing your brand name. Some marketers use this ranking to justify not bidding on their brands for paid search ads. After all, you’re already the top organic result for a branded search. Why spend money on ads when searchers can click on your organic link for free?

That sounds logical, but it’s not always the case. Bidding on your brand name can provide value. The ads can push down your competitors’ ads on search results pages. They can be easily changed to highlight a sale. And they can be a really inexpensive way to add value if traffic and revenue rise incrementally.

Discover the benefits that branded terms can bring, the challenges they present, and tips for using them.

Benefits of Branded PPC

Relatively Low Cost

Bidding on branded keywords can be cheap – depending on your brand name and your industry. Look at this exclusive data from the MarketingSherpa 2009 Search Marketing Benchmark Guide.

o Cost Per Click by Keyword Type
-High-performing brand term CPC
Average: $1.83
Median: $1.00

-Low-performing brand term CPC
Average: $0.85
Median: $0.38

One-of-a-kind brands generally benefit from lower CPCs on branded terms.

George Michie, Principal, Search Marketing, The Rimm-Kaufman Group, and his team manage search for 100 to 120 retailers with an average annual paid search spend of $1 million each. Most of his clients pay between 5 cents and 10 cents per click on branded search ads, he says.

Ian Lurie, President, Portent Interactive, says his clients with unique brands pay between 10 cents and 25 cents per click.

“In terms of click fees, the conversion rates are so high that, relatively speaking, it tends to be 1% of what a retailer spends on advertising,” Michie says.

o Generic brand names

Steven Broussard, Director Marketing, Golfballs.com, does business with a common brand name.

“My name is what I do, it’s the foundation of my business,” he says. “I don’t look at the word ‘golf ball’ as a brand term that I have to bid on. I look at ‘golf balls’ no differently than I’d look at ‘drivers’ or any other product line. It just happens to be my name.”

Since ‘golf balls’ is so common, Broussard sees higher CPCs on his “branded” terms. His average CPC is 78 cents for phrases, such as ‘golf balls’ and ‘golfballs’ in broad, phrase, and exact match, he says, and he receives about a three-to-one investment on the terms.

High ROI

People searching your branded terms are more likely to visit your site than if they search for a generic term or a competitor. That occurrence, coupled with the high-quality score and the low CPCs you can get with your branded terms, typically equals great ROI and conversion rates.

“One client is getting 17% conversion on a typo of their brand name, and they’re getting 19% conversion on their brand name in paid search,” Lurie says. “So they’re paying maybe 25 cents a click, and their per-visit value, their per-click value, is $8. It’s a radical return on investment.”

Broussard says that one of his “hugely successful” search campaigns targets keywords around personalized golf balls. It runs during the holidays and around Father’s Day.

“By far, that is my flagship campaign. Even during the non-holiday seasons, it ranks near the top,” he says.

Push Down Competitors’ Ads

Bidding on your branded keywords can combat your competitors’ ads because your ads are more relevant. That gives your ads a higher-quality score, lower CPC and better position. For many brands, the quality scores for branded terms should be so good that their average CPCs are a pittance, compared to their other terms.

Bidding on your own branded terms also can push some of your competitors’ ads down, below the fold, or onto the next results page. You’ll likely snatch a few clicks away from them, and you can get the top ad positions more easily and affordably than they can.

If you have an affiliate program, bidding on your branded keywords will also help you sell products without having to pay fees to those who are likely bidding on the same terms.

More Control Over Messaging and Links

You have more control and can change the messaging in your paid search ads more quickly than in your organic links. This is important for marketers with good copywriting skills. Your paid search ads can emphasize a sale or the number of days left in an offer.

You also have more control over the links in your paid search ads than in your organic results. For example, if you created a microsite for a new product, that site might not be ranking well in organic results. But you can easily link to it from a paid search ad. You cannot simply change the URL of an organic link or redirect users without SEO consequences.

Challenges in Branded Keywords

Agency Fee Structure

If you’ve outsourced your paid search program, you should not have to pay huge agency fees on revenue generated through branded search. You’ve done most of the hard work already.

“Most of the folks who are searching for a retailer by brand name are doing so because they’ve been driven by other advertising, or by word of mouth, or by their own history with the brand.”

“Click fees to the engines are going to be relatively small. It’s the agency fees that you have to watch out for,” Michie says.

o Pay by spend, not by revenue

Paying an agency based on the amount of money it makes for your company makes sense. But it can be the wrong structure for paid search. Branded searches are driven by marketing that has little to do with an agency’s work. Also, branded ads are among the least expensive and best converting.

“The real work of paid search is on the non-brand stuff,” Michie says, adding that he sees about 99% of paid search spending done on non-branded keywords.

Generic Brand Names

Having a generic brand name can be great for driving people who search for a product to your site. If your website is CarMirror.com, and someone searches for ‘car mirror,’ there’s a good chance the searcher will click on your organic link.

However, there are two sides to the search coin for generic brand names. CPCs for generic terms, such as ‘car mirror,’ are likely to be higher than a unique brand name (e.g., ‘AutoZone,’ if it’s your brand name).

This is the position Broussard finds himself in at GolfBalls.com. His CPCs are a little higher for keywords that include ‘golf ball’ than the CPC other brands pay for their branded terms. He handles it by ignoring that his brand is ‘Golf Balls,’ and treats the term like any other keyword.

“If the phrase ‘green grass’ would affect ROI positively, it would be part of my keyword campaign,” he says.

Affiliates, Distributors and the Competition

You will not be the only organization bidding on your brand. Here are three of the usual suspects and ways you can deal with them:

o Affiliates, hands off

Your affiliates sell your products, so they’re likely targeting the same types of keywords. This drives up your CPCs and fees paid to affiliates.

