Tech Giants Increase Paid Search Spending Despite Weak Economy According to Covario's Q3 Analysis : Third Installment in Covari

) October 15, 2008 --
Covario, Inc., the leader in interactive marketing analytics, today
announced the release of the Q3 2008 edition of its Global Search Spend
Analysis series. Despite the faltering economy, Covario has observed a
spike in Year-on-Year (Y-o-Y) paid search spending growth to 51 percent
from 43 percent growth rate in the previous quarterly analysis. This
spike resulted from a number of factors, including one-time Olympics and
seasonal “back to school”
advertising campaigns. This analysis focuses on global paid search
spending allocation patterns for 128 brands at 12 major U.S.-based
technology organizations such as Intel and Lenovo between Q1 2007 (Q1
'07) to Q3 2008 (Q3 '08). The combined paid search advertising spend of
the analyzed brands represents more than $225 million.

We are cautiously optimistic about paid search spend in 2009. We are recommending to clients that growth in paid search advertising should be in line with market share objectives

Our clients have been very successful in appropriately growing search budgets to date given the high ROI and clear accountability of paid search. However, we do expect paid search spending growth to slow over the next two quarters as a result of the severe economic conditions.

Protecting Your Online Marketing Budgets in Today's Challenging Economic Climate

“We are cautiously optimistic about paid
search spend in 2009. We are recommending to clients that growth in paid
search advertising should be in line with market share objectives,”
said Craig Macdonald, VP of marketing and product management at Covario. “Our
clients have been very successful in appropriately growing search
budgets to date given the high ROI and clear accountability of paid
search. However, we do expect paid search spending growth to slow over
the next two quarters as a result of the severe economic conditions.”

Trends by region

  • In North America (NA), Covario has seen Y-o-Y growth rates slow from
    83 percent in Q1 2007 to 32 percent in Q3 '08. This region has
    been hardest hit by financial issues and this is reflected in the
    data. Also, in Q3 '08, NA accounted for nearly 68.8 percent of all
    spending allocations on paid search, up from 64.6 percent in Q2 2008,
    largely a result of annual “back to school”
    programs that have driven more spending to the region.
  • Spending growth rates in Europe, Middle East and Africa (EMEA), have
    been increasing from -4 percent between Q1'07 and Q1'08, to 204
    percent increase in spending from Q3'07 to Q3'08.
    We believe 10-15% of this growth is currency-related, as the US dollar
    weakened throughout the year. Despite the growth in spending in EMEA,
    the overall allocation is still less in EMEA than the previous
    quarter. In fact, EMEA spending allocation contracted from 27.5
    percent of spend in Q2 '08 to 19.9 percent in Q3 '08, consistent with
    the pattern seen in 2007.
  • In Asia Pacific (APAC), paid search spending has been growing at 59
    percent rates from Q3'07 to Q3'08 largely due to additional
    expenditures by advertisers around the Olympics. APAC spending
    represented 9.9 percent of all spending, up from 7.2 percent in Q2 '08.

Trends by search engine

  • In Q2 '08, there was significant interest in the fact that Covario
    observed advertisers had shifted part of their budgets for paid search
    away from Google to Yahoo. Yahoo has solidified its Q2 gains in Q3,
    though the trend has flattened out. The percentage of spending in Q3
    '08 executed on Yahoo in NA was 13.5 percent, down only slightly from
    14.3 percent in Q2'08. As for Google, the Q3'08 spending allocation in
    NA was 82.9 percent, up slightly from 81.2 percent from the previous
    quarter.
  • There has been an increase in advertiser activity with Ask.com in NA.
    80 percent of the advertisers analyzed are doing some level of
    advertising on the engine, up from less than 40 percent during the
    first half of 2008 due to system improvements. Currently, the amount
    of overall spending on Ask.com is less than one percent.

Trends in keyword inflation (by search engine)

  • Covario continues to see reductions in the average Cost-Per-Click
    (CPC) that advertiser clients are paying on the search engines. This
    is largely the result of improved optimization on the part of these
    large advertisers due to the use of Covario™
    Paid Search Insight, which has enabled them to gain global visibility
    into their paid search programs and activities. In Q3, the average CPC
    for Covario’s advertiser clients was $1.09,
    down from $1.19 average in 2007. Baidu continues to have the lowest
    CPCs at $0.18 on average, and MSN has the highest CPC at $1.50.
  • Covario also added an analysis of the Click Through Rates (CTRs) by
    engine that the advertisers in the study are experiencing, and the
    general pattern is that CTRs are down in 2008 from 2007. Specifically,
    CTRs for Google were 1.9 percent in Q3 '08, down slightly from 2.4
    percent in 2007. Yahoo has the lowest CTRs for advertisers at 1.0
    percent and MSN is the highest at 2.2 percent (with the exception of
    Yandex, which is 3.0 percent but represents a very small percentage of
    global spending).

Additional findings and graphical representations of these trends are
available in Covario’s Global Search Spend
Analysis Vol. 3 (Q1 2007 to Q3 2008). The analysis results will also be
presented as part of a Covario webinar, titled “Protecting
Your Online Marketing Budgets in Today's Challenging Economic Climate,”
to be presented today, October 15, 2008 at 1 p.m. EDT / 10
a.m. PDT. In addition to a discussion of the Q3 findings by Macdonald,
the hour-long session will also include insights from Mark Sholz,
interactive manager of Imaging & Printing Group worldwide at
Hewlett-Packard on how HP is reacting to market challenges and driving
search in 2009, as well as insights from Ross Sandler, senior Internet
analyst at RBC Capital Markets, on 2008 search trends and projections
for 2009. To register, please use the following link: www.covario.com/podcasts_webinars/101508_protecting_budgets.shtml.

Covario’s Global Search Spend Analysis series
leverage the advanced analytics of Covario Paid Search Insight, which
gathers and analyzes paid search advertising data for more than two
dozen of the world’s largest advertisers to
determine global spending trends and performance. To download a copy of
this or previous analyses, please visit www.covario.com.

About Covario, Inc.

Covario, Inc. is the leader in Interactive Marketing Analytics (IMA)
software. The Covario portfolio provides global organizations with
robust interactive and search marketing analytics solutions for display
advertising, paid search advertising and organic search engine
optimization across the enterprise and throughout the channel. Covario
enables complex and distributed organizations to control brand
integrity, ensure budget transparency and deliver quantifiable results
across business units, distribution channels and languages.
Headquartered in San Diego, Covario’s growing
customer list include some of the world’s
best known brands in high tech manufacturing, financial services,
electronics, media and publishing and consumer packaged goods. For more
information on Covario, call 858.397.1500 or visit http://www.covario.com.

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