December 9, 2008

AdGooroo Report Shows Times Not So Tough for Search

The economic downturn may not be affecting search advertising, according to the latest Mid-Quarter Search Engine Update from AdGooroo. The report shows that first-page advertising activity on all three search engines was up sharply during the first two months of Q4. Google active advertiser counts were up about 54.9%, Yahoo up 11.2%, and Microsoft up 29.6%

Some of the uptick is due to increased spending on holiday campaigns across the engines. Some of Google's large increase in advertiser counts is due to the increase in ads per page that Google implemented this quarter.

In addition, AdGooroo reports that We estimate that Microsoft has increased its advertiser share from 11.5% in Q3 to about 15.8% in Q4, a 37% increase. That brings Microsoft much closer to second-place Yahoo, which stands at 22.1%, with Google squarely in the lead at 80.3%.

The full 4-page report is available for download.

Posted by Kevin Newcomb at 1:36 PM | Permalink | Comments (3)

November 3, 2008

JP Morgan Lowers Search Ad Growth Estimates

JP Morgan Internet analyst Imran Khan is lowering projections for search ad spend for 2008 and 2009. The forecast for 2008 growth is now 23.4% year-over-year, down from earlier projections at 27.4%. The forecast for 2008 is a dismal 17.3%, down from 25.5%.

Khan sees specific sectors as being hit harder than others, particulary travel, telecom, autos, and retail. Still, Khan expects search advertising to hold up better than display advertising.

What do you think of Khan's revised projections?

Posted by Nathania Johnson at 11:35 AM | Permalink | Comments (0)

July 15, 2008

SEW Experts: Bernstein Research Predicts the Future of Paid Search

In a full-blown recession, what's the future of paid search? In today's Search Engine WarGames column, "Bernstein Research Predicts the Future of Paid Search," Kevin Heisler looks at a new study from Sanford C Bernstein's research arm that's a virtual crystal ball into Google and search engine marketing.

» Full story

Posted by Kevin Newcomb at 12:00 AM | Permalink | Comments (0)

June 18, 2008

Paid Search Key in Projected Online Overtake of TV in UK Ad Spend

Paid search will take a lead role in online overtaking TV in the UK ad spending this year, according to Enders Analysis. Search ads are expected to surpass £2 billion, making up 60% of the online ad spend this year. The projections are in line with an e-Consultancy survey where 63% of companies said they planned to increase their paid search budget.

Google will see 80% of the search spend, possibly more with the recent announcement of an ad deal with Yahoo. 85% of search ads went to Google in the first quarter of 2008.

The total online ad spend is expected to reach £3.56 billion, while TV ad spend is expected to be £3.39 billion. Online ads will make up 19% of total advertising in the UK.

Posted by Nathania Johnson at 9:10 AM | Permalink | Comments (0)

January 11, 2008

Don't Worry About That Economic Slowdown

The Search Ad marketplace “sky” won't fall when our economy slows or possibly kicks into a recession this year.

Lately, we have all heard confirmations about the downturn. Jim Zarroli reported “hiring is down, real estate is in a coma and banks have suddenly become a lot more skittish” on NPR. Some 42% of surveyed economists (WSJ, paid access) believe there's a chance of recession, and the Fed's talking about lowering interest rates to stave it off.

Are search ads in some protective cocoon? Let's leave aside the well-worn argument that these ads are the safest due to ROI tracking and accountability. I think it's more important to consider other influences that could protect them from this downturn.

* Search Ads As Smaller Line Item -- Even if a company wants to cut ad dollars, search isn't where they would save the most. While each industry's mix varies, these ads typically represent 2% of all advertising revenues -- simply not a substantial savings.

* Search Ads Could Increase -- According to Kevin Lee, “If a mere 10 percent were reallocated from the top three media line items to SEM, most search budgets would double.” Should marketers decide to cut their ad dollars, then they might consider shifting some of those savings into more productive search ads.

* Financial Industry Still Spending -- While "bell-weather" financial services are clearly getting challenged, they continue spending online. At Efficient Frontier, Leann Prescott says they've experienced substantial sector growth this year. Ongoing clients (more than one year old) even increased spends by 35% between November 2007 and 2006.

*Search Ad Prospects Look Good -- According to Forrester projections, search ad revenues are forecast to grow from $4.5 billion (2007) to $10.1 billion (2012). It would take a lot for the Google juggernaut to switch gears as well.

So there's no need to be Chicken Little. Recession or not, the search marketplace might shift around but seems pretty stable. You won't see any search ad retrenchment this year.

Posted by at 8:01 AM | Permalink

May 24, 2007

Search Still Leads Online Ad Spending

According to the latest Internet Advertising Revenue Report from the Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers (PwC), search advertising made up 40 percent of the $16.9 billion spent in the U.S. for online advertising last year.

Search ad revenues (which include PPC search ads, contextual text ads, paid inclusion and SEO) total $6.8 billion for the year, up 31 percent from the $5.1 billion reported in 2005. The next-largest category for 2006 is display ads, at $5.4 billion, or 23 percent of total online ad spending. Next comes online classifieds, at $3.1 billion, or 18 percent of overall ad revenues.

Online ad spending in 2006 was still dwarfed by offline:

Direct mail – $55.7 billion
Newspapers – $51.2 billion
TV networks (broadcast and cable) – $39.9 billion
TV distribution – $32.5 billion
Magazines – $24.6 billion
Radio – $20.8 billion
Internet – $16.9 billion
Outdoor – .6.8$ billion

Kate Kaye has the full story at ClickZ News.

