Search Firms Say: Expect Smaller Budgets, Slower Growth In The Coming Months
This story was written by Tameka Kee.
Search tech and service firms continue to pump out "state of the market" reports in advance of this week's Q308 earnings announcements from Google (NSDQ: GOOG) and Yahoo (NSDQ: YHOO), and the latest two from Efficient Frontier and Covario paint a murky picture for the future of search spending in the U.S.
-- Overall growth slowing throughout 2008: Efficient Growth says search spending by non-financial services advertisers slipped by about 3 percent from Q2 to Q3, while spending by financial advertisers dropped nearly 7 percent. Year-over-year, that trend is even more pronounced, with financial services spending down by nearly 20 percent.
-- Economy to negatively impact spending: Covario's report only dealt with the budgets of big tech brands like HP and Lenovo, but also reflected a slowdown--this time with year-over-year spending growth rates. Advertiser spending grew just 32 percent from Q307 to Q308, in contrast to the 59 percent growth from Q207 to Q208. Craig Macdonald, Covario's VP of marketing and product management: "We are cautiously optimistic about paid search spend in 2009 ...However, we do expect paid search spending growth to slow over the next two quarters as a result of the severe economic conditions."
--Slight fluctuations in market share but Google's still unstoppable : As for performance by engine, Efficient Frontier says Google's market share dipped by nearly 2 percent from Q2 to Q3, though it still retained the lion's share (76 percent) of ad spend. Yahoo increased market share, seemingly at Google's expense, to 19 percent (up 2 percent from Q2), while Microsoft's (NSDQ: MSFT) share remained flat at nearly 5 percent. Covario pegs Google's market share at more than 82 percent, up by about one percentage point from Q3. Yahoo remained relatively steady at around 14 percent, while Microsoft contracted from 4 percent to 3 percent.
--Interest in Ask is growing: Interestingly enough, Ask--which is often forgotten when it comes to discussing core search--saw a surge in advertiser usage. Though spending on Ask accounts for less than one percent overall, 80 percent of Covario's tech clients were doing some form of advertising on the engine in Q3, up from less than 40 percent in both Q1 and Q2.
Year-on-Year Spending (click to enlarge):
Change in Search Engine Spending (click to enlarge):
By Tameka Kee