Paid search pays off for e-retailers

Online retailers continue to spend the most money on paid search because they find it is the most effective way to acquire new customers, according to a Forrester Research and Shop.org report.

Online retailers surveyed by the two organisations also indicated that paid search was more effective in driving sales in 2013 than the year before.

The findings come from the State of Retailing Online report, an annual study conducted by Forrester Research Inc. and Shop.org, the e-commerce arm of the National Retail Federation.

Respondents to the survey spent some money on pay-for-performance search placement, such as Google AdWords and Yahoo Advertising. About a fifth (19%) of respondents allocated more than 50% of their marketing budgets to paid search. Half of the 81 respondents allocated between 20% and 50% of their marketing budgets to paid search.

Search engine marketing was cited as one of the top three best ways to attract customers by the majority of the respondents (85%). Furthermore, 41% cited organic traffic, 40% named affiliate programmes, 29% said remarketing and retargeting of advertising, 15% direct mail campaigns, 10% said sweepstakes and 10% said behavourial targeting of ads.

Respondents also cited online marketplaces, offline advertising, social media and text advertising, although fewer than 10% of respondents selected those tactics.

Paid search is paying off

Three-quarters (76%) of the respondents found that paid search in 2013 was more effective in terms of revenue than paid search in 2012. Only 8% said it was less effective and 16% said it was just as effective.

Online retailers are also beginning to spend more on marketing tactics such as display advertising, specifically remarketing and behavioural ads.

The report said online retailers are allocating more of their marketing budgets to smartphones and tablets, though much of that is focused on the tried-and-tested tactic of email marketing. Online retailers reported that 42% of their emails were opened on smartphones, 41% on desktop computers and 17% on tablets.

“As more web traffic for retailers has shifted to mobile devices, email has turned out to be a key tactic to engage shoppers on mobile devices, particularly smartphones,” said Forrester e-commerce analyst Sucharita Mulpuru. “While virtually all the top online retailers have invested in apps, the majority of their mobile traffic continues to come from the same sources as their desktop traffic: search, email and organic traffic.”