S H O P P I N G
R E P O R Tfull edition
2011 U.S. ONLINE RETAIL HOLIDAY
Release Date: January 10th, 2011Covering Search Advertising Trends in the United States
November 1, 2011 through January 2, 2012
2© Kenshoo, Inc. 2011
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Contents
Infographic Overview
Key Insights
1. U.S. Consumers are Using the Internet More Often for Holiday Purchases and They’re Spending More
2. Heavy Retail Competition Drives Costs up but Return on Ad Spend Still Strong
3. Thanksgiving Cements its Position as a Major Online Shopping Day
4. U.S. Retailers Saw Fewer Opportunities for Ad Exposure but Higher Response When Exposure Occurred
5. U.S. Consumers are More Trusting of Search Ads and Retailers are More Savvy with Paid Search Campaign Management
6. Last-minute Shoppers Still Purchase Online the Week Before Christmas
7. Deal-Seeking and Gift-Card Redemption Drive Higher Post-Christmas Revenue
Trends in Mobile and Tablet Usage
Predictions for 2012
Summary Calendar
Glossary
Methodology
About Kenshoo
Contact
CONTENTS
3© Kenshoo, Inc. 2011
2011 U.S. Online Retail Holiday Shopping Report
7 KEY INSIGHTS
Source: Kenshoo 2011 U.S. Online Retail Holiday Shopping Report | © Kenshoo, Inc.Note: Insights reflect year-over-year data from Kenshoo U.S. Retail Index from November 1st, 2011 through January 2nd, 2012 vs. the same period one year prior.
4© Kenshoo, Inc. 2011
2011 Online Retail Holiday Shopping Report
Source: Kenshoo 2011 U.S. Online Retail Holiday Shopping Report | © Kenshoo, Inc.Note: Insights reflect year-over-year data from Kenshoo U.S. Retail Index from November 1st, 2011 through January 2nd, 2012 vs. the same period one year prior.
5© Kenshoo, Inc. 2011
2011 Online Retail Holiday Shopping Report
Source: Kenshoo 2011 U.S. Online Retail Holiday Shopping Report | © Kenshoo, Inc.Note: Insights reflect year-over-year data from Kenshoo U.S. Retail Index from November 1st, 2011 through January 2nd, 2012 vs. the same period one year prior.
6© Kenshoo, Inc. 2011
KEY INSIGHTS
1. U.S. Consumers are Using the Internet More Often for Holiday Purchases and They’re Spending More //////////////////////////////////
U.S. consumers have clearly come to rely on the Internet, and search engines in particular, as a preferred mode of commerce.
Throughout the holiday season, consumers spent more money online during the holiday season than last year as total sales
revenues for retailers driven by search advertising rose 22%. See Figure 1.0.
FIGURE 1.0 | U.S. Holiday Season Revenue Driven by Search Advertising Up 22%
Source: Kenshoo 2011 U.S. Online Retail Holiday Shopping Report | © Kenshoo, Inc.
2010 Revenue
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U.S. Holiday Season Revenue Driven by Search Adver8sing Up 22%
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For the entire holiday season, AOV was 5% higher than last year. This was likely a result of better merchandising by retailers
with more effective product bundling and promotions. See Figure 1.2.
FIGURE 1.2 | Average Order Value for U.S. Sales Driven by Search Ads During the Holiday Season Up 5%
Source: Kenshoo 2011 U.S. Online Retail Holiday Shopping Report | © Kenshoo, Inc.
Source: Kenshoo 2011 U.S. Online Retail Holiday Shopping Report | © Kenshoo, Inc.
U.S. Consumers are also spending more during each session at retail websites. Average order value (AOV = Revenue/Conversions)
for the entire period was up 5% Year-over-Year (YoY). Consumers really loaded up their carts earlier in the season as they
shopped en masse for all the items on their lists. During November, the AOV ranged from $125 to $160 per day. However,
AOV fell between $110 and $135 in December as consumers became more targeted in their shopping, buying only the items
they needed or had forgotten. See Figure 1.1.