Posted by Kevin Newcomb at 11:14 AM | Permalink

September 27, 2006

2006 Online Ad Spend: 37% Increase in '06 & Search Remains Hot

The Internet Advertising Bureau (IAB) in conjunction with PricewaterhouseCoopers (PwC) released online ad revenue figures for the first two quarters of 2006, showing a 37% increase year-over-year for the same period. The first half of 2006, revenues from online ads were $7.9 billion. Search counted for approximately 40 percent of those figures, at $3,164 million. Like in the past, they do not break out contextual ads from search ads.

A ClickZ story says that in a separate report, by eMarketer reports all of this year will be worth 15.9 billion. In short, growth is still strong at 26.8 percent but down slightly from last year at 30.3 percent.

Posted by Barry Schwartz at 8:29 AM | Permalink

September 20, 2006

Again, The Need For Search Ad Revenue To Stand Alone

Has the search bubble popped, given Yahoo's warning yesterday about declining ad revenue? That warning generated a stock plunge that has hit both Yahoo and Google. No, it's probably not a search bubble. Instead, it's a lesson in the danger of not breaking out search ad revenue from other forms.

Exactly as Robert Scoble notes here, the ad slip at Yahoo is not necessarily a search ad problem. What Robert calls "banner ads" is more specifically display advertising, graphical ads that are not pay-per-click text ads that show up in response to a search. Yahoo has a much bigger display advertising effort than Google. The downturn could be impacting just that side of their ad house.

In fact, the Wall Street Journal article about Yahoo's warning suggests this may be the case:

Yahoo's total revenue last year was $5.3 billion and an unspecified, but significant percentage of that was from so-called branded advertising, which includes graphical display ads as opposed to the small text ads placed beside search results.

Analysts say the two sectors Yahoo singled out generally spend heavily on such display ads. John Aiken, head of equity research at research firm Majestic Research Corp. in New York, said data about Internet activity suggest that search advertising for Yahoo and the broader industry appeared to be growing around expected levels. "Branded [advertising] is going to be a bumpier road for growth than people expected," said Mr. Aiken.

Of course, Google's not necessarily immune. A significant amount of Google's income is from non-search advertising -- contextual ads, some of which are graphical in nature. This is one reason why I'd asked Eric Schmidt at SES last month about breaking out search ad income from other forms. From the transcript of our talk:

Danny: Somewhat related: my understanding is that I still can't go to Google's financials and know how much money is going into content ads versus search – and I care about the search. I mean, to me search is a different intention and contextual. And so when people say, "we're going to measure the health of the search market," I want to know how the health of the search market is from a leader like Google. But I've always felt like when those figures are mixed together, it pollutes the data. For all I know, your contextual network is suddenly tanking, a whole bubble is about to burst out there, but search will be healthy. But the whole search industry might go down with it.

Eric: None of that is going to happen.

Danny: None of that is happening. And I was going to say, alternatively, everything has been doing great.

Eric: Since we're on the record, since we're on the record and it's a public company, I want to make sure that what you just said [that the contextual network is "suddenly tanking"] is not true.

Danny: Right. But that's the opposite to what could be happening. But contextual might be doing wonderfully, and search might be [tanking] …

Eric: They're both doing well. Again, we have a whole bunch of people who are trying to reverse-engineer the economics of Google. And we have historically not wanted to give out the detailed information that you're describing. These are clickthrough rates, CPCs, RPMs, and so forth. There are a number of reasons [not to split these out]. One of course is competitive. But there's a more fundamental reason, which is that anybody who looks at how Google actually runs the ad network makes simplifying assumptions that are not in fact true. And it's important that we, Google, not give out information that can be misused or is essentially false. So we've chosen, to the frustration of many, to not reveal the underlying economics of the ad box. Partly because it's changing so quickly. And all of the estimates that you see are based on smart people making estimates without our assistance. We think for numerous reasons that's the right decision. It's how we run the business.

Perhaps now we'll see some change happen. The failure to do good breakouts, the pollution of other ad revenues mixed in with search, directly causes search to perhaps be seen as in trouble when it might be completely healthy.

In fact, as I told a reporter yesterday, I think search will be just fine given its history. Search was booming during the ad downturn of 1999-2001. It was booming because of its highly measurable, highly converting nature. Born from a downturn, I expect it will continue to ride out any future ones, if not benefit from them.

Posted by Danny Sullivan at 9:06 AM | Permalink

September 19, 2006

Yahoo CEO Says Ad Growth Slowing Down; Ask.com To Increase Market Share

The Wall Street Journal reports that Terry Semel, Yahoo's CEO, has warned that online advertising growth will be slowing in automotive and financial services industries. He said that there is still growth, but "but they're not growing as quickly as we might have hoped at this point in time," Semel said. On that news, Yahoo's shared dropped $3.47, or 12%, to $25.54.

Barry Diller, CEO of IAC, said he can see Ask.com gaining market share, about 8 to 10 percent share. More details on that story at Reuters.com.

Postscript From Danny: See my follow-up post, Again, The Need For Search Ad Revenue To Stand Alone.

