The report, released by online marketing company, Efficient Frontier, states that during Q4 of 2011 search spend continued to increase in both the U.S. and U.K.

Increase in search spend in the UK by quarter. Source: Efficient Frontier

Retail spend in the U.S. grew by 18% year-on-year and 40% quarter-on-quarter, indicating that the spend increases substantially during the last quarter of the year. Retail growth in the UK was not as good, and this was reflected in the search spend too, which grew by just 10% year-on-year in the country.

Although Google accounted for 80% share of spend in Q4, Yahoo! and Bing clicks were found to be 14% more valuable and showed 9% higher return on investment than Google. The click-share of Google has, however, gone up by 2.5%.

Search CPCs dropped by 5% overall, mainly due to an increase in mobile advertising and better ad delivery.

Mobile ad spend now accounts for 7-8% of all ad spend compared to just 2% a year ago. Of this, tablets account for 50% of the share. Google drives 96% of mobile search ads while Yahoo! and Bing have just 4% share of the market.

In 2012, mobile search spend is expected to account for 16-22% of all paid clicks as users gradually shift from desktops to mobiles. For the same reason, search CPCs are also expected to fall by 4%.

Projected mobile search spend forecast by the end of 2012. Source: Efficient Frontier

Facebook accounted for 2.7% of biddable online spend in Q4, as marketers now spend a larger amount on social networks. Yahoo! and Bing are set to increase their ad inventory, while Facebook is expected to reach 5% of all online ad spend in 2012. Other social networks, such as Google+ and LinkedIn are also set to grow further and deliver more ad impressions.

The study was conducted between July 2009 and March 2010, and analysed 103 campaigns under 39 advertisers and covered 7 industries.

The different forms of online display ad targeting methodologies studied were:

• Audience targeting – based on the users past interest and interactions on the internet
• Contextual targeting – Ads related to page content
• Efficiency pricing – Click-Per-Cost engagement
• Premium pricing – High visibility placements on premium publishers
• Retargeting – To users who have already visited the advertisers site before
• Run-of-Network (RON) – Ads appearing anywhere in the network.

Comparison of brand lift for various targeting strategies

Each of these strategies has its own pros and cons, and marketers require accurate information in order to judge the performance of each strategy and optimise the ad campaign.

The average reach and cost of each strategy was compared to the baseline run-of-network strategy.

While retargeting had the highest lift (1046%), by a very wide margin, and it has moderate costs, it has low relative reach.

Audience targeting also has moderate costs with a good degree of brand lift but it also has low reach.

On the other hand, premium and contextual strategies are both very expensive. While premium strategies have a high average lift (300%) their reach is very low, and contextual ads have a lower lift but higher reach.

Run-of-network and efficiency based ads are both low cost with fairly high reach but show low brand lift (126% and 100% respectively).

The study has, however, found that when different placement strategies are used concurrently, they generated a better overall performance than any individual method.

The bid simulator can be accessed in the new AdWords interface by clicking on a CPC value to adjust it, or clicking on the tiny graph-like icon next to the current bid value, as shown in the screenshot below:

Accessing AdWords’ bid simulator

When the tool opens up in a new layer (on the same page), it shows a simulation of the estimated clicks, cost and impressions that particular keyword will get if the bid values are increased or decreased. The tool also includes a graph to illustrate the change in number of clicks as CPC changes.

AdWords bid simulator in action

Documentation provided by Google describes the function of the Bid Simulator: “It doesn’t predict the future, but it estimates the click, cost and impression data that your ads would have received over the last seven days had you set different keyword-level bids. ”

The tool does not work for all keywords, and the graph does not show up for all keywords that have the bid simulator enabled. Search volumes are the determining factor for whether or not the simulator and the graph within the simulator are enabled or not.

According to Google, “The bid simulator requires historical information in order to provide click and cost data for different bids. If a keyword didn’t receive many clicks in the last seven days, it isn’t possible to simulate clicks and cost.”

Values for the bid simulator only apply to the search network – that is, Google search and other search partners.

The minimum bid amount for each keyword may now be above or below $0.10. Account holders will be informed about the changes in due course.

Sources at Yahoo! explain that the new minimum bids will be like the reserve prices held at auction houses. This price will be based on a variety of features such as quality and value. If the quality of an ad is good and it receives more clicks than those of its competitors, it will receive a higher ranking and the minimum charge will be lower.

If the ad quality is poor Yahoo! will charge more by raising the minimum bid, but will still keep running the ad, which seems to show that they do not really care about quality if the advertiser can pay for it.

Keyword value is calculated using the number of advertisers bidding on the word and the amount they are willing to pay for it. Ads will be displayed for a keyword when the advertiser’s bid equals or exceeds the minimum bid fixed for it. If the advertiser’s bid falls below the minimum amount required the keyword will be inactivated.

Account holders will be informed via the Yahoo! Search Marketing dashboard about these changes and they will be allowed a grace period to make the necessary bid adjustments to keep their keywords active. The new system will be similar to Google’s and is likely to increase Yahoo!’s revenue at least in the short term, as it seems unlikely that the minimum bid for any word will be set below $0.10.

In the long run, however, it is possible that advertisers may go elsewhere rather than pay an exorbitant charge for ad placement on Yahoo!, in which case Yahoo! may end up being the ultimate loser. Advertisers will also have no way of knowing what their competitors are being charged and the level playing field that most advertisers liked about Yahoo! Search Marketing will now be completely lost.