Some marketers avoid this issue by forbidding affiliates to bid on their branded keywords. This prevents affiliates from piggybacking on your other marketing efforts and makes them work harder to find new customers.

“We advise all of our clients to keep everybody from bidding on your brand to the extent possible,” Michie says.

o Play nice with competitors

Competitors will often bid on one another’s branded keywords, sparking a bidding war. Some larger and well-established firms are willing to play nice, Michie says. Sometimes, a simple email or phone call requesting that you not bid on one another’s brands is enough.

o Distributors

You may also compete with your distributors on branded keywords. To determine if you should care, find out if the ROI of a direct order generated through a branded paid search is greater than the ROI of a customer purchasing from a distributor.

o Don’t get carried away

If you notice your CPCs getting higher and higher for branded keywords, you can fight back. But remember that you likely have the highest-quality score.

“I would never say, start doubling and tripling your spend, just to keep that number-one spot for your brand name,” Lurie says. “I just don’t worry about it that much because, eventually, the quality scoring is going to catch up with your competitors, and you’re going to end up back at the number-one spot anyway.”

Tips for Bidding on Branded PPC

Tip #1: Incremental revenue required

Every paid search campaign is original. Only you can determine if bidding on branded keywords is worth the investment.

When are the ads not worth the investment? If your traffic from paid and natural search combined stays roughly the same, or is not justifiably increased by the amount you’re spending on the branded ads, they’re not a good idea.

When is bidding on branded terms worth it? If you observe an incremental increase in traffic from your paid and natural search combined, bid away.

Tip #2: Monitor the competition

Get a look at the landscape first if you’re considering bidding on your branded keywords. Research your branded searches to find out who is advertising on them and where they’re driving traffic. This can help guide your decision.

Also, keep an eye on your branded campaigns once they’re running.

“Never take your hand off the wheel when it comes to bidding on your brand name,” Lurie says. “Don’t just build a campaign, bid on your brand name and then look at it a year later. You need to keep an eye on who else is bidding and why, because that can be a valuable warning about affiliates who aren’t behaving themselves or competitors who are taking a new tactic and trying to win customers away from you.”

Tip #3: Don’t forget misspellings and customer language

People talk about your company in their own language, which can deviate from your language. If you’re bidding on branded keywords, be sure to investigate common misspellings and spacing differences, such as “MarketingSherpa” and “Marketing Sherpa.”

Also, check out the online social networks that your customers use to find the different ways they refer to your brand.

“If huge fans, customers that really like you, start coming up with different phrases and terms around you, you want to know if those phrases or terms cross over from being descriptions to being additional kinds of brands,” Lurie says.

Tip #4: Isolate branded terms in an ad group

Your branded terms will likely have a good-quality score, so Lurie suggests giving them their own ad group. He also suggests having a separate ad group for the terms in broad match, phrase match, and exact match – even though there will be some overlap.

“Generally, you’re going to get a super-high clickthrough rate on exact match, a slightly lower clickthrough rate on phrase match, and a much lower clickthrough rate on broad match…Phrase match is probably going to be your real money ad group. Your exact match will get a super-high clickthrough, but not as many clicks.”

“We usually like to try to group stuff that’s going to have a high-quality CTR together, because then you get a higher-quality score and your bid cost is going to go way, way down.”

What demographic uses UGC and social networking in travel

February 13, 2009

In contrast, when it comes to social networking sites, like Facebook and MySpace, there is a definite discrepancy in the age of regular users.  EyeforTravel found that 70% of the 18-34 age group have used social networking sites in the last 30 days, compared to only with 35% of 35-49 year olds and 12% of 50-64 year olds. 

So why do the over 35’s feel more comfortable reading user reviews over participating social networks?  Firstly, travel-specific user-generated content sites, like TripAdvisor, are easy to use and very accessible.  The search functions are clear and quickly give people access to vast amounts of specific, relevant content.  This is not the case for social networks. 

Secondly, travel-specific UGC sites rarely require people to log-on or leave personal details, something which older people may see as an obstacle.  Reading user-generated content is more passive and less personally intrusive compared to actively participating in online social networks. 

Lastly, compared to social networks, the benefits of UGC sites are obvious.  For the over 35 age group, who are reading online hotel reviews, they can immediately see the opportunity to save money, avoid making bad decisions and get demographically suitable advice.  The benefits of social networking sites on the other hand, are not so clear.  The over 35 year age group tends to have more money to spend so it makes sense for them read customer feedback before making large purchases, such as travel.

On the other hand, there is a distinct portion of over 35’s who are perfectly poised to take advantage of the social networking phenomena; The Business Traveler.  This group tends to have greater connectivity and has access to state-of-art handsets and laptops.  Plus, they tend to spend more of their time online.  They are also more likely to accept impartial advice from fellow business travelers with the same requirements.  After all, you don’t need to be someone’s “friend” to get advice on traversing Chicago O’Hare on a Friday night. 

There is great potential for the business traveler to use social media to increase efficiency, access business-specific information, such as suitable restaurants for clients, and get updates on delays and adverse weather conditions.  Social networking sites TripIt and LinkedIn have recently made moves to exploit this opportunity.  The TripIt application on LinkedIn allows users to notify potential clients of upcoming trips. 

“TripIt was selected by LinkedIn as their travel application precisely because an older more professional audience is using social networking tools like LinkedIn and TripIt. The focus of these second-generation tools is on providing social utility and mobile convenience that provide information when and where people need it,” commented Gregg Brockway, TripIt Co-founder. Gregg Brockway and LinkedIn’s Lucian Beebe will be speaking about how business travelers can productively use social travel services at work at EyeforTravel’s Social Media Strategies for Travel Conference on March 10-11 in San Francisco.  They will explain which types of content, advertising and applications appeal to, and directly benefit, the business traveler.