FIGURE 1.1 | U.S. Basket Size by Day - Average Order Value for 2011 Holiday Season
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8© Kenshoo, Inc. 2011
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U.S. Holiday Season Paid Search YoY Budget Increase by Day
YoY Budget Increase
2. Heavy Retail Competition Drives Costs Up but Return on Ad Spend Still Strong. ////////////////////////////////////////////////////////////////////////////////////
Search advertisers brought out the big guns this holiday season to capture incremental volume. Search ad budgets for
the holiday season were significantly higher YoY as retail advertisers increased their overall investment by more than
30%. See Figure 2.0.
FIGURE 2.0 | U.S. Holiday Season Search Advertising Budgets Up 31%
Retailers got an early jump on search advertising activity in 2011. The week of Thanksgiving was especially competitive with
budgets for Thanksgiving Day and Black Friday topping out at 49% higher than 2010. Retailers also invested significantly more
this year in luring last-minute shoppers and deal-seekers as seen by the spikes in spend reaching upwards of 60% just before
and just after Christmas. See Figure 2.1.
FIGURE 2.1 | U.S. Year-over-Year Search Advertising Budget Increase by Day
CYBER MONDAY
NEW YEAR’S EVE
CHRISTMAS
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Source: Kenshoo 2011 U.S. Online Retail Holiday Shopping Report | © Kenshoo, Inc.
Source: Kenshoo 2011 U.S. Online Retail Holiday Shopping Report | © Kenshoo, Inc.
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9© Kenshoo, Inc. 2011
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U.S. Holiday Season Paid Search YoY Average CPC Change
YoY Average CPC Change
Higher budgets led to increased competition on individual keyword bid auctions as the average Cost Per Click (CPC) for
the holiday season increased by 8%. Competition spiked the day before Thanksgiving with an average CPC jump of 24%
compared to the same day last year. We also see that retailers pushed last-minute promotions as CPC jumped right before
Christmas. Additionally, the sustained budget increases through New Year’s Weekend is reflected in higher CPC for those
dates. See Figure 2.2.
FIGURE 2.2 | U.S. Holiday Season Paid Search Average Cost Per Click Up 8%
The overall increase in competition led to a slight drop in YoY Return on Ad Spend (ROAS = Revenue/Spend) as rising
budgets outpaced the rise in revenue. However, the return was still very strong as paid search advertising proved to be a
profitable channel. For the period, total ROAS was $5.57, meaning that for every $1 spent by retailers on search advertising,
they generated $5.57 in online sales revenue. See Figure 2.3.
FIGURE 2.3 | U.S. Holiday Season Search Advertising Return on Ad Spend: $5.57 During the Holiday Season
Source: Kenshoo 2011 U.S. Online Retail Holiday Shopping Report | © Kenshoo, Inc.
Source: Kenshoo 2011 U.S. Online Retail Holiday Shopping Report | © Kenshoo, Inc.
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Holiday Season Search Adver2sing Return on Ad Spend: $5.57 During the Holiday Season
2010 ROAS
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10© Kenshoo, Inc. 2011
3. Thanksgiving Cements its Position as a Major Online Shopping Day /////////////////////////////////////////////////////////////////////////////////////////////////////////////
In the Kenshoo 2010 Online Retail Holiday Shopping Report, we dubbed Thanksgiving “Cyber-Kickoff Day” in light of
the dramatic YoY increases we saw in revenue and the number of transactions on Turkey Day. This year, the trends
accelerated with a 28% increase in YoY conversion rates on Thanksgiving Day. See Figure 3.0. It seems people are hardly
waiting for the turkey to come out of the oven before going online to do their shopping; and when they’re going online,
they’re ready to buy. Many retailers started their Black Friday promotions on Thanksgiving and this was a powerful
incentive to convert browsers to buyers.
Higher conversion rates drove a 40% increase in YoY revenue from search advertising on Thanksgiving, exceeding the 29%
YoY growth for Black Friday. See Figure 3.1.
