Tech Giants Increase Paid Search Spending Despite Weak Economy According to Covario's Q3 Analysis : Third Installment in Covario's Analysis Series Shows Year-on-Year Paid Search Spending up from 43 Percent in Q2 to 51 Percent in Q3 '08 for 128 Brands at 12 of the World's Largest Technology Companies

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Covario, Inc., the leader in interactive marketing analytics, today announced the release of the Q3 2008 edition of its Global Search Spend Analysis series. Despite the faltering economy, Covario has observed a spike in Year-on-Year (Y-o-Y) paid search spending growth to 51 percent from 43 percent growth rate in the previous quarterly analysis. This spike resulted from a number of factors, including one-time Olympics and seasonal “back to school” advertising campaigns. This analysis focuses on global paid search spending allocation patterns for 128 brands at 12 major U.S.-based technology organizations such as Intel and Lenovo between Q1 2007 (Q1 '07) to Q3 2008 (Q3 '08). The combined paid search advertising spend of the analyzed brands represents more than $225 million.

Protecting Your Online Marketing Budgets in Today's Challenging Economic Climate

"We are cautiously optimistic about paid search spend in 2009. We are recommending to clients that growth in paid search advertising should be in line with market share objectives," said Craig Macdonald, VP of marketing and product management at Covario. "Our clients have been very successful in appropriately growing search budgets to date given the high ROI and clear accountability of paid search. However, we do expect paid search spending growth to slow over the next two quarters as a result of the severe economic conditions."

Trends by region

In North America (NA), Covario has seen Y-o-Y growth rates slow from 83 percent in Q1 2007 to 32 percent in Q3 '08. This region has been hardest hit by financial issues and this is reflected in the data. Also, in Q3 '08, NA accounted for nearly 68.8 percent of all spending allocations on paid search, up from 64.6 percent in Q2 2008, largely a result of annual "back to school" programs that have driven more spending to the region. Spending growth rates in Europe, Middle East and Africa (EMEA), have been increasing from -4 percent between Q1'07 and Q1'08, to 204 percent increase in spending from Q3'07 to Q3'08. We believe 10-15% of this growth is currency-related, as the US dollar weakened throughout the year. Despite the growth in spending in EMEA, the overall allocation is still less in EMEA than the previous quarter. In fact, EMEA spending allocation contracted from 27.5 percent of spend in Q2 '08 to 19.9 percent in Q3 '08, consistent with the pattern seen in 2007. In Asia Pacific (APAC), paid search spending has been growing at 59 percent rates from Q3'07 to Q3'08 largely due to additional expenditures by advertisers around the Olympics. APAC spending represented 9.9 percent of all spending, up from 7.2 percent in Q2 '08. Trends by search engine

In Q2 '08, there was significant interest in the fact that Covario observed advertisers had shifted part of their budgets for paid search away from Google to Yahoo. Yahoo has solidified its Q2 gains in Q3, though the trend has flattened out. The percentage of spending in Q3 '08 executed on Yahoo in NA was 13.5 percent, down only slightly from 14.3 percent in Q2'08. As for Google, the Q3'08 spending allocation in NA was 82.9 percent, up slightly from 81.2 percent from the previous quarter. There has been an increase in advertiser activity with Ask.com in NA. 80 percent of the advertisers analyzed are doing some level of advertising on the engine, up from less than 40 percent during the first half of 2008 due to system improvements. Currently, the amount of overall spending on Ask.com is less than one percent. Trends in keyword inflation (by search engine)

Covario continues to see reductions in the average Cost-Per-Click (CPC) that advertiser clients are paying on the search engines. This is largely the result of improved optimization on the part of these large advertisers due to the use of Covario™ Paid Search Insight, which has enabled them to gain global visibility into their paid search programs and activities. In Q3, the average CPC for Covario's advertiser clients was $1.09, down from $1.19 average in 2007. Baidu continues to have the lowest CPCs at $0.18 on average, and MSN has the highest CPC at $1.50. Covario also added an analysis of the Click Through Rates (CTRs) by engine that the advertisers in the study are experiencing, and the general pattern is that CTRs are down in 2008 from 2007. Specifically, CTRs for Google were 1.9 percent in Q3 '08, down slightly from 2.4 percent in 2007. Yahoo has the lowest CTRs for advertisers at 1.0 percent and MSN is the highest at 2.2 percent (with the exception of Yandex, which is 3.0 percent but represents a very small percentage of global spending). Additional findings and graphical representations of these trends are available in Covario's Global Search Spend Analysis Vol. 3 (Q1 2007 to Q3 2008). The analysis results will also be presented as part of a Covario webinar, titled "Protecting Your Online Marketing Budgets in Today's Challenging Economic Climate," to be presented today, October 15, 2008 at 1 p.m. EDT / 10 a.m. PDT. In addition to a discussion of the Q3 findings by Macdonald, the hour-long session will also include insights from Mark Sholz, interactive manager of Imaging & Printing Group worldwide at Hewlett-Packard on how HP is reacting to market challenges and driving search in 2009, as well as insights from Ross Sandler, senior Internet analyst at RBC Capital Markets, on 2008 search trends and projections for 2009. To register, please use the following link: http://www.covario.com/podcasts_webinars/101508_protecting_budgets.shtml.

Covario's Global Search Spend Analysis series leverage the advanced analytics of Covario Paid Search Insight, which gathers and analyzes paid search advertising data for more than two dozen of the world's largest advertisers to determine global spending trends and performance. To download a copy of this or previous analyses, please visit http://www.covario.com.

About Covario, Inc.

Covario, Inc. is the leader in Interactive Marketing Analytics (IMA) software. The Covario portfolio provides global organizations with robust interactive and search marketing analytics solutions for display advertising, paid search advertising and organic search engine optimization across the enterprise and throughout the channel. Covario enables complex and distributed organizations to control brand integrity, ensure budget transparency and deliver quantifiable results across business units, distribution channels and languages. Headquartered in San Diego, Covario's growing customer list include some of the world's best known brands in high tech manufacturing, financial services, electronics, media and publishing and consumer packaged goods. For more information on Covario, call 858.397.1500 or visit http://www.covario.com.

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