Posted by Barry Schwartz at 12:21 PM | Permalink

July 26, 2006

Online Ad Spend 9% Of All Ad Spend By 2011

ClickZ reports on a JupiterResearch report that online advertising spend is projected to snag up nine percent of the total advertising pie by 2011. They estimate that $25.9 billion in revenues will be spent on online ads by 2011, "rising at a compound annual growth rate (CAGR) of 11 percent over the next five years." For search marketers, 43 percent of the online ad spend will be search-based ads, accounting for $11.1 billion by 2011.

Posted by Barry Schwartz at 10:06 AM | Permalink

July 18, 2006

Keyword Prices Continue To Fall: Down 8.6 Percent

Fathom Online released a keyword price index update that shows keyword prices fell again quarter over quarter by 8.6 percent. Prices on average fell from $1.39 on March 31 to $1.27 on June 30. Last report also showed keyword prices dropping $1.43 at the end of 2005 to $1.39 in the first quarter of 2006, but folks blamed seasonality for the price drop. The reason for this drop? Marketers are bidding smarter says Matt McMahon, VP Marketing Services at Fathom.

Posted by Barry Schwartz at 12:25 PM | Permalink

June 14, 2006

Forecasted Online Ad Spend Is Corrected Upwards

Search is winning the hearts and minds of marketing managers across the US, (and this is good news for search worldwide). Brand managers that tend to buy display advertising more readily will continue to be a tough sell for search, but that may be its only limitation.

TNS Media Intelligence (which tracks online display advertising spend) has increased their forecast for 2006. This is a 4% correction from their earlier estimated growth, (and bucks the hold pattern or downward trend for other forms of advertising). The company cited earlier estimates as far too conservative after tracking faster than expected migration to the online space from traditional media. Online ad spend growth was 19.4% last first quarter, and is projected to continue to grow by 13% and reach a whopping 12% of total advertising spend in 2006. This figure is far higher than ever reported before.

Factoring search into the online advertising spend is what's responsible for this correction and several comments make this point clear. Search is not officially tracked by the company but was factored in using IAB numbers. Although I think it a generous figure, search is cited as adding an additional 50% to the tracked online spend and forecast for 2006. The health of online ad spending, (and search marketing especially), in the post-bubble online advertising era is unmistakable.

There are more quotes at Media Post.

Posted by Detlev Johnson at 9:43 AM | Permalink

May 11, 2006

Online Ad Spending Continues to Grow

During the Dot Com Boom, many companies planned their online revenue models around free services supported by advertising, and for many, this model didn't pan out because many traditional ad agencies - and their big brand, big spend clients - did not embrace the online advertising opportunities available at the time. However, a new article from CNET reports on the current status of online advertising, including how it has cycled back to a point where many new services are expected to be supported through online advertising and where big brands are a major part of the expected growth of online ad revenue.

Other points in the article include that online advertising growth is expected to continue, with online ad spend increasing 24.4% this year. By 2010, US online ad spending is expected to grow to $23.5 billion while worldwide online ad spend will grow to $55+ billion. And search advertising continues to play a major role, currently 40% of the US online ad spend. By 2010, search advertising is expected to be worth $7.5 billion, up from $4.2 billion in 2005.

The article can be viewed here.

Postscript: The Wall Street Journal has an article today about big brands advertising online in Brand Marketers Return to the Web, Driving New Growth in Display Ads

Posted by Jennifer Slegg at 6:50 AM | Permalink

March 29, 2006

Search Advertising Spend Grows 79% In UK

ClickZ reports that search advertising spend grew 79 percent to £768 million ($1.3 billion) during 2005. Total online advertising spend grew 66 percent to £1.4 billion (about $2.4 billion), including display advertising and classified advertising. The article shows that U.S. based companies are more willing to move ad dollars from the marketing budget towards online advertising, as compared to companies in the U.K. It is also important to note, that the study, for the first time, used "actual results from Google's U.K." In the past years, they estimated spend, and have "low-balled" those figures in the past.

Posted by Barry Schwartz at 12:46 PM | Permalink

March 3, 2006

Search Hypergrowth Over; But Search Growth Continues

Rebecca Lieb from ClickZ has wrote an excellent article named Is Search Shrinking? In her article she discusses some of the recent concern over Google's CFO, George Reyes statement, "Clearly our growth rates are slowing."

Rebecca explains that search as an industry is "maturing" and that we are "moving out of a period of hypergrowth." But the industry is not dead, far from it she says. We have contextual ads, local search market, all the social network applications and much more that is still in its infancy. Search ad growth may be not growing at the exponential numbers like it once was, but it will continue to grow.

Posted by Barry Schwartz at 9:32 AM | Permalink

February 16, 2006

PPC Ad Impressions Grow 16% in 6 Months

A new Nielsen//NetRatings study shows that "sponsored link advertising impressions" grew from 55.4 billion to 64.3 billion or 16 percent during the past six months (August 2005 and January 2006). Google in August 2005 earned 36.2 billion, which increased to 41.1 billion in January 2006, a six-month increase of 14%. Yahoo percentage growth was larger than Google's, accounting for 19.2 billion in August of 2005 with an increase to 23.2 billion in January 2006 or a 21% increase in the past six-months. These figures include all of Google's and Yahoo's search partners and contextual networks. For the full release download the pdf.

