We’re already through the first month in the 4th quarter of 2011. For search providers, it’s a busy time of year. Forecasters predict double-digits jumps in search spending through year end. And this is coming off a 7% increase when 3rd quarter pay-per-clicks (PPC) are compared to the activity reported last year.

The U.S. search engine market continues to be dominated by Google which currently enjoys an 81.6% market share. The  Yahoo Search/Bing alliance is now about 1 year old and remains a distant second competitor in this market. Their current market share of 18.4% is down from 20% a year ago. The folks at Yahoo/Bing have rolled out new innovations such as Rich Ads in Search but these efforts appear to be falling short of marketer expectations. The alliance’s cost-per-impression numbers have dropped 22.8%.

According to analysts at IgnitionOne, as marketers focus their ad dollars primarily with Google, they expect to be spending between 12%-15% more this holiday season. They anticipate better conversion rates in November and December and are willing to spend more to get them. Retailers are a key marketer group in the holiday period. So far this year, retailers have boosted the search ad budgets by 22%. At the same time, they have experienced a drop of 15.7% in conversion rates and a 5.1% drop in average order values.

The IgnitionOne analysts also note that marketers are pouring more money into display with 58% more impressions being delivered so far this year. Because of the expanding online inventory for display ads, marketers have only spent 21% more to obtain these impressions. And the CPM has dropped by 23.4%.

This trend is not necessarily good news for media space providers who are fighting more competitors. And, after the 4th quarter closes, marketers may be looking at their search budgets again. If the drop in conversion rates and order values continues, search may be due for an adjustment.

[Source: Global Online Advertising Report. Ignitionone.com. Fall 2011. Web. 31 Oct 2011]