GLOBAL SEARCH ADVERTISING TRENDS

Updated through Q1 2013

Published: April 23, 2013

2013, Kenshoo, Inc. | CO-04-1005-EN

Table of Contents
Overview..............................................................................................................................................................................3 Global Paid Search Ad Spend and Campaign Metrics................................................................................................4
Global Paid Search Budgets Continue to Show Year-over-Year Growth ...........................................................................4 Average Cost-per-Click Down Slightly but Still Near 2012 Levels.......................................................................................5 Significant Growth Year-over-Year in Both Clicks and Click-through-Rate ........................................................................6

Regional Search Ad Spend xand Cost-per-Click..........................................................................................................8

U.S. Paid Search Budgets up Year-over-Year with E.U. Relatively Flat and U.K. Down...................................................8

U.S. Mobile Device Breakdown.......................................................................................................................................11

Mobile Devices Account for 19% of All U.S. Paid Search Clicks but Just 14% of Spend ................................................11 U.S. Mobile Device CPCs Provide Price Discounts Relative to Computers but Tablets are Closing the Gap .........12

U.K. Mobile Device Breakdown.......................................................................................................................................13

Mobile Devices Account for 28% of U.K. Paid Search Clicks ...............................................................................................13 U.K. Tablet CPCs Comparable to Computer .............................................................................................................................14

Summary Infographic.........................................................................................................................................................15 Methodology.......................................................................................................................................................................16 About Kenshoo...................................................................................................................................................................17 Contact.................................................................................................................................................................................17

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Overview
Kenshoo Global Search Advertising Trends is a quarterly report reflecting aggregate data from campaigns managed through Kenshoo. Approximately $3 billion dollars in annual online advertising budgets are managed through Kenshoo by the most sophisticated advertisers and agencies in the world. Kenshoo was recently named the sole Leader in bid management software after an evaluation by independent firm, Forrester Research, Inc. Kenshoo clients include nearly half of the Fortune 50 companies and all 10 top global ad agency networks. This report focuses on paid search trends segmented by the following categories: Key Campaign Metrics Geographic Regions Mobile Devices

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Global Paid Search Ad Spend and Campaign Metrics

Global Paid Search Budgets Continue to Show Year-over-Year Growth
Q1 had a predictable quarter-over-quarter (QoQ) drop in global paid search ad spend as Q4 generates a seasonal budget surge. The 16% QoQ reduction is similar to the 14% drop we saw in Q1 of 2012. Year-over-year (YoY) Q1 ad spend was up 15% showing 2013 is off to a good start after a strong finish in 2012. Overall, last year, search ad budgets increased 32% in 2012 versus 2011.

Global Search Advertising Spend Quarter-over-Quarter (QoQ) Delta

Q3 2011 25%

Q4 2011 35%

Q1 2012 -14%

Q2 2012 5%

Q3 2012 5%

Q4 2012 25%

Q1 2013 -16%

Source: Kenshoo Search Advertising Trends, Kenshoo, Inc. 2013

Global Search Advertising Spend Year-over-Year (YoY) Delta

Q2 2012 52%

Q3 2012 28%

Q4 2012 18%

Q1 2013 15%

Source: Kenshoo Search Advertising Trends, Kenshoo, Inc. 2013

Quarterly Global Search Advertising Spend Volume

1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 1.10 1.00 1.05 1.38 1.15

Source: Kenshoo Global Search Advertising Trends, Kenshoo, Inc. 2013

Note: Volume metrics have been normalized to a factor of 1 based on the initial quarter of data. Data points from subsequent quarters are based on a multiplier from the rst quarter for example, 1.15 means that volume is 15% greater than volume in initial quarter measured (Q1 2012).

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Average Cost-per-Click Down Slightly but Still Near 2012 Levels

At $0.39, the global average paid search cost-per-click (CPC) in Q1 was the lowest it has been in five quarters. However, the CPC is on par with the $0.41 CPC we saw in Q1 of 2012.

Quarterly Global Search Advertising Cost-per-click Rates

$0.48 $0.46 $0.46 $0.44 $0.42 $0.40 $0.38 $0.36 $0.34 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 $0.41 $0.39 $0.44 $0.45

Source: Kenshoo Global Search Advertising Trends, Kenshoo, Inc. 2013

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Significant Growth Year-over-Year in Both Clicks and Click-through-Rate

Q1 total click volume was up 21% over the same period in 2012. Click-through-rate (CTR) also improved from 1.04% in Q1 2012 to 1.68% in Q1 2013 a dramatic YoY increase of 62%. Even though spend, clicks, and CTR have been trending upwards over the last five quarters, total impression volume has been declining steadily during the same period and was 26% lower YoY in Q1.