Posted by Barry Schwartz at 5:11 PM | Permalink

February 15, 2006

Search Engine Advertising to Grow 26% in 2006

The study "Annual Ad Spending Study: Where & Why Advertisers Are Moving Online" released this week by Outsell, Inc. contains advertiser data about the effectiveness of search keyword, contextual and behavioral advertising online, as well as online versus offline advertising methods.

Included in the findings of 1,200 advertisers controlling an estimated $2.8 billion ad budgets are:

Spending in online marketing will increase 19% in 2006, while growth in search engine advertising will increase 26%.
Growth in online advertising is eight times the rate of television ads and at six times the growth rate of print advertising.
Advertisers find Google search keyword advertising more effective than both Yahoo! and MSN, and Google contextual advertising more effective than Yahoo contextual ads.

ClickZ has more detailed information on the overall findings while JenSense has a more detailed look at the contextual and behavioral advertising findings. The survey can be downloaded from here.

Posted by Jennifer Slegg at 3:44 PM | Permalink

January 17, 2006

Search Spend Was Up Last Quarter

New online spending stats from a Deutsche Bank survey of 60 media executives found that last quarter (Oct-Dec. 2005), 65 percent said paid search spending increased compared to the third quarter. Google got 57 percent of spending, with Yahoo 23 percent, followed by MSN at 5 percent. Average cost per click was estimated at 58 cents, though the report added a caveat that it was difficult to guage this price accurately for various reasons. More details from Online Ad Spending Surpasses Expectations at MediaPost.

Posted by Danny Sullivan at 9:25 AM | Permalink

January 9, 2006

Search Engines As Leeches, The Difference Between Paid & Free Listings & Keyword Price Rises

Jakob Nielsen's just posted a Search Engines as Leeches on the Web article that makes a good point, don't be too search engine dependent. However, he muddles his point by confusing the issue of paid search advertising and free "organic" listings. A closer look at that, plus how "super conversion trackers" and "brand idiots" are likely to keep pressure on keyword prices.

As a reminder, the major search engines give you two main types of listings when you do a search. There are the "organic" or "free" or "natural" listings that they gather from crawling the web. They don't charge for these listings (though Yahoo's paid inclusion program kind of clouds the water over there). These listings are like the editorial content you get at newspapers.

Search engines also carry paid ads. Pay, and you can get listed for terms you want without hoping that it just happens naturally.

Jakob says:

I worry that search engines are sucking out too much of the Web's value, acting as leeches on companies that create the very source materials the search engines index.

That will resonate with many who have long voiced similar concerns that search engines are making tons of money by gathering "content" from sites from across the web to make their listings.

If suddenly every site on the web were to block Google from indexing them, Google would have a crisis in short order. Its main "content" would have gone away, and the ads alone aren't going to keep attracting searchers.

Web site owners have not done that, however. That's because by and large, they've found that search engines drive more traffic to them than they cost in terms of bandwidth of being indexed.

WebmasterWorld has become a classic case study of this. Google and other search engines were banned in November along with "rogue" spiders, because somewhat similar to Jakob's "leech" metaphor, they were seen to have been sucking down more bandwidth than it was worth supporting.

WebmasterWorld founder Brett Tabke was often quoted saying he had the best sleep in months after blocking the spiders. His sleep may have improved, but what to do about the major spiders didn't go away. By the end of December, Brett had done a 180 degree turn and let the major spiders back in.

Until now, WebmasterWorld's been about the only major site I can think of that has tried to block spiders. Craigslist was rumored to have done so, but that wasn't true.

I do believe concerns over spidering are growing, especially as we have more spidering from both the major search engines and from rogues that are out there. Back in October, The lie of distribution--search engines return very little value to news/blog sites yet hog bandwidth and increase server loads from Tom Foremski was an example of this.

As I commented on his blog, it's fair to say that despite grumbles, that the vast majority of site owners do not consider search engines leeches. If they did, they would deleech themselves by blocking spiders. It's not hard to do. A simple change to the robots.txt file will block all the major search spiders. But no on does this, because they want the traffic. Even Jakob's own file isn't blocking Google and gang.

But back to Jakob's point, it turns out he really isn't talking about the "source material" being leeched but instead about the high cost of advertising. Again to his opening statement, with the key part in bold.

I worry that search engines are sucking out too much of the Web's value, acting as leeches on companies that create the very source materials the search engines index.

And the evidence of this?

Paid search confiscates too much of a website's value.

What? Paid search "confiscates" a site's value? Since when did search engines suddenly show up at a web site and demand the owner sign-up for advertising? We've long had rumors that a site that doesn't advertise might find themselves banned with various major search engines. We've even had reports of "monetization targeting" where site owners have found that doing an ad or paid inclusion buy might clear up a spam banning problem. But by and large, there are plenty of web sites that spend nil with search engines on advertising and get plenty of traffic.

In fact, the exhausting, annoying, tiring, boring, you name it regular updates to Google generate plenty of forum fodder that show people aren't spending and getting traffic from search engines. If they weren't, they wouldn't be freaking out any time Google undergoes a major algorithm change that sends rankings dancing and for some, traffic plunging. They wouldn't worry, because they'd have had both a balance of paid and natural search listings that helped them ride out the rough times if there was an issue on the natural side.

Instead, the October 2005 "Jagger" update showed plenty of site owners are still dependent on getting traffic from search engines for free. The Nov. 2003 Google Florida update should have taught many not to be free listing dependent, but clearly they remain this way. And the lessons not to be dependent were in place even before this.

