AdGooroo Search Engine Update - Q408 (Final)

Posted by Richard Stokes on January 12, 2009 to AdWords, Research

Search Engine Advertising Update - Q408
January 12, 2009

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December’s data continues to support our thesis that Q4 will prove to be the strongest quarter on record for Google and Microsoft Live Search.

Google led in Q4 with first-page advertiser growth of 58.0%, followed by Live Search with 42.3%. Yahoo trailed with a mere 8.8%, surprisingly low given the brisk pace of online holiday sales.

Microsoft continued to close the gap in advertiser share with Yahoo. In Q3, Yahoo led by 17.6 percent (30.4% vs. 12.0%). By the end of Q4, this lead has narrowed to 3.0% (19.4% vs. 16.4%).

As we reported in our mid-quarter update, we measured large increases in ad coverage on Google - a trend which continued throughout December. Yahoo remained consistent with previous 2008 ad coverage measurements, while Microsoft ad coverage declined in Q4 (indicative of continuing focus on ad quality control and holistic search).

We expect a flattening out or even a decline of advertiser accounts into Q1. This is typical of the post-holiday quarter, but should nevertheless lead to positive Y/Y growth.

Is Microhoo! A Possibility?

Although Microsoft officially withdrew its offer for Yahoo! in May, the financial markets have been abuzz with chatter about the possibility (or unlikelihood) of a follow-up offer. Microsoft’s comments have not been particularly enlightening either way.

On November 7th, Steve Ballmer stated to the Financial Times, “It was clear that (Yahoo!) doesn't want to sell the business to us and we moved on.”

A month later, he elaborated:

"We're fully prepared to compete without any partnership with Yahoo. We don't need to act. Would it be advantageous for both of us to make a deal? Look, the fundamental basis for doing the search deal with Yahoo has to do with critical mass in the advertising marketplace. It doesn't have to do with technology, or any of these other things, it really is a market phenomenon. Together we would have more advertisers….which means we'd have more relevant ads on our page. We'd have higher monetization levels possible in front of us because there would be more people bidding on more key words. Most importantly, Google would have perhaps a real credible competitor sooner."

- Steve Ballmer, December 5, 2008

Continued in full report...

Charts available in full report:

1. Monthly Growth in Advertiser Count
2. Share of Advertisers by Search Engine
3. Avg # Ads/Keyword (US & International)
4. Avg # Ads/Keyword (US only)
5. Top 25 Advertisers by Search Engine

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