AdGooroo Q208 "share of advertisers" estimates now available for Google, Yahoo!, and MSN
Posted by Richard Stokes on July 7, 2008 to
Search Engine Advertiser Update – Q208
July 8, 2008
Perhaps as should be expected as we head into the summer months, Q2 was a quiet quarter for the search advertising industry.
While advertiser counts for all three search engines were flat to lower, it appears that Google and Yahoo have turned up the heat on Microsoft. While Yahoo managed to hang on to its advertiser base (+0.03%) and Google showed a small decline (-6.4%), we observed nearly a 20% drop in MSN’s active client count in Q1.
Of the three major search engines, only Yahoo has held onto its gains made over the past year. Trailing twelve month advertiser growth for Google, Yahoo, and MSN respectively were -8.5%, +9.8%, and -6.7% respectively.
While advertiser counts have historically been a reliable directional indicator of search revenue, we know that Google is attempting to change the rules of the game by placing increasing emphasis on ad quality. This is particularly evident when looking at the average number of ads displayed per keyword.
Over the past 6 months, the average number of ads per keyword shown on Google in the US has declined from 6.5 to 4.0, a nearly 40% drop. While it’s possible that this could reflect a poor economic environment, it’s more likely the result of Google’s ongoing efforts to improve the quality of its ads.
The theory is that by eliminating less effective ads, the remaining ones should have higher clickthrough and (possibly) conversion rates. This in turn should justify higher bid prices.
However, the auction-based bidding system makes this a double-edged sword. As the number of advertisers declines, so does the competitive pressure for higher bid prices. If advertisers don’t step up to the plate and bid more aggressively for placement, then it’s possible that search revenues could stagnate.
We speculatively view Google’s new AutoMatch algorithm as their response to (and tacit understanding of) this Achilles heel of auction-based pricing. AutoMatch automatically shows ads on search queries not specifically targeted by advertisers, thus increasing the number of bidders across all keywords. AutoMatch was released on May 20 so it will likely be one or two quarters before we can conclusively judge its success. However, we’ve already seen an uptick in ad coverage for June (from 3.9 to 4.0), so this is a possible portent of success.
Is search recession proof?
1. Share of Advertisers by Search Engine
2. Monthly Growth in Advertiser Count
3. Relative Advertiser Count vs. 12 Months Ago
4. Avg # Ads/Keyword (US & International)
5. Avg # Ads/Keyword (US only)
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