October 16, 2008, 12:00 AM

Google still dominates search in Q3 but Yahoo gaining ground, report says

With 76% of all third-quarter search marketing spending, Google’s share dropped 1.9 percentage points from Q2; Yahoo’s 19.2% share rose 1.8 points, Efficient Frontier reports.

Google Inc. again got the largest share of advertiser spending on search engines in the third quarter-76%-but Yahoo Inc.’s gaining ground. Yahoo’s share gained 1.8 percentage points from the previous quarter to hit 19.2% in Q3, while Google’s declined by 1.9 percentage points, according to the third-quarter U.S. Search Engine Performance Report from Efficient Frontier. Microsoft Corp.’s Live Search held steady at a 4.8% share.

Though the overall rate of growth in search engine advertising has been slowing through 2008, return on investment in search engine advertising remains strong, according to James Beriker, CEO of Efficient Frontier. “Our data shows that search engine marketing continues to be a highly productive direct marketing channel for advertisers, even in challenging markets,” Beriker says.

Third-quarter spending on Google by advertisers outside of financial services-an advertiser sector particularly hard-hit by the current economic climate, according to Efficient Frontier-was up 3.6% year over year, more than the 2.5% overall growth rate. Third-quarter spending on Yahoo by advertisers was down 1% year over year, while spending on Microsoft Live Search was down 3.8% from the previous year.

Of Google’s 76% share, 4.6% was from ads served on the Google Content Network of publisher sites. Google’s Content Network was the only search engine channel for which all categories of advertisers increased spending in the third quarter.

Year over year, third-quarter return on investment improved on all three engines for all advertisers except for advertisers of financial services. For non-financial services advertisers, Google search ROI increased by 11.3%, while Yahoo search ROI increased by 19.7% and Microsoft Live Search by 29.9%

The report was based on an analysis of 60 billion impressions and 428 million clicks across an index of Efficient Frontier advertisers. Efficient Frontier, a search engine marketing company, specializes in strategic bid management technology and services.

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