Quarterly Global Search Advertising Click Volume

1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 1.00 0.97 0.98 1.25 1.21

Source: Kenshoo Global Search Advertising Trends, Kenshoo, Inc. 2013

Note: Volume metrics have been normalized to a factor of 1 based on the initial quarter of data. Data points from subsequent quarters are based on a multiplier from the rst quarter for example, 1.21 means that volume is 21% greater than volume in initial quarter measured (Q1 2012).

Quarterly Global Search Advertising Click-through Rates

2.00% 1.63% 1.50% 1.04% 1.00% 1.12% 1.31% 1.68%

0.50%

0.00% Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013

Source: Kenshoo Global Search Advertising Trends, Kenshoo, Inc. 2013

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Quarterly Global Search Advertising Impression Volume

1.20 1.00 0.80 0.60 0.40 0.20 0.00 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 1.00

0.90 0.77 0.80 0.74

Source: Kenshoo Global Search Advertising Trends, Kenshoo, Inc. 2013

Note: Volume metrics have been normalized to a factor of 1 based on the initial quarter of data. Data points from subsequent quarters are based on a multiplier from the rst quarter for example, 0.74 means that volume is 26% less than volume in initial quarter measured (Q1 2012).

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Regional Search Ad Spend and Cost-per-Click

U.S. Paid Search Budgets up Year-over-Year with E.U. Relatively Flat and U.K. Down
In the U.S. and the U.K., ad spend was predictably down QoQ following the strong Q4 shopping season. However, whereas U.S. Q1 spend followed the global trend of YoY growth (24%), ad spend in the U.K. dropped by 11% in Q1 compared to the same quarter in 2012. In the E.U., Q1 budgets actually rose by 4% QoQ but were down 4% YoY. Average CPC in the U.S. and U.K. dipped slightly in Q1 and the U.K. remained higher than the U.S. at $0.44 and $0.38 USD respectively. CPC for continental Europe has been relatively flat for the last five quarters and stood at $0.36 in Q1.

Quarterly U.S. Search Advertising Spend Volume

1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 1.07 1.00 1.17 1.51 1.24

Source: Kenshoo Global Search Advertising Trends, Kenshoo, Inc. 2013

Note: Volume metrics have been normalized to a factor of 1 based on the initial quarter of data. Data points from subsequent quarters are based on a multiplier from the rst quarter for example, 1.24 means that volume is 24% greater than volume in initial quarter measured (Q1 2012).

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Quarterly U.K. Search Advertising Spend Volume

1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 1.18 1.00 0.93 0.97 0.89

Source: Kenshoo Global Search Advertising Trends, Kenshoo, Inc. 2013

Note: Volume metrics have been normalized to a factor of 1 based on the initial quarter of data. Data points from subsequent quarters are based on a multiplier from the rst quarter for example, 0.89 means that volume is 11% less than volume in initial quarter measured (Q1 2012).

Quarterly E.U. Search Advertising Spend Volume

1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 1.00 1.02 0.96 0.92 0.96

Source: Kenshoo Global Search Advertising Trends, Kenshoo, Inc. 2013

Notes: U.K. excluded from EU data set. Volume metrics have been normalized to a factor of 1 based on the initial quarter of data. Data points from subsequent quarters are based on a multiplier from the rst quarter for example, 0.96 means that volume is 4% less than volume in initial quarter measured (Q1 2012).

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Quarterly Regional Average Cost-per-click (USD)

$0.50 $0.45 $0.40 $0.38 $0.35 $0.30 $0.25 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 $0.36 U.S. U.K. E.U.

$0.44

Source: Kenshoo Global Search Advertising Trends, Kenshoo, Inc. 2013

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U.S. Mobile Device Breakdown

Mobile Devices Account for 19% of All U.S. Paid Search Clicks but Just 14% of Spend
Mobile devices continue to play a prominent role in U.S. consumer search and SEM. While the computer and tablet click-to-spend ratio is fairly even, phone spend lags significantly behind phone click volume with 8.7% of total paid search clicks but only accounting for 5% of total spend.

Q1 2013 U.S. Search Advertising Spend and Clicks by Device

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Clicks Ad Spend 8.7% 10.1% 5.0% 8.9% Computer Phone Tablet 86.1% 81.2%

Source: Kenshoo Global Search Advertising Trends, Kenshoo, Inc. 2013

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U.S. Mobile Device CPCs Provide Price Discounts Relative to Computers but Tablets are Closing the Gap
Mobile device CPCs in the U.S. are discounted compared to computers with phone clicks being 46% less expensive and tablets being 18% lower than computers. At $0.46 per click, tablets are just $0.10 behind computer CPCs and 53% more expensive than phone clicks.

