Study: Search advertisers paying less per click

Looks like Google was right to concentrate on revving up its search ad volume this year. New research from Efficient Frontier shows that the average cost per click (CPC) on Google dropped 14% in Q1 2009, but that overall ad volumes increased--along with the percentage of ads clicked. So what revenue Google lost per ad, it may have made up for in quantity.

The study showed that Google competitors also saw a dip in CPC revenue, with Yahoo seeing a 16% decline and Microsoft a 28% drop. And overall, the average CPC declined 19% compared with Q1 2008, and 13% compared with Q4 2008. None of which is good news as the search engines look to survive a down economy where their mainstay consumers are tightening their belts.

Still, Efficient Frontier found some bright spots to report. Overall, the search engines are showing more ads more frequently, and users are clicking on them more. For example, the number of times an ad was shown, on average increased 11% compared with Q1 2008, with Google increasing impressions a whopping 20%, compared with Yahoo's 1% and Microsoft's 10% increase. At the same time, users clicked on a slight fraction more of those ads, with Google seeing a 2.27% increase vs. Q4 2008 (although total click-throughs dropped vs. Q1 2008 by 2.55%).

But Efficient Frontier's best news had to do with ROI. As consumers buy less and advertisers find they need to be more judicious with their resources, search engine advertising continues to provide a robust bang for the buck. For example, quarter over quarter, advertisers on Google Search saw an ROI increase of 10%, while Microsoft Live Search saw a 43% gain and Yahoo's ROI increased 12%.

"Advertisers will continue to demand greater ROI from their search campaigns, as a buffer against economic uncertainty," said Dr. Siddarth Shah, senior business analyst at Efficient Frontier. "We are at an interesting crossroads. On one hand, advertisers are slicing budgets. On the other, more users are searching online, and clicks are cheap. This provides the perfect opportunity for advertisers with deep pockets to embrace the downturn, to consolidate market share and continue growing their businesses."

It's a nice thought, but the proof is in the numbers. And Google's announcing how it fared this past quarter on Thursday at 1:30 pm PT. Stay tuned.

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Copyright © 2009 IDG Communications, Inc.

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