Advertiser counts for all three major search engines were flat to lower in Q2, with MSN’s active client count dropping nearly 20%, according to a report from AdGooroo, which said Google and Yahoo may be putting pressure on Microsoft.
Like MSN, Google’s also declined (-6.4%), while Yahoo’s increased slightly?(+0.03%), holding on to its advertiser-base gains made over the past year.
Trailing 12 month advertiser growth for Google, Yahoo, and MSN were -8.5%, +9.8%, and -6.7%, respectively.
Though advertiser counts have historically been a reliable directional indicator of search revenue, Google is attempting to change the rules of the game by placing increasing emphasis on ad quality. This is particularly evident when looking at the average number of ads displayed per keyword, AdGooroo said.
Over the past six months, the average number of ads per keyword shown on Google in the US has declined from 6.5 to 4.0, a nearly 40% drop – likely the result of Google’s ongoing efforts to improve the quality of its ads.
However, as the number of advertisers declines, so does the competitive pressure for higher bid prices, AdGooroo points out, and if advertisers don’t step up to the plate and bid more aggressively for placement, then it’s possible that search revenues could stagnate.
AdGooroo views Google’s new AutoMatch algorithm as a response to (and tacit understanding of) this Achilles heel of auction-based pricing. AutoMatch automatically shows ads on search queries not specifically targeted by advertisers, thus increasing the number of bidders across all keywords.
AutoMatch was released on May 20 so it will likely be one or two quarters before its success can be judged, according to AdGooroo.