FIGURE 3.0 | U.S. Thanksgiving Day Search Advertising Conversion Rates Up 28%
FIGURE 3.1 | U.S. Paid Search Advertising Revenue Increase YoY
Source: Kenshoo 2011 U.S. Online Retail Holiday Shopping Report | © Kenshoo, Inc.
Source: Kenshoo 2011 U.S. Online Retail Holiday Shopping Report | © Kenshoo, Inc.
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11© Kenshoo, Inc. 2011
Source: Kenshoo 2011 U.S. Online Retail Holiday Shopping Report | © Kenshoo, Inc.
4. U.S. Retailers Saw Fewer Opportunities for Ad Exposure but Higher Response When Exposure Occurred ///////////////////////////////
For the 2011 holiday season, search advertising impressions were down 3% YoY but clicks were up 21%. See Figures 4.0
and 4.1.
There are a few possible explanations for the drop in impressions:
• U.S. consumers performed fewer search queries relative to last year and instead turned to social networks
(including real-world conversations with friends and family at the dinner table) for input on what to buy.
• Modifications made by search engines to improve relevancy of Search Engine Results Pages (SERPs) caused fewer ads to show.
As for the increase in clicks, there are two likely explanations:
• U.S. consumers have come to rely on search ads as the place to find the best and most up-to-date deals.
• Advertisers did a better job of delivering targeted ads and compelling offers.
FIGURE 4.0 | U.S. Holiday Season Search Ad Impressions Down 3%
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U.S. Holiday Season Search Ad Impressions Down 3%
2010 Impressions
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FIGURE 4.1 | U.S. Paid Search Holiday Season Clicks Up 21%
Source: Kenshoo 2011 U.S. Online Retail Holiday Shopping Report | © Kenshoo, Inc.
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U.S. Paid Search Holiday Season Clicks Up 21%
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12© Kenshoo, Inc. 2011
FIGURE 4.2 | U.S. Holiday Season Key Dates - YoY Change Impressions and Clicks
Source: Kenshoo 2011 U.S. Online Retail Holiday Shopping Report | © Kenshoo, Inc.
Looking at key dates during the holiday season, we see an even bigger discrepancy between impressions and clicks
YoY. See Figure 4.2. On Black Friday, Cyber Monday, Green Monday, and Christmas Day, there was a pronounced inverse
relationship between impressions and clicks.
13© Kenshoo, Inc. 2011
5. U.S. Consumers are More Trusting of Search Ads and Retailers are More Savvy with Paid Search Campaign Management /////////////////////////////////////////////////////////////////////////////////////////////////////////////
Paid search advertising click-through rates for the holiday season in 2011 rose 26% over 2010. See Figure 5.0. Search has
become the go-to channel for consumers when they’re ready to make a purchase. Meanwhile, retail advertisers continue to
improve their campaign structures by leveraging technology platforms to automatically create keywords, ads, and landing
pages based on updated product inventory and promotions. This approach ensures relevancy and improves quality score,
having the net effect of delivering targeted ads to the most qualified consumer queries.
FIGURE 5.0 | U.S. Paid Search Holiday Season Click-Through Rates up 26%
Source: Kenshoo 2011 U.S. Online Retail Holiday Shopping Report | © Kenshoo, Inc.
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U.S. Paid Search Holiday Season Click-‐though-‐Rates Up 26%
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14© Kenshoo, Inc. 2011
6. Last-minute Shoppers Still Purchase Online the Week before Christmas ///////////////////////////////////////////////////////////////////////////////////////////////////
This year, consumers turned to the Web for last-minute shopping at a much higher rate than 2010. Placing their trust in rush
shipping, consumers drove search advertising revenue up 40% during the week before Christmas, peaking at 60% the day
before Christmas Eve. See Figure 6.0.
FIGURE 6.0 | U.S. Week Before Christmas - YoY Revenue Increase 40% (Total Week)
Source: Kenshoo 2011 U.S. Online Retail Holiday Shopping Report | © Kenshoo, Inc.
