The Bottom Line
Across our clients, from January 2008 to February 2008, Google picked up 2.3 points of ad spend share. Google's growth came at the expense of Yahoo (down 1.6 points), Microsoft (down 0.6 points), and Ask (down 0.1 points).
Across our clients, comparing February 2008 to February 2007, we did not observe evidence of an advertising or sales slow-down: median same-client Google ad-spend was up 22% year-over-year, and corresponding same-client resulting PPC sales were up 26%.
We've been reporting monthly PPC market share numbers for our aggregate client base since February 2007.
Each month, we add up the total PPC ad spend across all our clients on Google, Yahoo, Microsoft, and Ask, then divide those four totals by the grand total. This calculation yields the fraction of each paid search dollar our clients spent which went to each engine. Expressing spend as relative share removes seasonality and our own firm's growth.
Because most of our clients instruct us to buy all the high-performing clicks we can for them (rather than, say, establishing absolute dollar budgets by engine), changes in relative share reflect changes in click quality across the engines.
Our client base is predominantly online retailers, most from the IR500, with approximately 85% selling B2C and 15% selling B2B.
PPC Ad Spend Share
This chart shows the relative PPC ad spend share for each engine so far this year. For earlier data, see last month's post.
The key take-away from this graph is Google's utter dominance of the paid search industry.
Measured by their share of our clients' ad spend, Google is five and a half times the size of Yahoo (!), Yahoo is three times the size of Microsoft, and Microsoft is forty times larger than Ask. That puts Google at 750 times the size of Ask, for those keeping score.
Search remains a winner-take-all business. As I've blogged previously, I don't think that a combined Yahoo and Microsoft ("Microhoo") would pose any significant threat to Google in pay-per-click search.
The scale of the prior graph hides small changes. You can see the Google line slopes up a bit, but the trend is clearer looking at the same data tabularly.
Signs Of Recession In Paid Search?
I went looking to see if the effects of the overall retail slowdown were visible in our aggregated client results.
Considering only clients who have been with our agency for more than one year, and restricting attention to Google clicks, I compared key PPC metrics between Feb 2008 and Feb 2007: ad spend, resulting sales, orders, items, clicks, impressions, cost per click, sales per click, average order size, CPM, and A/S ratio.
The median change in Google adspend, Feb 2008 vs. Feb 2007, was +22%. The average rose +49%, so there were outliers on the right with bigger upticks in spend.
The median change in resulting PPC-driven sales, Feb '08 vs. Feb '07, was +26%. The average was up +48%, again due to big outliers.
The median CPC jumped 8 cents Feb '08 vs. Feb '07, from 33c to 41c. The average CPC soared 9c, from 55c to 63c.
Median sales-per-click (SPC) stayed flat at $2.82 year-on-year. Average SPC rose 87c, from $3.34 to $4.41.
Median conversion rate (orders over clicks) rose from 1.7% to 2.3%. Average conversion rose from 2.2% to 2.6%.
Again, these are same-client year-on-year results, analogous to same-store comp sales.
For clients who've been with us for more than a year, we're seeing strong increases in both advertising and resulting sales.
While the overall retail sector slumps, web sales continue to grow, albeit with somewhat less strength than in the past. For multichannel retailers, this web growth usually isn't incremental, but rather reflects channel shift as consumers move spending online.
Certain RKG clients in specific verticals have been hit hard by the larger economic slowdown. Fortunately, so far, we're not seeing signs of an slump in B2C online retail overall. Hopefully that remains true going forward.