Retail Search Advertisers Saw Return on Ad Spending Rise 25% in the 2010 Holiday Season

Kenshoo, a search marketing and online advertising company, recently released its “Kenshoo 2010 Online Retail Holiday Shopping Report,” which includes a good number of findings. Among them is a 25 percent rise in the return on ad spending during the holiday season from the same period in the previous year.

The report’s first finding is that the online holiday shopping season started earlier and lasted longer than ever before. “In 2010, retailers ramped up their budgets dramatically about one week before Thanksgiving, whereas, in 2009, budgets started to climb significantly only in the last few days before the holiday,” the report notes.

Overall, search advertising budgets were up 52 percent during the holiday season from last year’s holiday season. Online sales revenue driven by paid search was up 69 percent from the same period in 2009, according to Kenshoo.

The company observed a greater responsiveness to paid search advertising by online shoppers in the 2010 holiday season. Each of the key measures of direct response saw significant year-over-year increases.

Search ad impressions rose by just 1 percent year-over-year, but the number of clicks on search ads rose 54 percent. Conversion rates (“the percentage of clicks that resulted in online sales”) rose 21 percent year-over-year.

The report also highlights that while the number of online sales transactions resulting from search advertising increased by 87 percent, the average order value declined by about 10 percent, from $129 to $116.

“Free shipping orders and other merchandising tactics from retailers likely compelled consumers to buy products individually through separate transactions rather than through one larger order,” the report notes. “Additionally, consumers appear to be more comfortable “shopping around” at niche retailers rather than buying everything on their lists from mass retailers.”

Return on ad spend (“total revenue divided by total spend”) in the 2010 holiday season rose 25 percent year-over-year, according to Kenshoo. The cost per click dropped 15 percent. As a result, retailers earned an average of $10.60 in online revenue for every dollar spent on search ads during this period.

While Black Friday has traditionally been viewed as the official “kickoff” day of the holiday shopping season, Thanksgiving Day turned out to be the start of 2010’s holiday shopping season, according to Kenshoo. The company also notes that search query volume for keywords related to “black friday” spiked right after dinner time (6 p.m. EST). “Clearly, consumers have their computers, smart phones and tablets in hand on turkey day and are multitasking between eating, shopping, and watching football.”

Competition in the arena of search advertising spiked on Cyber Monday and the second shopping week in December, when the daily cost per click reached peaks.

The seven implications for advertisers are:

1) Approach online advertising with confidence
2) Plan ahead
3) Build in flexibility
4) Experiment with merchandising
5) Leverage advanced bid algorithms
6) Focus on relevancy
7) Stash some cash

Source:

http://www.kenshoo.com/Kenshoo_2010_Online_Retail_Holiday_Report.pdf