mobile search advertising around the globe

Mobile Search Advertising Around the Globe:

2014 Annual Report

WH

ITE PAPER

Copyright © 2014 Marin Software Inc. All rights reserved. 2

Mobile Search Advertising Around the Globe:2014 Annual Report

TABLE OF CONTENTS

Executive Summary 03

Introduction 03

Methodology 04

Part I—United States 05

Part II—United Kingdom and Eurozone 08

Part III—Mobile Search Across the Globe 11

About Marin Software 14

3


EXECUTIVE SUMMARY

As mobile adoption makes the world more interconnected by the hour, advertisers willneed to move faster and be more responsive to their customers. In working with someof the world’s largest and most sophisticated advertisers, our research uncovered somevery interesting trends that highlight the increased value of mobile devices as a missioncritical channel for reaching consumers, and the increased competition that advertisersface.

To create this brief, we sampled the Marin Global Online Advertising Index, composedof advertisers who invest more than $6 billion in annualized ad spend on the Marinplatform to create this brief. Our research uncovered three key findings:

1. Consumer Adoption: At the current growth rate, mobile devices will account for50% of all paid search clicks by December 2015.

2. Increased Competition: Cost per click (CPC) on mobile devices increased at a muchhigher rate than cost per click on the desktop during 2013. In some regions, tabletCPCs have surpassed desktop CPCs.

3. Improving Performance: Conversion rates on tablets and smartphones rosethroughout 2013 as consumers became increasingly comfortable with mobilecommerce. In the US, conversion rates on tablets edged out those on the desktop,marking an important milestone.

INTRODUCTION

Even though mobile devices have been around for years, it is nothing short of stunninghow quickly smartphones and tablets have become an essential part of modern-day life. Today’s consumers are constantly connected via one device or another. And whileadvertisers have historically had to play catch-up with mobile enabled consumers, wesaw 2013 as the year where brands and agencies really began to focus on mobileadvertising.

According to eMarketer, 19% of Google’s 2013 ad revenue came from mobile searchads and it will increase to 30% over the next 3 years.1 This growth reflects the shape ofthe digital advertising landscape as driven by the increased usage of mobile acrossconsumer markets. Global smartphone penetration currently sits just above 60% withover 1 billion users.2 eMarketer predicts smartphone penetration to reach 69.4% by2017.3 In addition, tablet sales are projected to exceed computer sales by 2015.4 Thewidespread penetration of smartphones and tablets only underscores the importance ofmobile as an advertising channel.

1 http://searchengineland.com/googles-mobile-search-revenue-to-top-30-percent-desktop-to-fall-to-43-percent-by-2015-forecast-170812 http://www.emarketer.com/Article/Smartphone-Users-Worldwide-Will-Total-175-Billion-2014/10105363 http://searchengineland.com/googles-mobile-search-revenue-to-top-30-percent-desktop-to-fall-to-43-percent-by-2015-forecast-1708114 http://marketingland.com/mobile-devices-to-eclipse-pcs-in-q4-this-year-58833

4


As mobile devices become increasingly integrated with everyday life, advertisers needto adjust marketing strategies to accommodate the always-connected consumer, who isconstantly on the go and whose shopping and product research behavior is vastlydifferent than anything we’ve seen before.

This research brief analyzes mobile trends from 2013, forecasts the state of mobileadvertising for 2014, and examines the overall performance of mobile ads acrossdevices. Our objective with this report is to help the digital marketer wrap their armsaround the explosive growth in mobile advertising, while developing effectivebenchmarks and strategies for success.

METHODOLOGY

In this study, we looked across leading brands and advertisers that manage more than$6 billion in annualized online ad spend. Our data set represented all major industrysectors alongside the following countries or regions:

• Australia • India • Singapore• Brazil • Japan • United Kingdom• Canada • Mexico • USA• China • New Zealand• Eurozone • Russia

The size and diversity of our data set, coupled with the broad geographic coverage,enables us to provide the most comprehensive report on how smart mobile devices arechanging paid search. That being said, our clients mainly consist of large advertisersspending upwards of $100,000 per month on paid search, social and display. As such,the information presented in this report is biased towards larger advertisers, and maynot reflect mobile search trends for small or medium sized businesses.

4.8%

12.3%

19.1%

25.3%

30.8%

2011 2012 2013 2014 est. 2015 est. Source: company reports, 2012 & 2013; eMarketer, Aug 2013

M Mobile Share of Google Ad Revenue

Copyright © 2014 Marin Software Inc. All rights reserved.