So overall, the issue doesn't involve free listings. Jakob's really concerned about the rising cost in search advertising. Over time, as he's worked with client sites, they've been able to pay more by pushing up conversion rates. But at some point, others catch up and the margins of what his clients can pay is reached. He says:

If your search bid stays the same, your ad will sink off the page as more and more competing sites improve their design enough to afford higher bids. Our site therefore has no choice but to increase its own bid to $7.99 per click if it wants to stay in business.

This simply isn't true unless Jakob's clients are making the mistake of depending solely upon paid search ads to gain customers. If that's the case, yep, you should be looking to diversify. More on this in a moment.

Jakob also says (and the bolding is his):

This is great news for search engines: they can double their income by doing nothing. Just sit and wait for all other websites to improve -- then skim off the increased earnings.

In other words, the search engines get to make more by doing nothing because the advertisers are learning they can afford to pay more. And they sound pretty evil. But rewrite it this way:

This is great news for the Super Bowl: the cost of buying a commercial keeps going up even though they do nothing. Just wait for advertisers to be willing to pay more -- then skim off the increased earnings.

Honestly, perspective like the above is very much in order. Consider:

Search advertising has long been undervalued. People still pay less than a dollar for some paid search ads and they obtain clients that will be with them for life. But few advertisers are calculating the lifetime value of search. Jakob doesn't appear to be consider this. The examples he gives are to the purchases made directly from a click on an ad. Do his B2B customers come back to the site directly the next time and buy? If so, the only reason they did so was because they found the site through search in the first place. If you don't factor that lifetime value, then you fail to understand how much you really can afford to pay.
Advertisers are getting smarter. Those who better measure conversion know they can pay more and they are. The search engines are to blame for this? They're simply seeing that their undervalued advertising medium is finally growing to what it really is worth. The real person to be upset with is that other advertiser. And the solution is to get smarter.
It's an open marketplace. Is Apple is a leech on consumers for overcharging for MP3 players that you can buy from others that work as well if not better but lack the Apple logo? The search engines aren't forcing people to buy ads. If advertisers can't afford to continue paying high prices, they won't. And when they don't, the prices will fall. The exceptions are if the search engine conspire in some way to force purchases (say they really do link buying ads to getting other types of listings) or when they set artificially high minimum bids (Google tried doing this but had to drop many because people weren't willing to pay).

So rather than "despite search engines, websites can make money," as Jakob says, the reality remains that because of search engines, plenty of web sites are making money without spending a dime, pence, euro, yen or whatever on search advertising.

I completely agree that anyone running a web site should heed Jakob's "search engine liberation" advice of alternative ways to promote a web site, such as considering RSS, email newsletters and so on. But this isn't suddenly new advice. Any long-time internet marketer would tell you not to depend just on search engines. Thinking "beyond search engines" has been the core of my basic tips since I put them up back in 1997:

Search engines are a primary way people look for web sites, but they are not the only way. People also find sites through word-of-mouth, traditional advertising, the traditional media, newsgroup postings, web directories and links from other sites. Many times, these alternative forms are far more effective draws than are search engines. The audience you want may be visiting a site that you can partner with or reading a magazine that you've never informed of your site. Do the simple things to best make your site relevant to search engines, then concentrate on the other areas.

It's all a matter of balance. Don't obsess over search engine listings, but don't ignore them, either. Do a variety of online marketing activities -- and do a variety of offline ones, as well. Search -- both paid and free -- is a component of any campaign. But it isn't something you should depend on, any more than you should depend on all television advertising, all print ads, all RSS ads or a strategy of no advertising at all. If you are not diversified, you'll have a weakness that might hit when you least expect it.

To conclude, no one should put all their eggs into any basket, search or otherwise. It's absolutely true that search engines are not the end all be all and that sites can thrive and survive without them. But many sites also can thrive and survive better by incorporating them into a diversified publicity campaign.

Search engines definitely can do more to help those with support on the organic side of things, which is especially needed since webmasters do indeed provide the content that the search engines depend on. The good news is that last year, we saw more changes and developments to give webmasters new tools than ever before.

Finally, ad prices will likely continue to rise, and different advertisers will react in various ways. John Battelle recently pointed at a blog suggesting that FTD might be nearing all it can afford to spend. But just today, we reported on a survey showing four out of five advertisers saying they can still afford to pay more, though the question of whether a plateau is being reached is raised. Then the latest Fathom report on keyword prices saw a continuing "downward spiral," as MediaPost put it. I haven't looked closely at the latest numbers, but the sample is so small (500 terms) that I'm generally wary on depending on it as a foolproof predictor.

From my part, I see two main issues with keyword prices going forward: Super Conversion Trackers & Brand Idiots.

Super Conversion Trackers are those who will indeed track a lifetime value of someone who comes to them from search. They'll understand that the initial purchase may lead to more and more purchases over time and feel comfortable paying multiples above competitors to gain a lead. That will push some out of the bidding. See Most Conversions Happen Offline; You Need To Measure These! for some further thoughts on this.

Brand Idiots are what some marketers think derisively of others who jump into bidding without linking it to a direct ROI target. They can screw up bidding on what seems to be "logical" or "fair" amount that most in the marketplace may assume. But brand idiots are part of that marketplace, and you can expect to see more of them.

