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Executive Summary
- Strong Q1 Spend across Engines: Spend from existing search marketing advertisers (“Same Advertiser Spend”) is up year-over-year (“YoY”) in Q1 across all engines by 28.5%. Yahoo showed the greatest gains with a 57.6% increase in spend YoY; however, this could be attributed to the fact that Yahoo experienced a particularly weak Q1 2007 with the delay of their Panama launch. Despite strong growth overall in Q1, spending in March shows some weakness, raising concerns going into Q2.
- Mixed Bag for Retailers: Historically retailers have been increasing their investment in search marketing each quarter. Despite a strong start to the quarter for retailers, March showed a dramatic slowdown in YoY retail search spend growth. The decline in spend growth coincided with a decline in conversion rates and Average Order Value (“AOV”) for retailers in the first quarter.
- Search Engine Market Share: Yahoo gained significant market share in Q1 as measured by search spend, primarily at the expense of Google. Yahoo’s share of spend grew to 24.2% in March from 19.6% at the end of Q4, while Google’s share declined to 70.4% down from 74.5%.
Meanwhile, MSN’s share of search spend fell to 5.4% from 5.9% quarterover- quarter.
Spend from marketers who have utilized paid search for more than one year (“Same Advertiser Spend”) is up YoY in Q1 across all engines by 28.5%. Yahoo showed the greatest gains with a 57.6% increase in spend YoY; however, this could be attributed to a particularly weak Q1 2007 for Yahoo due to the delay of their Panama launch.
Significant Intra-Quarter Fall-Off in Search Growth
Despite strong spend growth in Q1, monthly data from Q1 shows negligible sequential actual monthly growth and declining YoY growth. In particular, spending growth in March significantly decreased, raising some concerns heading into Q2.
Taking a closer look at the month-over-month (“MoM”) performance within the quarter, Same Advertiser Spend growth across all engines decreased MoM January through March, declining from 47.6% in January to 33.5% in February and to 19.1% in March. Google saw the most precipitous decline, from 44% growth in January to 14.4% in March. Spend on Yahoo grew 79.2% in January, slowing to 37.3% in February and then showing a slight increase to 43.9% in March.
Sharp Increase in Retailer Spending is Abated
There were some marked differences in retailers’ search spend in Q1 compared with trends for the search marketing industry at large. Despite retailers’ increase in YoY spend in January and February, March showed a dramatic slowdown, with retail search growth lagging behind spend growth from non-retail marketers. The decline in spend growth coincided with a decline in conversion rates and Average Order Value (“AOV”) for retailers in the first quarter. YoY conversion rates for retailers were down 6.2%, while YoY AOV in March was down 1.6%. While Google is still the clear leader in the space, Yahoo gained several points of market share in Q1 as measured by search spend. Yahoo’s share of spend grew to 24.2% in March, while Google’s share declined to 70.4%. This is down from Google’s peak market share of 77.5% in May 2007. MSN’s share of search spend fell to 5.4%.
This report tracked more than 22 billion impressions and 391 million clicks on Yahoo, Google, and MSN from January 1, 2006 through March 31, 2008 across more than 500 marketers, all of whom are clients of SearchIgnite directly or via its sister company 360i.
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