Search now accounts for 21.9% of all ad spend with display budgets suffering as a result
Advertisers across the world are spending more than one-fifth of their ad dollars on search ads with growth in the sector coming at the cost of online display, according to research which also suggests that a fifth of US advertisers have now fully moved their programmatic buying in-house.
Voice is an increasingly common method for consumers to search for goods and information on the internet
In its latest monthly Global Ad Trends report, Warc claimed that the total search advertising market will amount to $100.5bn in 2018, representing a rise of 11% year-over-year, with mobile accounting for 62.4% of the total.
Search is growing at the expense of display
Warc found that across mobile and desktop, paid search’s share of global advertising spend has trebled over the last decade, rising to more than a fifth of all spend this year with most of these gains coming at the expense of display formats.
The latest figures from the UK-based research outfit examined trends across 12 of the most mature markets across APAC, EMEA, as well as the Americas and forecasts that US search’s share is expected to reach 22% this year, 26% in China, and near 30% in the UK.
Further analysis of company reports shows that the four largest providers – Google, Baidu, Yahoo and Microsoft’s Bing – made a combined $101bn from paid search in 2017, of which $10.5bn came from outside WARC’s 12 key markets.
Google's dominance in numbers
Google dominates the landscape, drawing an estimated $85.8bn in 2017 (up 20% from 2016). The search giant also now commands an 89.3% share of the mobile search market. Meanwhile, Badiu ($10bn), Yahoo ($3bn) and Microsoft ($1.8bn) follow some way behind, but all saw revenues grow.
Warc’s analysis of the growth of paid-for search advertising (at the expense of display ad budgets) suggests that former regularly outperforms the latter in terms of both conversion and click-through rate (CTR).
On average, search ads recorded a CTR of 3.3% compared to just 0.57% for online display, with regard to conversion rates, search’s average is 4.32% compared to display’s 1.09%, according to the study.
James McDonald, Warc’s data editor, said: “In its function as a pull medium, search has done more than replace classified – it is steadily eating into the share of advertising expenditure going to display. Emerging formats such as mobile voice and image look likely to continue this trend.
"This may be a sign that brands are shifting budget; though it more likely reflects a multitude of SME advertisers who have started spending due to the accessibility of the format.”
In-housing is on the rise
The report contains other snippets of information, notably how almost a fifth of all advertisers have fully moved their programmatic buying in-house, a stat that tallies with recent research from the IAB.
A report published last week by the US chapter of the trade body found that nearly two-thirds of brands purchasing ads through programmatic means have fully or partially moved the function in-house.
The report claims that 65% of brand marketers that purchase digital ads programmatically have either completely moved programmatic buying in-house (18%) or have partially begun the process of internalizing the function, with plans to continue further down the path (47%).
The qualitative findings, based on more than 100 interviews with US-based advertisers from Advertisers Perceptions, cite improved ad performance plus ROI, improved transparency levels, and better control and management of data as motivating factors.
In addition, the paper explored hurdles, noting that the programmatic in-housing transition typically requires at least a one-year commitment, complex coordination of partner contracts, staff training, and more.
“If brands are going to bring programmatic in-house, they need to understand both the benefits and pitfalls,” noted Orchid Richardson, IAB Data Center of Excellence, vice president, and managing director.
The phases of in-housing
Commenting on the IAB’s findings to The Drum, Tom Triscari, Labmatik managing partner, added the caveat that ‘in-housing’ does not necessarily mean brands severing all ties with the traditional media agency model.
He stated that there are three tiers of in-housing, notably: contracts, processes, resource allocation. Triscari went on to state his opinion that the vast majority of the 65% highlighted in the IAB study was likely in the process of taking their contractual relationships with adtech companies in-house.
For those looking to take such initiatives a step further, they need to work out the internal processes to perform the function in an effective manner, according to Triscari. This involves three primary functions such as mapping out current processes, establishing what needs to change in order to drive improvements, and then resourcing appropriately.
He further forecast that those advertisers currently making the process changes would likely be at about 18%, but that in 12 months time this could be as much as 40%.
“Steps two through four will likely be very low percentages today because this is where the hard work begins and also where unnecessary politics and entrenched positions come into play,” he added.