Automakers Buy Up 80% Of Ad Space On Car Sites For 2006 from AdAge is a good example of this. It explains how automakers are going more and more online to extend their brands. Edmunds, a car research site, expects to take those brand dollars and buy more search as well as display ads to fuel that desire. That's big brand money that's going to be fueling those buys and putting pressure on others trying to compete.

Big Guys Crowd Out Little Guys in SEM Arena; Some Branding Focused Advertisers Willing to Spend "Whatever" It Takes and C'mon In Brand Owners, The Search Water's Fine has more on these type of moves.

Stuck in a bidding war? How To Get Out Of Bid Wars A Winner? over at our Search Engine Watch Forums may have some helpful advice if you're already tracking and improving conversions as much as possible and getting some brand idiot money is not an option.

Want to comment or discuss? Visit our SEW Forums thread, Search Engine Leeches, Dependency & Losing Perspective.

Posted by Danny Sullivan at 1:27 PM | Permalink

SEMPO Survey Sheds Light on Search Marketing Industry

SEMPO has released its annual State of the Search Marketing Industry report, which looks at the activities and budgets of search marketers during 2005, and offers perspective on where the industry is likely going in the near term. I've got a rundown of the report in today's SearchDay article, The State of Search Engine Marketing.

Posted by Chris Sherman at 8:00 AM | Permalink

October 18, 2005

Survey: Growth of PPC Spending Looks Healthy

Although a new survey of 87 media industry execs by Media Post and Deutsche Bank: Media Execs Bullish On Ad Spending, focuses on Internet advertising overall, it does offer a few nuggest that might be of interest.

Overall, respondents reported price increases for both search and display ads--including ads on run-of-network sites."
Growth in spending on pay-per-click ads also looked healthy. "Our survey results and channel checks suggest that pricing growth for the industry has picked back up in September after a flat July and August," states the report.
The majority of executives surveyed--58 percent--reported paying more for cost-per-click ads in the third quarter than in the second. Most of those who reported an increase in cost said it was between 1 and 10 percent.
Thirty-one percent of respondents reported no change in cost-per-click, while 11 percent said they paid less in the third quarter than the second.
Weighted growth in pay-per-click advertising came to 5 percent for the quarter, according to Deutsche Bank.

Posted by Gary Price at 2:23 PM | Permalink

September 29, 2005

Search Pulling From Banner Ad Spend

An article in New Media Age UK titled: Long-time advertisers are abandoning banner ads in favour of search, includes comments about how firms that have been the "backbone" of Net advertising for years are moving into search marketing.

Eric Abensur from Wanadoo UK and Giles Ivey from AOL both say that big-volume advertisers are switching their spending from display ads and banners into search.

Media agency Unique Digital says it has been seeing this from finance, retail and travel brands, with some putting up to 20% of their budgets into search. "It's primarily advertisers that are looking for a direct response," said the agency's media director Martin Kelly. "Search is an easy win, but it's not a long-term solution."

While Abensur and Ivey are postive about large companies moving from banners to search spending, Phil Macauley, head of planning and strategy at Yahoo Europe, says:

Direct response advertisers are increasing their media spend online as a whole, both in branded advertising and sponsored search. But they're moving it away from other media, rather than moving budgets around within online."

Posted by Gary Price at 2:49 PM | Permalink

September 26, 2005

IAB Report: Search Ads Account for 40% of Ad Sales During First Half of 2005

Via a thread in the Search Engine Watch Forums, news from the Interactive Advertising Bureau and PriceWaterHouseCoopers about online ad spending in the first half of 2005.

From a ZDNet article: As of June, advertisers had spent $5.8 billion to place ads online this year, a 26 percent increase compared with the first six months of 2004, according to a new report...Overall, search ads accounted for 40 percent of Internet ad sales, in line with last year, the group said. Banner ads and classified listings were the next-biggest ad categories, attracting 20 percent and 18 percent of the spending, respectively.

This IAB news release offers a bit more. The complete report will be available via the IAB web site next week.

Last year, Danny noted that contextual advertising, which he doesn't conisder search advertising, was included in the search ad total. I can't spot anything in today's news release that shows that this fact is any different this time around.

It's very likely that Danny will post some analysis of these numbers in a future blog entry but I thought they were worth getting out asap.

Want to discuss? Check out this thread in our Search Engine Watch forums.

Posted by Gary Price at 4:37 PM | Permalink

September 21, 2005

Paid Search to Displace Online Display Ads by 2010

Paid search will garner more revenue share than online display advertistments within five years, according to a new market forecast by Jupiter Research. According to a ClickZ article:

The category accounted for 34 percent of total online ad spending in 2004, or $4.2 billion in spending. In 2009, paid search will draw even with display advertising, with both bringing in around $6.9 billion. By 2010, paid search, including paid listings and paid inclusion, is expected to equal 40 percent of the online ad spend, or $7.5 billion.

The article goes on to quote Jupiter Research analyst Sapna Satagopan who offers a number of suggestions for search marketers to get ahead of this trend.

In particular, Satagopan recommends that search marketers familiarize themselves and take advanage of the new search advertising programs from Ask Jeeves and MSN. Savvy search marketers will also change their focus from achieving top position to measuring the revenue generated by spending on search ads.

For more detail, see the press release announcing the forecast.