Q1 2013 U.S. Search Advertising Cost-per-Click by Device (USD)

$0.60 $0.50 $0.40 $0.30 $0.20 $0.10 $Computer Phone
Source: Kenshoo Global Search Advertising Trends, Kenshoo, Inc. 2013

$0.56 $0.46

$0.30

CPC

Tablet

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U.K. Mobile Device Breakdown

Mobile Devices Account for 28% of U.K. Paid Search Clicks
When it comes to mobile search in the U.K., phones and tablets represent 28% of all paid clicks and roughly 25% of ad spend. While computer and tablet spend share is very aligned with their share of clicks, phones lag behind with 11.5% of total clicks, yet only 7.8% of total spend.

Q1 2013 U.K. Search Advertising Spend and Clicks by Device

90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Clicks Ad Spend 11.5% 16.3% 7.8% 16.7% Computer Phone Tablet 72.3% 75.5%

Source: Kenshoo Global Search Advertising Trends, Kenshoo, Inc. 2013

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U.K. Tablet CPCs Comparable to Computer

Tablet CPCs in the U.K. are now equal to computer CPC prices at 0.30. Phones CPCs lag behind both computers and tablets at 0.20, which is 33% lower than the bigger screens.

Q1 2013 U.K. Search Advertising Cost-per-Click by Device (GBP)

0.35 0.30 0.25 0.20 0.15 0.10 0.05 0.00 Computer Phone
Source: Kenshoo Global Search Advertising Trends, Kenshoo, Inc. 2013

0.30

0.30

0.20 CPC (GBP)

Tablet

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Global Search Advertising Trends - Q1 2013

Summary Infographic

Global Search Ad Spend Up

U.K. Cost-per-Click Exceeds U.S.

Year-over-Year

15% 62%
Clicks

Average CPC by Region (USD)

$0.44 $0.38

Global Click-through Rates Up

Year-over-Year

Mobile Devices Steal the Screens but Not the Wallets

Ad Spend Clicks Ad Spend Clicks Ad Spend

81% 86%

10% 9%

9% 5%

Clicks

Ad Spend

Clicks

Ad Spend

Clicks

Ad Spend

72% 75%

16% 17%

12% 8%

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Methodology
To analyze quarterly data in its historical context through the most uniform and largest sample possible, an aggregate data set was built from a representative sample of advertisers and agencies who had been active on the Kenshoo platform during the entire previous 24 months. Whenever possible, the initial 3 months of campaign data were excluded from the index in an attempt to reduce the impact of program launches and the associated anomalies they present as marketers set up their programs and make initial tweaks. The rolling data set used in this research reflects billions of dollars in global paid search ad spend. While this sample better reflects changes over time in the overall marketplace, there may be variations in numbers for past or future reports published by Kenshoo, as the rolling data set is dynamic each new quarter. All volume metrics have been normalized to a factor of 1 based on the initial quarter of data. Data points from subsequent quarters are based on a multiplier from the first quarter for example, 1.55 means that volume is 55% greater than volume in the initial quarter measured. Mobile device data comes from a representative sample of Kenshoo clients in the U.S. and U.K. who were tracking device type, conversions, and revenue metrics within the Kenshoo platform during Q1 2013 for paid search activities. Mobile device data comes from a different sample of Kenshoo client data than the index data set used for global and regional analysis.

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About Kenshoo
Kenshoo is a digital marketing technology company that engineers premium solutions for search marketing, social media and online advertising. Brands, agencies and developers use Kenshoo Enterprise, Kenshoo Social, Kenshoo Local and Kenshoo SmartPath to direct more than $25 billion in annual client sales revenue. The Kenshoo platform delivers Infinite Optimization through closed-loop targeting, universal integration, and dynamic attribution. Kenshoos adaptive technology, proven algorithms, and unmatched scale power campaigns in more than 190 countries for nearly half of the Fortune 50 and all 10 top global ad agency networks. Kenshoo clients include CareerBuilder, Expedia, Facebook, KAYAK, Havas Digital, Hitwise, iREP, John Lewis, Resolution Media, Sears, Starcom MediaVest Group, Tesco, Travelocity, Walgreens, and Zappos. Kenshoo has 16 international locations and is backed by Sequoia Capital, Arts Alliance and Tenaya Capital. Please visit www.Kenshoo.com for more information. Kenshoo brand and product names are trademarks of Kenshoo Ltd. Other company and brand names may be trademarks of their respective owners.

Contact
Josh Dreller, Director of Marketing Research Josh.Dreller@Kenshoo.com

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