A number of advertisers are already complaining that the new bids have overnight been increased by 2 to 4 times the earlier price and they think it is especially wrong to do so in the given market conditions.

Jim Phillips, one of the many unhappy customers that commented on this announcement, said “I will eventually pull ALL my business from Yahoo! if this is the same as Google. What they are really doing is punishing the advertisers for a slow economy and poor ad revenue from click through. So you pay a LOT more for the few clicks you might get vs. all the impressions you get.”

A number of advertisers also saw the move as a poor way to induce Microsoft to increase the amount they pay to acquire Yahoo! While that may not actually be the case, it has still left the few advertisers that still use Yahoo! Search Marketing quite unhappy.

Conversion actions can be classified as:

• Purchase/Sale
• Signup
• Lead
• View of a key page
• Other

Actions can be used with pay per click as well as pay per action campaigns. Google launched the pay per action beta test just over a year ago in March 2007.

The new conversion tracking tool allows more sophistication for pay per click advertisers who have for the longest time only been able to track overall conversion volumes. Advertisers using the pay per action system will benefit much more, though, as they can now determine which keywords lead to more valuable actions and are worth bidding more for.

The ‘Campaign Summary’ page still shows the total number of conversions, cost per conversion and conversion rate. However, a new ‘Conversion Tracking’ page has been developed, which provides a breakdown of the number of conversions by conversion type.

Strangely enough, the various actions cannot be viewed for individual campaigns and Ad Groups just yet. The reports have not been updated either, so the Conversion Tracking page offers the best, albeit extremely limited, view of the types of actions visitors from AdWords have taken on the site.

This information, however, does not apply to clicks on paid search links. People that typically click on display ads are not representative of the total US online population. It should be further noted that most heavy clickers on the net, are not very likely to provide much revenue generation for the advertisers as data reveals that these people are generally in the low income range (below $40,000 per annum), They are usually between 25 and 44 years of age and spend a lot of time on gambling and auction sites; in other words they do not seem to have much work to do.

It was found that more clicks on an ad do not necessarily imply that there is better awareness of that brand. A high click rate does not necessarily mean good performance by the ad.

Some advertisers may already be aware of these drawbacks of the pay per click display advertising system. What is important is that they should start focusing on other aspects like actual sales generated, or brand awareness created through the ad campaign, rather than worrying about how many clicks their ads receive. Based on the findings of this study, advertisers would be better off investing in CPA (cost per action) bidding rather than CPC.

Erin Hunter, executive VP at comScore says, “while the click can continue to be a relevant metric for direct response advertising campaigns, this study demonstrates that click performance is the wrong measure for the effectiveness of brand- building campaigns.”

Read the full press release from comScore

A vast number of mobile phones do not allow JavaScript to run on their browsers. Furthermore, even with those that do allow JavaScript, many do not allow cookies. In fact, a number of mobile network operators block cookies as well as session details from being passed on to third parties such as Google AdWords.

Without cookies, the vast majority of conversions resulting from AdWords ads on mobile devices will go undetected. This is a serious issue, as it implies that the ROI calculations many mobile advertisers make for their campaigns will be far from the actual figures.

Not only is this a serious problem for Google, who has traditionally bragged about the exceptional accountability and reporting capabilities of its advertising platform, but it is also one that cannot be solved by the search giant.

Google needs to either find a better, more innovative way to provide accurate conversion tracking for mobile ads, or advertisers will shrug their shoulders and accept it as a flaw till a better, more reliable system is introduced, probably by a network operator.

An account manager at Google AdWords has confirmed this is the case. Her reply to our query is quoted below:

“A significant percentage of mobile browser and carrier combinations do not support cookies. Google adds cookies to a user’s mobile device when he or she clicks on an ad to track conversions. Therefore, if users are using mobile browsers or carriers that do not accept or support cookies, they will not be included in your conversion tracking statistics.

Additionally, cookies on mobile phones expire faster than the ones created for PCs. Therefore, a significant number of conversions for your site may go unrecorded after a certain period of time. When viewing conversions for a specified time period, note that conversions are assigned to the date on which the ad click occurs, not the date on which the conversion occurs. In addition, we will not be able to report conversions for users who disable cookies.

Conversion tracking is also not supported when users disable images on their mobile phones.

Although Google cannot record every conversion due to the reasons mentioned above, your conversion rate, cost-per-conversion, cost-per-transaction and value/click are adjusted to reflect only those sites from which we can track conversions.“

Update:

The post has been updated to clarify that the lack of JavaScript support on a mobile device is not a problem in and of itself. The problem lies in the cookies being rejected by mobile operators. Since the time of publication of this post, Google has updated its conversion tracking platform, and now offers an improved solution for conversion tracking on mobile searches.

Placement Targeting

Site Targeting has been renamed to Placement Targeting. This is due to the additional ability to specify ad placement by section within a site or even by specific area of a particular webpage. The targeting feature allows advertisers to pick sites by specific publisher-defined placements or site sections in the Placement Tool, as can be seen below:

Placements indented in the list shown above are created and implemented solely by publishers. Advertisers can additionally specify site sections by submitting specific URLs where they want their ads to be displayed.

Cost Per Click Bidding

CPM (cost per thousand impressions) used to be the only available model available for advertisers using site targeting. Google has now changed this by introducing a cost per click option, allowing advertisers to measure and target all their AdWords campaigns equally.

Advertisers using the content networks to drive sales or generate leads are likely to welcome this feature, as the CPM model can end up being more expensive than CPC bidding if a company is not focusing purely on branding.