Search Marketing Snaps Back to Strong Q3 Growth: Report

Amid reports that marketers are cutting back on traditional advertising channels, a new report from search marketing firm SearchIgnite finds that spending on search ads continued on a healthy growth path in Q3 2008.

The study finds that spending by U.S. marketers who were already doing search rose by 26.9% compared to the amount spent on search engine marketing in the third quarter of 2007. That figure takes into account budgets spent on all search engines during the period.

That hike represents a return to strong year-over-year growth after serious slippage in Q2 2008, when SearchIgnite reported only a 10% increase in quarterly spending compared to the previous year. In fact, the growth rate in Q3 2008 is a tad higher than the 25.9% increase in search marketing spending SearchIgnite found in Q3 2007.

“Paid search spend continued to hold strong in Q3 despite the economic climate,” SearchIgnite president Roger Barnette said in a statement. “The strength of this ad market in today’s economy suggests that paid search continues to be a highly profitable and efficient digital marketing channel for brands.”

Compared to second-quarter 2008, advertisers who were already in the search market spent a bit more in Q3, increasing their search budgets by 1.6%. That small rise tracks with 2007, when search spending increased 1.9% from Q2 to Q3.

By contrast, 2007 search spending by those marketers grew 37.3% from Q3 to Q4, taking in the crucial holiday shopping season.

Much of that seasonal increase in search spending came from retailers, of course. In that category, retail marketers spent 1.5% more on search ads in Q3 2008 than they had in the same quarter of 2007.

But the SearchIgnite report finds some evidence that this year may not see the same stratospheric search spending spike by retailers that 2007 did. The study raises that possibility on the basis of a falloff in monthly search spending by retailers during the third quarter of this year. While retail search spending in July 2008 was up more than 19% year over year, that same-month increase slowed to only 1.9% in August and declined 10% in September.

The September decline came despite year over year increases in both retailers’ sales conversion rates from search ads and average order volumes in both August and September.

For the entire third quarter, retail ad conversion rates were up a slight 1.5% over the same period last year. But SearchIgnite found that average order volumes posted a year over year decline for the quarter. The report suggests this drop in average tickets could be the result of retailers getting aggressive earlier in the buying season about discounting prices and promoting sales.