2011 ended with an extremely strong Q4 for online advertising as U.S. paid search spending grew 22 percent year-over-year resulting in the best quarter to date, according to IgnitionOne, a leading digital marketing firm, managing more than $1 billion in online advertising.

Retailers drove much of this spending, as holiday shopping initiatives pushed their search budgets up 26 percent year-over-year. Mobile search advertising among retailers was up a huge 269 percent YoY and accounted for 14 percent of total retail search budgets – peaking at 24 percent on Black Friday.

Key findings in the report:

  • U.S. Mobile search is growing at an enormous rate – YoY mobile search ad impressions are up 317 percent and spend is up 269 percent. Among retailers, mobile search ad spend accounted for 14.2 percent of total paid search budgets, compared to 5.2 percent last year. This spiked on Black Friday with 24 percent of retail search ad spend going towards mobile queries.
  • U.S. Search advertising has its best quarter ever – It was a strong holiday season for search with advertising spend up 22 percent YoY in Q4. Search advertising spend among retailers was up even higher at 26 percent YoY. There were also large YoY increases in impressions (42 percent), clicks (42 percent) and transactions (67 percent).
  • U.S. Search costs (CPCs) declining – In total, Q4 CPCs are down -8.6 percent YoY and -2.3 percent compared to last quarter. This trend benefits marketers as clicks cost less while monetizing at the same rate and benefits Google through expanding impression base and higher clickthrough rates pointing to revenue growth for Google. The trend is driven by Google, as Yahoo!/Bing saw a YoY 6.4 percent increase in CPCs.
  • Google retains U.S. market share lead – In mid-Q4, Yahoo!/Bing held only a 16.6 percent share of the search market, but as expected, given its retail consumer focus, it rebounded with a stronger holiday shopping season. However, by the end of Q4, search market share remained largely unchanged from the previous quarter, with Google commanding 81.8 percent compared to Yahoo!/Bing at 18.2 percent.
  • Europe search advertising also on the rise – Q4 shows gains for European search advertising as spend increased 14 percent, clicks increased 22 percent and Clickthrough Rate (CTR) increased 19 percent.
  • Google continues to grow in display – U.S. spending on display advertising was up 9.3 percent and impressions were up 31.5 percent. The growth for Q4 came from Google’s DoubleClick Ad Exchange, which saw a 105.5 percent increase in spend.

“Adoption of smart phones and tablets is exploding and mobile search is becoming a major part of the shopping experience for many consumers,” said Roger Barnette, President of IgnitionOne. “Advertisers are responding to this trend, which is clearly shown in the enormous growth of mobile search advertising spending.”