5


PART 1—UNITED STATES

Mobile Search Trends and Projections

Smartphone and tablet usage grew sharply in 2013, with consumers embracing paidsearch on mobile devices and advertisers following suit. From January to December of2013, the share of paid search clicks from mobile devices increased from 21.8% to34.2% of all paid search clicks. In particular, paid search clicks from smartphonesalmost doubled during that period. Projecting this trend forward, we think that theshare of paid search clicks from mobile devices will break 42% by December 2014,with smartphones accounting for half of the overall volume. Additionally, our datasuggests that mobile devices will account for 50% of all paid search clicks byDecember 2015, marking a significant milestone where mobile is the new normal.

Mobile Click Share

21.8% 21.9% 23.2% 23.5% 25.0% 26.7% 27.4% 29.2% 29.4% 29.6% 32.1% 34.2%

12.1% 12.0% 12.8% 12.9% 14.1% 15.5% 16.0% 17.4% 17.9% 18.4% 19.4% 20.3%

9.6% 9.9% 10.4% 10.7% 10.9% 11.3% 11.4% 11.8% 11.5% 11.2% 12.8% 13.9%

Mobile Smartphones Tablet

Mobile Spend Share

19.3% 19.6% 20.1% 19.3% 20.7% 22.2% 22.9% 23.7% 24.4% 24.2% 26.6% 27.9%

9.5% 9.7% 10.3% 9.4% 10.2% 11.3% 11.8% 12.5% 13.2% 13.3% 13.9% 14.4%

9.8% 9.9% 9.8% 9.9% 10.5% 11.0% 11.0% 11.3% 11.2% 10.9% 12.7% 13.6%

Mobile Smartphone Tablet

Spend share, or percentage of budget, saw similar increases, with mobile spend sharespiking a stunning 45% from January to December 2013 as it rose from 19.3% to27.9%. Similar to 2012, we continue to see budget share lag click share on mobiledevices. Also, the share of paid search budgets on smartphones surpassed the same fortablets in mid-2013. And our analysis indicates that mobile budget share will exceedone-third of overall paid search budgets by December 2014.


2013 Average CTR by Device

2013 Average CTR by Ad Position



With smartphones accounting for a fifth of all paid search clicks, advertisers need to beincreasingly thoughtful when it comes to allocating their paid search budget acrossdevices. Specific things to consider include cost per click, click-through rate, andconversion rate across devices.

Benchmarking Across Devices

Advertising on a smartphone is intrinsically different from advertising on a desktopcomputer because of how consumers use smartphones and the difference in formfactor. For example, many advertisers may have noticed that smartphone click-throughrates are consistently higher than those on computer and tablets. There are a fewdifferent reasons for this. To start with, the limited screen size of smartphones reducesthe number of ad impressions delivered per search. Additionally the increased urgencyassociated with being mobile and on-the-go can change consumer behavior and lead to greater engagement with the SERP. In 2013, the average click-through rate on asmartphone was 3.75%, vs. 2.29% and 2.70% for computers and tablets, respectively.

However, when normalizing for position, it appears that click-through rates across devices might not be that different. Across devices, click-through rates are similar for ad positions one through five. Smartphone searches only deliver up to five ads, and notcoincidentally, smartphone ad click-through rate disappears altogether after position five.

2.29%

3.75%

2.70%

Computers Smartphones Tablets

5.0%

2.4%

1.7% 1.3%

5.2%

2.4% 2.1%

1.0%

5.1%

2.9%

1.9%

1.3%

1-2 2-3 3-4 4-5

C Computers Smartphones Tablets

7


Mobile CPC shows advertisers another advantage of mobile advertising. The chartshows that smartphone clicks are about 30% cheaper than computer clicks, andtablets are about 8% cheaper. While CPCs are closing the gap, we still see smartphoneCPCs being significantly cheaper than their computer counterparts for the near future,with tablets reaching computer levels.

$0.83

$0.58

$0.76


When comparing CPCs in 2013 versus those in 2012, we see 20.8% and 22.6% CPCgrowth on smartphones and tablets. This rate of growth is almost double that ofcomputer CPCs, which increased 10.7% in 2013. The relative increase in mobile andtablet CPCs point to the increased competitiveness of mobile advertising, compared tothe relative maturity of advertising on desktops.