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U.S. Week Before Christmast -‐ YoY Revenue Increase 40%
YoY Revenue Increase
15© Kenshoo, Inc. 2011
7. Deal-Seeking and Gift-Card Redemptions Drive Higher Post-Christmas Revenue //////////////////////////////////////////////////////////////////////////////////
Thanks to consumers looking for bargains as well was making use of gift cards, search ad impressions were up nearly 20%
YoY following Christmas. See Figure 7.0.
FIGURE 7.0 | U.S. Post-Christmas Search Ad Impressions Up 19%
FIGURE 7.1 | U.S. Post-Christmas Conversions Up by 37% and Revenues Up by 32% YoY
Source: Kenshoo 2011 U.S. Online Retail Holiday Shopping Report | © Kenshoo, Inc.
Source: Kenshoo 2011 U.S. Online Retail Holiday Shopping Report | © Kenshoo, Inc.
These deal-seekers were not just window shopping, though, as sales conversions were up 37% and revenue increased 32%
for the 8 days following Christmas. See Figure 7.1
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U.S. Post-‐Christmas Search Ad Impressions Up 19%
2010 Impressions
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16© Kenshoo, Inc. 2011
FIGURE 7.2 | U.S. Searches for “Shopping Deals” Keyword on Google December 11, 2011 through January 8, 2012
FIGURE 7.3 | U.S. Searches for “Redeem Gift Cards” Keyword on Google December 11, 2011 through January 8, 2012
Source: Google Insights for Search, 2012
Source: Google Insights for Search, 2012
Post-Christmas searches for “Shopping Deals” and “Redeem Gift Cards” reached their peaks on December 26th as seen in
Google Insights for Search. See figures 7.2 and 7.3.
17© Kenshoo, Inc. 2011
TRENDS IN MOBILE AND TABLET USAGE2011 saw a remarkable diversification of device usage as smartphones and tablets increased in popularity and consumers
turned to them more often to search and actually make purchases. In Figure 8.0 we can see metrics that indicate how
consumers are using various devices to shop online.
Personal computers still hold the lion’s share of both clicks and revenue. This is clearly the device that consumers are most
comfortable transacting upon. Personal computer conversion rates are higher than tablet and mobile which can be attributed to the
fact that most retailers have spent more time and have more experience optimizing the shopping experience for these devices.
Interestingly, tablets are responsible for the highest average order value (revenue per conversion) this year. As the market
share of tablets grows, retailers will have to make plans to accommodate them, including creating rich mobile sites as well
as considering creating applications with stripped-down functionality.
Mobile phone revenue accounted for only 1% of the total revenue and performed the poorest when measured by conversion
rate. Consumers tend to use their cell phones for quick searches, locating products or stores, and placing phone call inquiries
as opposed to completing actual transactions.
Source: Kenshoo 2011 U.S. Online Retail Holiday Shopping Report | © Kenshoo, Inc.
FIGURE 8.0 | Breakdown by Device of U.S. Online Retail Clicks and Purchases Resulting from Search
18© Kenshoo, Inc. 2011
For those consumers who did use smartphones to make purchases, Apple iOS mobile phone users represented a more
desirable audience, spending 13% more on purchases and delivering a conversion rate that was almost 20% better than
Android mobile phone users. See Figure 8.1.
Source: Kenshoo 2011 U.S. Online Retail Holiday Shopping Report | © Kenshoo, Inc.
FIGURE 8.1 | Conversion Rates and Average Order Size by Mobile Phone Operating System
Conversion Rate
0.79%
Conversion Rate
1.01%
Average Order Size $108.33
Average Order Size $122.48
Android Mobile Phone Apple Mobile Phone
19© Kenshoo, Inc. 2011
PREDICTIONS FOR 20121. Shoppers will spend more online in 2012 spurred on by the “Deal Economy.”
