Spending growth slowed during the third quarter, according to data released by Kantar Media–up only 0.4% compared to last year. This slower growth story was true for every media sector—including online ad spend. Within this sector, paid search was the category to suffer the most. The good news: thanks to increased spending on holiday campaigns, it doesn't necessarily feel that painful.

Within the Internet sector, display advertising expenditures jumped 15.8% during July-September and the gains were broadly distributed across top spending categories, Kantar said.  But measured investments in paid search declined 14.4% in Q3 on continuing reductions from insurance companies, legal services and medical care providers.

For the first nine months of 2011, display spending increased 10.1% while paid search fell 2.1%.

Holiday Spend on Paid Search Rises 29%

Fortunately for the sector, advertisers stepped up their paid search campaigns for the holiday with search advertising budgets for the holiday season significantly higher than last year–by some 29% during the 4 weeks leading up to Cyber Monday, according to a separate report by Kenshoo.

It also found that the average cost per click (CPC) for the four-week period was up 9%.  Despite the overall increase in competition on individual keyword bid auctions, return on ad spend remained steady year-over-year at $5.22 for the period, meaning that for every dollar retailers spent on paid search, they made more than $5 in sales revenue.

Black Friday boasted the largest share of search advertising revenue for the 4-week period (10.93%), followed by Cyber Monday (9.34%), and Thanksgiving (7.09%).