However, conversion rates tell a different story. In 2013, tablet conversion ratesmanaged to edge out computer conversion rates for the first time (5.5% vs 5.3%respectively). This is an important milestone for tablets and underscores their role asemerging online shopping devices. Smartphone conversion rate still lags at 4.4%.However, when we compare conversion rates between 2012 and 2013, smartphonesand tablets have increased conversion rates by 57.1% and 66.7%, versus 35.9% forthe desktop. Mobile conversions are growing faster than ever and advertisers are poisedto take advantage of the mobile e-commerce revolution.


2013 Average CPC by Device

10.7%

20.8% 22.6%


CPC Change, 2012 vs 2013



PART II—UNITED KINGDOM AND EUROZONE

Mobile Search Trends

In the UK, mobile click share grew from 24.4% in January to 43.4% by the end of theyear, marking a 77.9% increase in 2013. The Eurozone grew its 2013 mobile paidsearch click share from 12.4% to 20.2%, displaying an impressive 62.9% growththrough the year.

5.3%

4.4%

5.5%


12.1% 20.6%

5.1% 7.7%

12.3%

22.8%

7.3% 12.5%

UK Euro

Smartphone Tablet

January2013

January2013

December2013

December2013

Ad spend share also showed marked growth across the board in Europe, reflecting theincreased interest in mobile and realization of mobile relevance in 2013. UK mobile ad budget share increased from 22.0% to 34.8%, or growth of 58.2% in 2013.Meanwhile, the Eurozone mobile budget share increased from 10.0% to 20.9%, or anincrease of 109%. In the Eurozone, mobile budget spend caught up with click share.

2013 Average Conversion Rate by Device

2013 Mobile Share of Paid Clicks

9


Benchmarking Performance Across Devices

Across the board, we saw that click-through rates for mobile devices are higher thanthat for computers. In the UK, click-through rates were significantly higher for mobiledevices relative to the Eurozone.

7.1% 12.9%

3.2% 7.8%

14.9%

21.9%

6.8%

13.1%

January2013

December2013

UK Euro

Smartphone Tablet

January2013

December2013

2.59% 3.02%

5.71%

3.83% 3.85% 3.63%

UK Euro


On the CPC side, we observed similar trends. In the UK and Eurozone smartphone costper click was significantly less than that of computers and tablets. However, tabletCPCs in the Eurozone surpassed that of computers. This is a first for tablets and quitepossibly a leading indicator on their emerging value to performance advertisers.


2013 Mobile Share of Search Budgets

2013 Average CTR across Devices



Smartphone CPCs saw the largest growth from 2012 to 2013. Across both the UK andthe Eurozone, smartphone CPCs increased just over 26%. Tablet growth slowed from2012, increasing about 10% across Europe. Computer CPCs actually decreased in theEurozone, dropping by about 3%.

Smartphone conversion rates remain below that of desktop and tablet. Europeansmartphone conversion rates have grown sharply, similar to the US, signaling improvedad targeting and optimization, as well as consumer momentum on mobile advertising.Additionally, tablet conversion rates have been increasing in the Eurozone, and willlikely reach the same level as desktops this year.

£0.34 € 0.30

£0.19 € 0.24

£0.31 € 0.33

UK Euro


2013 Average CPC across Devices

13.3%

-3.2%

26.7% 26.3%

10.7% 10.0%

UK Euro

Computer Smartphone Tablet

CPC Change, 2012 vs 2013

2013 Average Conversion Rate



15.3%

2.4% 7.2% 3.9% 2.6% 4.2% 6.6% 8.0%

14.8% 7.1%

16.5%

3.6%

9.7% 9.2% 11.2%

30.8% 24.8%

7.9%

11.2% 17.2%

68.2%

93.9% 83.1% 86.9% 86.3%

65.0% 68.6%

84.1% 74.1% 75.7%

Australia Brazil Canada China India Japan Mexico New Zealand Russia Singapore

Tablets Smartphones Computers

PART III—MOBILE SEARCH ACROSS THE GLOBE

Across the globe, we saw similar trends in mobile advertising. Mobile devices have seenwidespread and rapid adoption around the world, with smartphones penetrating moreand more markets.

The charts below show click-share and budget-share across devices for each marketunder consideration. We also looked at device-specific click-through rates and cost perclick for each market. Please note that this is only reflective of Google mobile data, anddoes not include data for other search engines, such as Bing, Yahoo! Japan, or Yandex.

