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This Holiday, Money Really Will Buy Happiness For Paid Search Advertisers in Retail

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This week, all the large paid search platform providers are telling their Black Friday/Cyber Monday stories. Many are making predictions or offering advice on the trends they are seeing within start of the holiday shopping season based on the advertising budgets they are managing. Yesterday, Efficient Frontier told paid search marketers to increase their advertising budgets and spend more to generate the best possible results from the holiday shopping spree.

Efficient Frontier's data strongly echo Kenshoo's recent findings and both companies are of a similar size, managing $1bn in paid search spend. Both companies report strong numbers over the Thanksgiving weekend predict a robust retail season, characterized by online shoppers who were exceptionally savvy and who started searching for deals ahead of Black Friday.

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In particular, where Kenshoo reports 8% drop in average order volume and 83% increase in online transactions, Efficient Frontier reports a 5% drop in average order volume and 41% increase in online transactions. They seem to concur that for the holiday shopping season of 2010, marketers are already seeing more online shoppers than ever before. Consequently Return on Ad Spend (ROAS) is through the roof and marketers and online retailers can look forward to a healthy quarter.

However, Dr. Siddharth Shah Director, Business Analytics of Efficient Frontier makes the interesting point that ROAS is a deceptive metric and there are potentially more lessons to be learned. So don't sit on your laurels!

"The return on investment for advertisers can be a good indicator to estimate if advertisers are catching to trends in consumer demand. When ROI on advertiser campaigns increase dramatically it means that they are operating far above their acceptable efficiency targets and are extremely profitable. However, while this may sound like good news, it also means that they are not capturing profitable traffic and are therefore sacrificing volume. ROI trends for both 2009 and 2010 reveal that advertisers were far above their baseline ROI numbers on Cyber Monday. We estimate that they could have gained 30-40% more business on Cyber Monday had they increased their SEM budgets for Cyber Monday."

The lesson for paid search marketers is don't get conceited over profits and don't underestimate demand. If you are are making lots of profit, namely generating a fantastic return on adspend, then look to sacrifice some of it and sink back into the advertising budget to meet bigger demand and reach even more customers than ever before.


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