Kenshoo, a global leader in digital marketing software, today published its inaugural quarterly report, "Kenshoo Global Search Advertising Trends." The report examines the performance of paid search ads by analyzing aggregate campaign data across search engines including Google, Yahoo!, Bing, Baidu, and Yahoo! Japan based on more than $3 billion in annual paid search budgets managed through Kenshoo.

The first report has some interesting findings, among them: phone search is pretty useless compared to search on tablets for conversions. More on that later.

First, global search ads are growing (which we kind of knew already). Through the first three quarters of 2012, global paid search budgets were significantly higher year-over-year (YoY). For Q3 2012, the YoY growth rate was 24%. The increase in global search ad spend comes despite average cost-per-click (CPC) being relatively flat YoY, reflecting incremental budgets being allocated to paid search.

Second, paid search cost-per-clicks are on the rise in the US, UK and EU. During 2012, both the US and UK,as well as the broader European Union, have shown steady CPC increases quarter-over-quarter (QoQ). If growth rates remain consistent, CPC rates in the UK (currently $0.45 USD) could match the US CPC rate ($0.48) by Q4 2012. With CPC rising, marketers will have to increase search ad budgets and/or develop sophisticated optimization strategies to sustain traffic and conversion volumes.

Third, Yahoo! Bing network is driving strong results. In the US, while Google delivers more overall traffic (684% more in Q3 2012), the Yahoo! Bing Network (YBN) drives online sales revenue at a more efficient rate. Specifically, the return on ad spend (ROAS) of paid search on YBN was 28% higher in Q3 than that of Google and the YBN click-through rate (CTR) was 29% higher (see graphic). As a result, advertisers increased their YBN ad spend 10% quarter-over-quarter and 35% YoY, representing a faster rate of growth than Google.

Google Product Listing ads are outperforming text ads. Google Product Listing Ads (PLA) have gained significant traction and outperformed paid search text ads in CTR (68% higher), conversion rate (38% higher) and ROAS (25% higher). Google Shopping moves to an all paid model in the US on October 17, 2012, with the UK and Europe expected to follow in 2013.  This means only merchants who leverage PLA will be present in the search results, making these findings especially notable.

Now, about those mobile phones. Mobile ads represent 13% of total US paid search spend, while mobile phones and tablets generated 21% of all US search ad clicks. But, while mobile phones accounted for 11% of all search ad clicks and 6% of all spend, phones returned just 0.6% of all conversions. Meanwhile, tablets generated 8.8% of all conversions and 10% of total clicks while accounting for only 7% of total ad spend. These converging trends illustrate the impressive performance of tablet paid search for top advertisers, as well as a move toward differentiating paid search campaigns on mobile phones to better accommodate mobile searchers and achieve complementary conversions that aim for something other than direct online sales.

"Through the first three quarters of 2012, we've seen strong growth in paid search budgets as advertisers continue to generate exceptional results from this intent-driven marketing channel," said Aaron Goldman, CMO of Kenshoo. "Marketers should closely examine our data as well as their own campaign benchmarks to find the best performing areas and those ripe for expansion to meet their goals. This report identifies a number of specific opportunities, including increasing investment with the Yahoo! Bing Network, ramping up Product Listing Ads for Google Shopping, and creating mobile campaigns with unique targeting for different devices.