Search Advertising Spending, ROI Improve as Google Strengthens Market Lead

Search advertisers spent 29 percent more on search engine advertising in the fourth quarter of 2007 compared with the year-earlier period, and they improved their return on investment (ROI) 13.1 percent in the same period, according to Efficient Frontier’s “Search Engine Performance Report: Q4 2007,” writes MarketingCharts.

The factors considered by EF were search engine spend, click through rates (CTRs), cost per click (CPC), and return on investment (ROI).

1. Google, Yahoo, MSN share of search engine spend, 4Q06 - 4Q07
2. Share of additional search engine spend (4Q07 vs. 4Q06)
3. Average clickthrough rate index, by engine, 4Q06 - 4Q07

• Of the top three search engines, Google made the most gains, increasing its share of total market spend by 8.6 percent to reach 76.6 percent, improving ROI 7.5 percent and capturing 97 percent of the total increase in search spending from 4Q06 to 4Q07.
• ROI on Yahoo improved 39.4 percent since the launch of Yahoo’s Panama platform (4Q07 versus 4Q06); however, overall spend on Yahoo declined 3.8 percent during this period, leaving it with 17.9 percent of search engine spend in 4Q07.
• Yahoo Search Assist launched in October 2007, and the resulting impression increase may have contributed to a 34 percent drop in CTR on Yahoo search from Q3 to 4Q07.
• MSN maintained its lead in driving the highest ROI for advertisers; its ROI was 27 percent greater than the average return across all engines in 4Q07.
• MSN also leads the major search engines in average click-through rate (CTR). It maintained its 5 percent share of search engine spending in 2007.

About the study: Efficient Frontier analyzed nearly 17 billion impressions and more than 270 million clicks to determine how shifts in the search marketplaces in 2007 affected overall spending and campaign effectiveness. The Search Engine Performance Report: Q4 2007 was completed based on data from a fixed sample of Efficient Frontier’s US clients from 4Q06 through 4Q07 and includes data from large search engine advertisers across multiple verticals.