Posted by Chris Sherman at 4:08 PM | Permalink

June 22, 2005

Pay Per Call May Rise To $4 Billion In 2009

Kelsey Group: Consumers, Click Fraud Will 'Compel' Pay-Per-Call Adoption from MediaPost looks at a new Kelsey Group report projecting that pay-per-call revenues may grow to between $1.4 and $4 billion in the US by 2009. Currently, they amount for a "negligible" amount of paid search spending. The report also speculates that if click fraud concerns grow, some advertisers might consider pay-per-call as an alternative. Of course, online merchants might more likely look to doing something like revenue sharing or cost-per-acquisition deals. More about the report directly from Kelsey here.

Posted by Danny Sullivan at 8:49 AM | Permalink

June 1, 2005

Yahoo and Google Rewrite the Information Industry Playbook, Divert Ad Revenues from Newspapers

Information industry consulting firm Outsell has published a new study about how Google and Yahoo have "rewritten the information industry playbook."

Outsell wrote that Google and Yahoo! are "clearly diverting advertising revenue" directly from the newspapers and magazines owned by the 10 largest information companies. In fact, Outsell found that the newspapers owned by the New York Times Co. are struggling as the industry in general tries to "recapture ad revenue growth and young audiences."

More info in the Media Post story: Report: Google, Yahoo! Taking Ads From Newspapers.

Posted by Gary Price at 12:42 PM | Permalink

May 25, 2005

Search Spend Doubles, Sends Online Retailers 43 Percent Of Their Traffic

A new Forrester/Shop.org report finds that online retailers more than doubled their search ads spend from 2003 to 2004. Of 136 retailers surveyed, they spent $877,630 on search ads in 2004, over double the $399,923 spent in 2003. Retailers also reported that search traffic made up a giant 43 percent of traffic to their web sites. More details in this press release on the study and some charts in this ClickZ article: Online Retail Growth Robust.

Posted by Danny Sullivan at 10:36 AM | Permalink

April 29, 2005

2004 Online Ad Spend: Search Is Hot, But Contextual Pollution Of Figures Continues

As Gary mentioned earlier, online ad spending figures for all of 2004 were recently released by the IAB. What do they show specifically for search? Up, up, up, no matter how you want to slice it, though mixing in spending on contextual ads doesn't give a completely clear figure.

Search & Contextual Is Top Category, Again: For another year, search (which includes contextual ads, according to the study) had a far bigger slice of ad spend than any other category, gaining a 40 percent share of all revenue. Display ads were a distant second at 19 percent, though if you buy into the "All Display Advertising" super-category the IAB also provides, then it rises to 39 percent of all spend.
Search & Contextual Worth Nearly $4 Billion: In terms of actual revenue, search was estimated to have earned $3.85 billion in ad spending.
Search & Contextual Had Biggest Spending Rise: Search revenues rose more in dollar amounts than any other category, climbing by $1.3 billion from $2.54 billion in 2003 to the aforementioned $3.85 billion in 2004. That's a 51 percent rise.
Search & Contexual Still Below Other Offline Spending: Despite being worth $4 billion, the report shows that search spending is still well below many other types of media spending. Direct mail tops the list, being worth $50 billion, followed by newspapers at $46 billion and broadcast TV at $33.5 billion. The list ends with outdoor advertising at $6 billion. But with more growth, search may push ahead.

The IAB Internet Advertising Revenue Report is available (PDF format) to anyone and has plenty of charts and details. Another nice chart is over in the press release about the report. I used those figures to sort the data differently and put search in better perspective, which you'll in the version of this post for Search Engine Watch members.

That extended post also looks in depth at the giant flaw with report, the failure to break out contextual ads from search. They aren't the same as search, as I explain -- and counting them as search pollutes the data.

I also look at how the recent Google CPM pricing for contextual ads is finally generating more awareness that contextual isn't search, as well as what I've long written, that Google and Yahoo aren't tech companies, aren't search companies but are ad or media companies.

Posted by Danny Sullivan at 9:40 AM | Permalink

April 28, 2005

Report: Online Ad Revenues at Highest Levels Ever

I'm sure Danny will have more to say later but I thought I would point out that the Interactive Advertising Bureau/PricewaterhouseCoopers Internet Advertising Revenue Report with 2004 revenues was released today. Zachary Rodgers takes a look in this Clickz article.

He writes:

Search marketers continued their stampede. Annual revenue in this category leapt from 35 to 40 percent of the overall spend. On a dollar basis, search revenues were up more than half to $3.9 billion.

This press releases from the IAB has much more along with a few tables that break the numbers out by: + Ad Format + Ad Categories + Pricing Model

Want more? No problem. The full text of the report is available here. It's loaded with charts and tables.

Posted by Gary Price at 6:03 PM | Permalink

April 19, 2005

Past 10 Years Of Online Advertising History Available.

The Decade in Online Advertising 1994-2004 is a new 21 page PDF report from DoubleClick that offers a ton of data about online ad spend over the past 10 years. Check out the nice quarterly spend chart on page 4. Page 12 has a nice pie chart showing search at having 40 percent of online spend as of the second quarter of last year. A short history of search ads begins on page 11.

Posted by Danny Sullivan at 11:39 AM | Permalink

April 6, 2005

Online & Search Spending Rose In First Quarter 2005

Internet Ad Spending Up In First Quarter from MediaPost reports of a new study finding online ad spend continued to grow in the first quarter of this year. Based on questioning 108 media executives, most spend is going to display ads -- 57 percent, while search gets 20 percent. Overall spending was estimated to be up 11 percent from the previous quarter. At the end of the story are more search specific stats, including that 69 percent reported paying more for search in this latest quarter. Google gets 53 percent of search spend; Overture gets 28 percent.

