Search Advertising Spending Growth Slows

Triple digit growth of search advertising spending by small businesses leveled off in the third quarter, but is still growing, according to a report from WebVisible.
Although small businesses are still spending more on search advertising than in the previous year, growth is slowing down, according to the latest quarterly report from WebVisible released Thursday.

"The triple-digit growth numbers from previous quarters have leveled off," according to the interactive advertising technology services firm's Q3 2010 report.

Jon Rosen, the company's chief revenue office, noted that the report reflects WebVisible's own customers' experiences, but, said Rosen, "We feel what we are seeing is representative of the industry overall."

The average advertiser spent $2,327 on paid search advertising in Q3 2010, an increase of 43 percent over Q3 2009, according to the company. This represents a slower growth rate than in previous quarters, when year-over-year (YoY) spending was up 159 percent in Q2 2010, 91 percent in Q1 2010, and 111 percent in Q4 2009. The survey queried more than 12,000 small-business advertisers.

The report said, "The slower growth rate could indicate that small business search advertisers are closing in on the optimum level of spending they need to achieve their desired results. Additionally, service providers are refining their ability to determine efficient spend amounts in order for advertisers to achieve the highest return on spend."

"We're coming off the worst economic crisis since the Great Depression, and all ad budgets went down, yet search marketing in 2008 went up," said Rosen. "In 2009 and 2010, you've seen recovery quarter-over-quarter."

Online ad spending is still growing. For example, WebVisible noted, automotive advertisers are spending 41% more (annualized) than a year ago. Roofing and air conditioning advertisers showed seasonal spending increases -- "mostly likely due to the hot summer months and simultaneous preparation for winter."

Other metrics noted in the report include:

-- Keyword counts increased in Q3 2010, up 41% from Q3 2009 to an average of 78 root keywords per advertiser.

-- Spending on Bing increased by 37% from Q2 2010 to Q3 2010, resulting in a gain of 3.7 percentage points of share. Yahoo! and Google lost 1.3 and 5.8 percentage points in share respectively.

-- Click through rates converged in Q3 2010, with Bing CTR dropping 27% from Q2 to match Google CTR, which dropped 4%. Yahoo!’s CTR increased by 28% QoQ, and is now only 22% less than Google and Bing."

-- Average keyword prices rose on Google (+4%), Yahoo! (+14%) and Bing (+19%) in Q3 2010, with Yahoo! CPC only 13% less than Google’s cost per click.

Web advertising isn't the only thing that's up, WebVisible also observed: "Nearly 30 percent of all advertisers included video on their landing pages in Q3 2010, more than double the number of advertisers using video a year ago. Viewing video was the second most popular conversion action after clicking through to the advertiser's website."

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