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Search Engine Advertising Update – Q2 2010

However, these increases were not equally distributed among the search engines. We recorded an increase of 7.3% in first-page advertisers on Google, but only 2.8% for both Yahoo! and Bing. This disparity translated into a slight increase in advertiser share for Google (which has remained steady at 80% for around 18 months now.)

One indicator which has proven to be a reliable predictor of search revenues is ad coverage – the average number of ads shown per search query. There was a marked increase in ad coverage for all three engines over the quarter. Google increased the average number of ads shown by 15%, Yahoo! by 22%, and Bing by 11%.

While rosy, these statistics require further interpretation. We cannot take them at face value. If that were true, what would stop a search engine from increasing ad coverage indefinitely in order to grow revenues? The reason this does not happen is because increasing ad coverage results in diminishing returns – beyond a certain point, showing more ads does not translate into higher revenues and can result in user dissatisfaction. If Google’s past performance is any guide, the magic number appears to be around 5.5-6.0 ads per query. Yahoo! is now at 6.85 so it’s unlikely the increase in ads will lead to much additional revenue. On the other hand, Bing is currently only showing 3.85 ads per keyword, so it’s extremely likely this will be reflected in better-than-expected revenues. Similarly, Google went from 4.97 to 5.72, so there’s a good chance they’ll report healthy increases as well.

Another change worth noting was Google’s MayDay update. This tweak to the natural rankings algorithm was intended to improve the relevance of long-tail searches by eliminating auto-generated content from the search results. Not only were we able to confirm that many auto-generated sites were largely removed from Google’s index, we also noted that Google is now monetizing nearly 8% more of their keyword searches (keywords with no ads decreased from 43.6% in Q1 to 39.7% in June.) This is a very positive sign.

There were some interesting trends at the vertical level as well. We noted substantially increased spends this quarter for cell phone service providers, auto insurance, and printer ink vendors. Conversely, we saw large drops in travel and online retail (both likely seasonal) as well as mortgage lenders (not seasonal but the downward trend appears to be decelerating.)

Upcoming Bing/Yahoo! Partnership
Like many search marketers, we are looking forward with anticipation to the upcoming Microsoft-Yahoo! search alliance. The integration of the two platforms will enable advertisers to reach a substantially larger audience while eliminating much of the overhead of managing multiple campaigns. Microsoft has wisely decided to adopt Google’s de facto standards, thus making it possible to share campaigns between both platforms with a minimum of hassle.

More importantly, the partnership will combine an additional 230,000 advertisers who were previously on one platform or the other. This will not only result in higher competition for placement (and thus increased CPCs), it should also allow for better matching of ads and search queries, further improving conversion rates for advertisers.

The integration date has not been announced yet but it’s very likely to occur in late Q3 in advance of the 2010 holiday season.


Top 25 US Advertisers by Search Engine[KS1]
Advertisers with highest number of estimated ad impressions
United States, June 2010

Note on Methodology: The top 25 advertiser list is based on the total number of recorded first-page ad impressions during the stated time period and does not necessarily reflect total ad spend. Ad impressions are estimated via sampling over a 30-day period. Advertisers are listed in alphabetical order.




* New in top 25 since prior quarter

About AdGooroo
Based in Chicago, AdGooroo provides competitive intelligence to Internet marketers through its suite of products, including SEM Insight, Display Insight, Link Insight and Trademark Insight. Nearly 2,000 companies rely on our unique products for quantifiable insights they can use to rise above the competition and build a long-term advantage over competitors. 

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