Of 500,000 search advertisers, 90% of them use Google
In the first of what it expects to be a series of regular research notes on the topic, Chicago-based investment firm William Blair & Co. partnered with search marketing company AdGooroo to turn its eye on the search engine industry from the perspective of advertisers. Based on data from AdGooroo’s keyword database, the report estimates the global marketplace for search advertising consists of about 500,000 advertisers, and that 90% of them advertise on Google.
The initial report on the search advertising industry, issued in August, analyzed growth, market share and engine-specific trends from February to June of this year. The report underscores Google’s dominance among the three major search engines in the number of advertisers it attracts, estimating that Google has about three times more advertisers than its nearest competitor, Yahoo, and about 10 times more than the third major engine, MSN.
Yet Google’s base of advertisers doesn`t cover the entire universe of search advertisers. Some 10% of search advertisers participate in Yahoo or MSN, but not Google, according to the report. About half of advertisers who use Yahoo and MSN also advertise on Google, with Yahoo attracting about 30% and MSN about 10% of the total universe of paid search advertisers every month, the report estimates.
Overall, the total number of paid search advertisers was up about 20% during the period studied, with Google experiencing the largest growth rate in that regard at 15%. Yahoo’s advertising base was relatively flat, and advertiser growth at MSN was up less than 10%.
The researchers also studied the effect of Project Panama, a new search advertising system Yahoo unveiled in February, which has a more Google-like user interface that incorporates click-through rates and other factors into the ranking algorithms in an effort to improve ad relevancy. The report’s conclusion: the effort attracted a surge of new advertisers immediately after it launched, but then experienced some fallout as the adjustments lowered the rankings of some advertisers. The report notes, however, that the new system appears to be having a positive effect on the relevancy of the ad listings returned with search results, as it is serving up fewer, but more relevant paid listings per search than formerly.
Seasonality was another factor the researchers examined. Though the number of search advertisers overall is growing, individual advertisers come and go depending on competitive factors and what’s happening in their vertical marketplace, the report notes. During the period studied – which did not include third- or fourth-quarter search activity – researchers determined that the number of search advertisers increases in March, likely due to the marketing of spring and summer apparel, travel and Mother’s Day gifts; and declines in June, due to a slow-down in Internet activity tied to school breaks and vacations.
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