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Search Ad Costs Slow

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NEW YORK Separate surveys by investment banks SG Cowen and Piper Jaffray found the price of keywords advertising was mostly flat in the second quarter.

SG Cowen, which tracks 3,300 search terms, said prices declined 1.7 percent compared to the first three months of the year.

Piper Jaffray said pricing was "mostly stable," with some rises for search ads from Google.

The reports buttress figures released last week by Fathom Online, a San Francisco search agency, which said it found keyword pricing in June rose slightly for most industries it tracks.

Piper Jaffray noted that search volume was only up slightly in the second quarter in contrast to strong growth in the first quarter. The investment bank said pricing for keywords was "mostly stable" in the second quarter.

SG Cowen forecasts the share of online ad spending devoted to search will continue to grow. This year, it expects online brand ad spending at $6.5 billion, compared to $5.6 billion for search. In the coming years, the bank believes search spending will slightly surpass brand-advertising outlays, accounting for a little over half of a $22.9 billion online ad market in 2009.

Google is the biggest beneficiary of the popularity of search advertising, seeing its share of Web ad spending rise from 9 percent in the first quarter of 2004 to 14 percent in Q1 2005, according to SG Cowen.