May 3, 2007, 12:00 AM

Average keyword price declines 3.3% to $1.46 in first quarter, Fathom finds

Fathom Online’s Keyword Price Index shows prices stable over the past three quarters. The findings argue for sophisticated management of integrated campaigns versus a sole focus on keyword prices.

Keyword prices are flattening out, according to the quarterly index of marketing and technology services company Fathom Online. Fathom’s Keyword Price Index, a weighted average of more than 20,000 active keyword prices across several industries including retail, showed that the average keyword price paid by online advertisers declined 3.3% from the previous quarter to $1.46 in the first quarter of 2007.

The recent trend in keyword prices over the past three quarters has been largely stable. This year’s first-quarter average is just 5% higher than in the first quarter of 2006, when the average keyword price was $1.39, according to Fathom’s data. Since Fathom initiated the index, average keyword prices have ranged from a high of $1.87 in the second quarter of 2005 to $1.27 in the second quarter of 2006.

“This quarter’s average keyword price points to a longer-term trend of stable prices and consequently the growing importance of sophisticated analytics to manage integrated campaigns, rather than a focus on keyword prices alone,” says Fathom Online CEO Dean DiBiase. “In watching keyword prices closely, it is clear that everything a company does before and after the bid is more important than any particular keyword bid.”

Another effect of flattening prices on keywords is that the practice of arbitraging keyword prices is becoming a short-term game with little growth opportunity, Fathom notes.

The index, a weighted average of 20,000 active keywords across all major search engines, was drawn from industry verticals including retail, automotive, computing, consumer services, electronics, finance, healthcare, media, entertainment, telecom and travel. Fathom Online notes that the index is a representative sample and that actual market prices of keywords may vary greatly depending on a variety of marketplace factors.

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