6.09%

4.60%


1.76%

2.79%

1.03%

4.60%

1.67%

UK Euro

2013 Click Share by Region



3.5%

2.0%

1.7%

1.5%

5.0%

1.8%

1.2%

1.7%

4.2%

3.3%

3.6%

2.9%

2.4%

1.8%

4.8%

2.0%

1.7% 1.6%

5.0%

2.4%

4.3%

2.5%

1.9%

2.9%

5.7%

1.8%

1.1% 1.3%

4.9%

3.8%



14.45%

2.17% 6.89% 4.60% 2.73% 4.53% 7.53% 7.80%

13.62% 5.65%

12.97%

2.32%

7.01% 7.14%

4.93%

35.10% 24.26%

5.23%

9.01%

12.23%

72.57%

95.51% 86.10% 88.27% 92.34%

60.37% 68.21%

86.97% 77.36%

82.12%


p y g Tablets Smartphones Computers

2013 Spend Share by Region

2013 Average CTR by Region



Optimizing Mobile Search Campaigns

With mobile’s rapid growth and reach throughout the globe, it is an important area formarketers to focus their attention. However, advertising on mobile differs vastly fromadvertising on desktop, and it is important to accommodate for mobile user behaviorwhen creating mobile campaigns. This section covers best practices for mobile devicesto help marketers get the most out of their advertising dollar.

1. Ad position: As shown earlier, ad position is critical for advertising in general.However, it is especially important for smartphone advertising due to the constraintsof the small screen. Positions 1 and 2 are by far the most valuable positions for ads.Across all devices, click-through rates drop by 50% after position 2, from roughly5% to 2.4%.

2. Mobile experience: A strong factor for conversion rates is overall user experience.Many websites still lack a robust mobile-optimized experience. Advertisers shouldensure that all parts of their conversion path are well-optimized for mobile devices,and specifically smartphones.

3. Mobile conversions: Smartphone advertising tends to have conversions that happenvia a non-standard pathway, such as a call or in-store visit. This can lead todifficulties recording these conversions and acknowledging that they are mobile-influenced. Marketers should look into tracking mobile ad formats like click-to-calland store-locator. If successful, they can better estimate revenue from mobiletransactions and adjust budget accordingly.

$1.18

$0.32

$1.06

$0.39

$0.16

$0.47

$0.37

$0.54

$0.25

$0.64

$0.87

$0.20

$0.73

$0.30

$0.07

$0.57

$0.36 $0.35

$0.19

$0.42

$1.05

$0.28

$0.97

$0.45

$0.16

$0.55

$0.43 $0.51

$0.22

$0.48



All amounts in USD

2013 Average CPC by Region

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ABOUT MARIN SOFTWARE

With more than $6 billion in annualized advertising spend, Marin Software (NYSE:MRIN) is the leading digital ad management platform in the world. Offering anintegrated platform for search, display, social, and mobile advertising, Marin helps theworld’s best brands and agencies simplify their advertising workflow while dramaticallyincreasing ad performance. Powering advertising campaigns in more than 160countries, Marin’s technology transforms data into insights and complexity intoopportunity for hundreds of global advertisers and agencies. For more informationabout Marin’s solutions, please visit: http://www.marinsoftware.com/solutions/overview.

United States

San Francisco123 Mission Street25th FloorSan Francisco, CA 94105Tel: +1 (415) 399-2580

New York215 Park Avenue SouthSuite 1801New York, NY 10003Tel: +1 (646) 490-2427

Chicago140 S. Dearborn StreetSuite 300-AChicago, IL 60603Tel: +1 (312) 267-2083

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Portland A317 SW Alder StreetSuite 850Portland, OR 97204Tel: +1 (971) 302-6191

EMEA

United Kingdom 1st Floor, Orion House,5 Upper St Martin’s Lane,London, WC2H 9EATel: +44 (0)845 262 0404

France Actualis Level 221 and 23 Boulevard HaussmannParis 75009Tel: +33 1 80 95 68 60

Germany Am Kaiserkai 120457 HamburgTel: +49 40 80 80 74-522

Ireland Suite 20428-32 Upper Pembroke StreetDublin, 2

APAC

Singapore One Raffles QuayNorth Tower, Level 25048583Tel: +65 6622 5888

Japan 3rd Floor, Sanno Park Tower2-11-1 Nagata-choChiyoda-kuTokyo 100-6162Tel: +81 3 6205 3179

Australia Level 33Australia Square264 George StreetSydney NSW 2000Tel: +61 (0)2 9258 1820

mobile search advertising around the globe

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