With the Internet's heavy hitters on deck for first-quarter earnings, investors are taking a close look at Net ad-pricing trends.
So far, the results are mixed, though observers agree that prices have been reasonably stable, which is good for the big advertisers, who are increasingly leaning on Internet search to get their message out.
Net-search keyword prices fell 3% in the first quarter following a dropoff in advertising from the holiday season, according to a survey by Fathom Online. Meanwhile, a separate report from a
fan says keyword pricing is rising, at least a bit.
The average advertiser keyword bid was $1.39 per click in the first quarter, compared with $1.43 at the end of last year, according to Fathom. Prices have risen 1.4% since Fathom started its survey in September 2004. Most search advertisers are charged every time a user clicks on their ad.
"Search marketing is growing at a robust 25% this year, and price stability helps that growth," says Matt McMahon, vice president of marketing services at Fathom. "As advertisers see a more predictable keyword bidding environment, confidence in the channel grows and advertisers continue to invest further in search marketing."
Investors awaiting this week's results from
and Google will pay close attention to keyword prices. Google gets most of its earnings from search. Yahoo! is trying to reverse its declining market share in search, while eBay is one of the largest keyword advertising buyers.
Since there are a huge number of variables, it's difficult to generalize about keyword prices. Fathom's index includes data from 20,000 generic keywords across 12 categories. Other reports reached similar conclusions.
A joint survey by Deutsche Bank, Media Post Communications and Insight Express finds "modest pricing growth." Piper Jaffray analyst Safa Raftschy, whose $600 price target on Google is the highest of any analyst, was more optimistic. He says the "pricing environment continued to trend positively in the first quarter." He rates Google a buy.
Search continues to be appealing for advertisers because it allows them to precisely measure the effectiveness of their campaigns. Companies including
Pontiac division are integrating search into other types of advertising, and local companies are increasingly using the engines.
"Our recent survey of search engine advertisers also indicates that the searchadvertising market is very healthy, the pricing environment continued totrend positively in the first quarter, and existing advertisers are increasing spending with Google at a robust rate," writes Rashtchy, who has a buy rating on Google.
Though search remains popular, there are signs that its explosive growth is starting to slow, which is one of the reasons Google has lately been adding new features like a digital calendar and financial news. This will help Google attract brand advertisers who do their spending on Yahoo! Most Google users don't stay on the site long after they do their search, which makes the site less desirable for brand advertisers.
Google is due to report first-quarter earnings Thursday. Yahoo! results are due Tuesday, with eBay coming Wednesday.