This morn­ing, we released our quar­terly State of Dig­i­tal Mar­ket­ing Report for Q3 2011 with our sub­sidiary Con­text Optional. These reports have become a defin­i­tive source of infor­ma­tion for media and mar­keters. This quar­ter we saw some inter­est­ing trends. As we pre­dicted, Face­book ad spend and CPCs are con­tin­u­ing to rise at a rapid pace, illus­trat­ing that social media is becom­ing an increas­ingly impor­tant part of brands’ over­all dig­i­tal mar­ket­ing strate­gies. Mean­while, search spend increased by dou­ble dig­its YoY, and Google regained mar­ket share for the first time since the Yahoo!/Bing alliance in the U.S. We’re also see­ing tablets become an impor­tant part of the mobile land­scape, cap­tur­ing a huge por­tion of the mobile ad spend last month.

Among the Q3 2011 key highlights:

SEARCH SPEND INCREASED 20% YoY IN THE US AND 16% IN THE UK– Sig­nif­i­cant increases in ad bud­gets in the retail and finan­cial ver­ti­cals drove up over­all search spend. ROI, how­ever, trend did in oppo­site direc­tions. US adver­tis­ers look­ing to scale and increase vol­ume saw a decrease in ROI. UK adver­tis­ers upped bud­gets and increased ROI indi­cat­ing that the UK mar­ket has room to spend more in search.

GOOGLE REGAINS MARKET SHARE FOR THE FIRST TIME SINCE THE YAHOO/BING ALLIANCE IN THE US.  As search spends increase and adver­tis­ers look to scale in vol­ume, Google wins back mar­ket share because of its abil­ity to offer more inven­tory, despite Yahoo/Bing’s power to pro­duce higher ROI.

FACEBOOK AD CPCs INCREASED 54% IN Q3 FROM Q2. This indi­cates that adver­tiser com­pe­ti­tion in Face­book mar­ket­places is ris­ing. Face­book has become an essen­tial mar­ket­ing chan­nel for many brands. Increased cost per clicks (CPCs) reflect both a higher vol­ume of adver­tis­ers and more price com­pe­ti­tion on the platform.

FACEBOOK AD SPEND INCREASED 25% IN Q3 FROM Q2. Adver­tis­ers see the value in sig­nif­i­cantly increas­ing invest­ments in social.  Strate­gies to max­i­mize fan reach with Spon­sored Sto­ries and acquire new fans with Face­book ads are con­tribut­ing to spend growth. 84% of Face­book engage­ment can be attrib­uted to Likes, which are cred­ited to Face­book adver­tis­ing. Today, brands are increas­ing fan counts 9% per month on aver­age, increas­ing fan base by 2x YoY.

TABLETS CAPTURE 77% OF ALL RETAIL MOBILE AD SPEND IN SEPTEMBER 2011. In a span of less than a year, mobile search spend went from 0.5% to 4.2%. For retail adver­tis­ers today, mobile spend is 7% of search spend with tablets rep­re­sent­ing 60% of all mobile impres­sions and clicks.

EXCHANGE DISPLAY SPEND INCREASED 7% QoQ. Adver­tis­ers’ demand for dis­play is ris­ing as per­for­mance con­tin­ues to gar­ner addi­tional invest­ment. More mod­est gains on a same-advertiser basis are expected while new adver­tiser demands for exchange buy­ing options remain high.

OUR OUTLOOK FOR Q4 2011 & 2012:

FACEBOOK ADS WILL CONTINUE TO RISE 30–40% QoQ. Adver­tis­ers will con­tinue to increase invest­ments to acquire, engage and mon­e­tize Face­book users dri­ving more com­pe­ti­tion on the Face­book ad plat­form. A steady rise in engage­ment rates YoY and the devel­op­ment of new Face­book ana­lyt­ics will allow adver­tis­ers to mon­e­tize and gauge ROI of Face­book users more effectively.

FACEBOOK EMERGES AS A MORE SIGNIFICANT PART OF MARKETERS’ MEDIA MIX. An evolv­ing plat­form and new suc­cess met­rics that mir­ror tra­di­tional mar­ket­ing chan­nel met­rics will allow adver­tis­ers to invest more com­fort­ably in Face­book ads. New tools such as Con­text Optional Ana­lyt­ics inte­grated with Facebook’s Insights API pro­vide adver­tis­ers with clearer bench­mark met­rics and solid social KPIs mak­ing Face­book adver­tis­ing more attrac­tive to cau­tious advertisers.

YAHOO/BING WILL FOCUS ON INCREASING INVENTORY TO REGAIN SPEND SHARE FROM GOOGLE. We believe US search spend will increase 15% YoY in Q4 2011. Adver­tis­ers love the stronger per­for­mance and high ROIs they are get­ting from Yahoo/Bing, but as they look to scale with larger ad bud­gets they will not be able to increase vol­ume due to a lack of inven­tory. Yahoo/Bing will need to focus on expand­ing inven­tory, while main­tain­ing high qual­ity traffic.

MOBILE IS PROJECTED TO BE 7–10% OF ALL PAID SEARCH SPEND BY THE END OF Q4 2011. Recently, Google announced that key­word qual­ity scores for mobile cam­paigns will be influ­enced by web­sites’ mobile opti­miza­tion. The abil­ity to attribute con­ver­sions across devices (mobile, tablet, desk­top) is now pos­si­ble with the devel­op­ment of the Google+ net­work that keeps users logged in to the Google ecosys­tem. Adver­tis­ers should pre­pare for this trend by invest­ing time into look­ing at tablet traf­fic and con­ver­sions, while opti­miz­ing web­sites for mobile.

To get the full story, down­load our State of Dig­i­tal Mar­ket­ing Report for Q3 2011 here: http://​news​.efron​tier​.com/​Q​3​2​0​1​1​R​e​p​o​r​t​.​h​tml

Dr. Sid­dharth Shah

Senior Direc­tor, Busi­ness Analytics