While this is certainly not the boldest prediction, the Kenshoo U.S. Online Retail Holiday Shopping Report revealed record revenue
figures in 2011. Other research from comScore and IBM also showed significant increases in e-commerce activity. Black Friday has become an online shopping event in addition to a staple for brick and mortar stores. In many cases, online retailers
started their Black Friday deals online during Thanksgiving Day to capture increased demand. This is just one example of how the
“deal-economy” has affected the retail landscape. Thanks to companies like Groupon, LivingSocial, and Rebate Networks, consumers
have been conditioned to seek out deals and never pay “full price.” Meanwhile, retailers have become savvy with merchandising tactics
to position their offerings as true deals.
A final trend leading to increased online shopping is the impulse purchases brought on by shipping clubs such as Amazon Prime and/or
free-shipping offers from various merchants. Shipping costs (and lag times) were once a barrier to online sales but no longer. In 2012,
look for retailers to leverage advanced technology solutions like Kenshoo RealTime Campaigns to manage deals and promotional
offers in “real-time” based on inventory availability and up-to-the-minute pricing and packaging.
2. 2012 will be the year of the tablet.
With nearly 7% of all revenue driven by paid search advertising coming from tablets, we can expect this device to play a more
prominent role in consumer shopping and marketer ad targeting habits.
According to the Pew Research Center, 11% of Americans own a tablet and spend an average of 95 minutes a day on the device. Families
with household incomes over $75,000 make up 54% of tablet owners, which may help explain why the average order size on tablet
purchases was higher than desktop.
As for mobile phones, while conversion rates and revenue share are relatively low, keep in mind the data we looked at represents the
Kenshoo U.S. Retail Index where a conversion is defined as an online purchase. For other verticals where conversions are defined as
application installs, phone calls, or location check-ins, mobile phone conversion metrics will be quite strong. Marketers will be wise to
leverage tools like Kenshoo that integrate online and offline metrics into the tracking, reporting, attribution, and optimization processes.
Another best practice for search marketers is to use platforms like Kenshoo to break out separate campaigns for mobile versus desktop as
well as target specific devices. Tailoring keyword selection, ad copy, landing pages, and bids to each particular device will improve quality
score metrics as well as conversions.
3. Paid search will increasingly be viewed as cost of goods sold in light of massive volume but heavy competition.
In its IPO filing, Groupon asked investors to view online marketing expenses as a capital expense. While this ran contrary to standard
accounting principles and caused much debate, the message was clear -- online marketing, and particularly paid search, is a long-term
investment and, in many cases, a pre-requisite for sales and, therefore, could be considered a cost of goods sold.
20© Kenshoo, Inc. 2011
Even if SEM can’t be taken as capital expenditures, such an approach to budgeting and P&L management becomes especially important
as the paid search competition becomes cut-throat and many advertisers irrationally increase bids beyond the point of profitability in an
effort to maintain volume. In order to meet sales projections in a marketplace marked by inflated budgets and CPC but flat impressions
and ROAS, expectations need to be set very carefully and budgets doled out responsibly.
To effectively compete in such a landscape, we expect retailers to maximize paid search budgets first, before allocating money to any
other marketing line items. Furthermore, marketers will continue to adopt model-based bid policies, such as those offered by Kenshoo, to
dynamically categorize keywords into portfolios and automatically calculate marginal ROI before making optimizations and squeeze out
last bit of profit.
4. SEO and PPC will be managed more holistically as competition increases and multiple device usage proliferates.
In many cases dwarfing paid search volume, organic search remains the largest driver of Web traffic to retailers. With the PPC landscape
continuing to get more competitive and ROAS holding steady, optimizing websites to achieve stronger organic rankings will be on every
marketer’s 2012 to-do list.
Retailers will need to develop mobile-friendly sites and other assets that will stand out on SERPs as search engines continue to move
towards universal rankings and blended listings. The key to success for marketers will be to view PPC and SEO data side-by-side to best
understand the interplay between paid and organic listings as it relates to the path-to-conversion. In some cases, 1+1 will equal 3 and a
listing in paid and organic will generate more volume and/or conversions. But, for some keywords, a cannibalization effect will occur and
1+1 will equal 1.5.