The vast majority of respondents--69 percent--also reported spending more to buy sponsored listings on search engines. Thirty-five percent of executives said cost-per-click had increased between 1 and 10 percent, while 25 percent reported a price increase of 11 to 20 percent; 9 percent of respondents said paid search was now at least 21 percent more expensive than in the last quarter of 2004. FindWhat and MSN are also named with 4 percent of spend each.

A separate brief story from MediaPost also covers that media planners expect to pay more in the second quarter of this year.

Posted by Danny Sullivan at 9:24 AM | Permalink

April 5, 2005

Online Spend Beats Radio In The UK

My wife used to be in radio promotions with the solid job when I went into that fly-by-night internet stuff. Well, love, online advertising in the UK just nudged out spend on radio, 3.9 percent for online versus 3.8 for radio in 2004. Figures are promised in the next few weeks to breakdown online spend by category. Expect search likely to be a significant chunk. Won't it be interesting (perhaps inevitable) if in a few years, search itself manages to outspend radio? More details from ClickZ: U.K. Online Ad Spend Edges Out Radio.

Posted by Danny Sullivan at 6:14 PM | Permalink

March 21, 2005

Euro Search Marketing To Grow 65 Percent

Forrester Research estimates that search marketing will increase 65 percent in 2005 to 1.4 billion. That spend includes non-search contextual ads, however. From its new report, the UK is found to be Europe's biggest online ad marketing, followed by Germany. France is said to have shown surprising growth. If you're a Forrester client, the "Europe's Search Engine Marketing Forecast, 2004 To 2010" report is here. If not, then European Search Engine Marketing To Grow 65 percent in 2005, Says Forrester Research from Tekrati has a summary.

Posted by Danny Sullivan at 1:52 PM | Permalink

February 24, 2005

Paid Search Worth $5.5 Billion In 2009

JupiterResearch says paid search will rise to $5.5 billion in 2009, driven by four vertical areas: retail, financial services, travel and media & entertainment. More from ClickZ: The Four Horsemen of Vertical Search.

Posted by Danny Sullivan at 11:10 AM | Permalink

February 15, 2005

Paid Search Fastest Growing Media Channel in the UK

I came across an article on the Revolution web site, Online adspend increases by 53% in paid search boom, with some new numbers about search engine advertising in the UK.

Online advertising spend is up 52% year on year to £507m while paid-for searches have become the fastest growing media channel, according to a report by Starcom UK. The media planning and buying agency also revealed that paid-for searches on Google, Yahoo! and MSN are becoming the fastest growing media channel...Display advertising still accounts for the largest proportion of online adspend at 46%, although paid search now accounts for 32%. Classified advertising accounts for 12% and acquisition e-mails make up the final 10%.

Posted by Gary Price at 10:29 AM | Permalink

February 4, 2005

Safa Sez: Search Worth $14 Billion In 2007, But No One Amazed

Piper Jaffray analyst Safa Rashtchy has been covering the paid search space for ages, offering one of the earliest independent predictions of future spending. Rashtchy's Golden Search Turns Platinum from MediaPost looks at how his March 2003 projection that search would hit $7 billion was greated with amazement, while his recent November 2004 estimate increasing that figure to $13.5 billion seems to have caused hardly a ripple. Why? "I think search is now accepted as a big business," Rashtchy said. In this article, a closer look at his latest estimates -- though as always, I dispute that "contextual search" is search or that those figures should be lumped in with search.

Posted by Danny Sullivan at 7:48 AM | Permalink

January 28, 2005

Local Ads Spend Online To Rise; Paid Search Nearly 10 Percent Of It

Local Online Ad Spend to Rise 46 Percent in '05 from ClickZ summarizes a Borrell Associates report on 210 US media markets predicting that online ad spend will rise from $2.7 billion last year to $3.9 billion in 2005, a 46 percent increase.

Daily newspapers grew the most last year, with online yellow pages spending slower. Why? Money may be going to the major search engines like Google and Overture that offer local ad targeting, rather than online yellow pages. Quoting out of the report, which you can request here:

Some of the pure-play companies offering targeted local advertising also picked up share. But Internet Yellow Pages appeared to have slipped, perhaps seeing their results cannibalized by Paid Search. More analysis will be offered in early March when we complete our annual survey of local Internet media.

And the report also has this on paid search:

Paid Search averages 8.4% of all locally spent online advertising. This is the first year we are tracking Paid Search spending by local advertisers. Our projection for 2005 is $329.5 million. Without Paid Search, local markets would see a 33.8% increase this year.

What will drive growth this year? More people being online; proof from previous spending that local ads online work and all the online local media companies deluging local merchants with information about their opportunities and programs.

Posted by Danny Sullivan at 10:05 AM | Permalink

January 18, 2005

Report: Paid Search Still Hot In 2005, But Growth Will Slow

MediaPost's Report: Rich Media's The New Paid Search looks at eMarketer's predictions that 2005 will see rich media overtake paid search in terms of growth. But paid search spend will still dwarf rich media, $4.7 billion predicted versus $1 billion for rich media. Paid search will make up 42 percent of the predicted online advertising spend this year.

Posted by Danny Sullivan at 10:55 AM | Permalink

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