In 2012, retailers will take advantage of partnerships like the one struck by Covario and Kenshoo to integrate SEO and PPC data into
a single dashboard for ease of tracking, analysis, and optimization. Additionally, organic keyword traffic can be a great source of
inspiration for paid search keyword expansion. Tools like Kenshoo that integrate SEO data can activate such insights within the
same user interface.
5. Marketers will integrate their social media and SEM campaign management practices.
For the second straight year, SEM ad impressions were flat or down during the holiday season, reflecting a tendency for consumers
to query their friends and families via social networks before, after, or even instead of querying their favorite search engine.
Social networks such as Facebook, Twitter, and LinkedIn have become a trusted source for product recommendations. Since the
advertising opportunities on social networks resembles that of paid search with dynamic ads and real-time bidding, search marketers
are positioned well to leverage platforms like Kenshoo to manage search and social campaigns.
However, the mindset of consumers on social networks is quite different than when they are using search engines with
communication and entertainment more top of mind than commerce. Furthermore, the ad targeting options for retailers on
social networks are much different with intent inferred by user profiles, interests, location and connections.
To best address both the similarities and nuances between social network advertising and search engine marketing, retailers will seek
out technology solutions like Kenshoo that provide unified tracking, reporting, and attribution while delivering unique user-interfaces,
targeting options, and bid algorithms to extract the maximum value from each channel.
21© Kenshoo, Inc. 2011
SUMMARY
22© Kenshoo, Inc. 2011
GLOSSARY
Click Through Rate:
Return on Ad Spend:
Average Order Value:
Conversion Rate:
Cost Per Click:CTR =
ROAS =
AOV =
CVR =
CPC = Clicks
Impressions
Revenue
Cost
Revenue
Conversions
Conversions
Clicks
Cost
Clicks
.
23© Kenshoo, Inc. 2011
METHODOLOGYThe research provided in this report is based on the Kenshoo U.S. Retail Index™, a cross-section of Kenshoo retail advertisers
covering verticals like apparel, electronics, entertainment, home improvement, gifts, luxury goods, and toys. The data set
includes paid search advertising in the U.S. across channels like Google, Yahoo, and Bing from November 1st through January
2nd in 2011 and compared to that same period in 2010. The 2011 statistics were culled from an aggregation of more than 28
billion total search advertising impressions, 350 million clicks and 8 million online sales transactions. The mobile and tablet
data represents a subset of retailers in the index and a shorter window of analysis during the month of December 2011.
ABOUT KENSHOOKenshoo is a digital marketing software company that engineers technology solutions for search marketing, social media
and online advertising. Advertisers, agencies and marketing providers use Kenshoo Enterprise, Kenshoo Local and Kenshoo
Social to direct more than $15 billion in annual customer sales revenue. The Kenshoo Universal Platform delivers automation,
intelligence, integration and scale to make better marketing investments. Kenshoo powers 6 of the top 10 global hotel
groups, 7 of the top 10 retailers, 7 of the top 10 telecoms, 9 of the top 10 ad agency networks, and 23 of the Fortune 50
companies. With campaigns running in more than 100 countries, Kenshoo customers include Accor, Annalect, Barnes
& Noble, CareerBuilder, Facebook, Havas Digital, Hitwise, iREP, John Lewis, LendingTree, Sears, Starcom MediaVest Group,
Tesco, Travelocity, Walgreens, and Zappos. Kenshoo has ten international offices and is backed by Sequoia Capital and Arts
Alliance. Please visit www.Kenshoo.com for more information.
Kenshoo is a trademark of Kenshoo Ltd. Other company and brand names may be trademarks of their respective owners.
CONTACTPlease contact Ari Rosenstein, Director of Marketing Research at Kenshoo, with any questions about this research or the
insights derived.