Looking at our agency’s client base in aggregate, last month Google received 79% of our clients’ ad dollars. Yahoo received 17%. Microsoft received 5%.

Here are the year-to-date ad spend share figures for our clients.

Same data, graphed:

Background: RKG manages pay-per-click advertising for over 100 online retailers. Most are B2C. Nearly all bring a direct-marketing perspective to paid search. Our clients focus on ROI rather than CPC or CPM. We’d suggest online retailers as a class are among the savviest and most demanding competitors in the click auctions. Data from our agency may or not be representative of the total online advertising universe.

Our clients don’t establish a priori budgets by engine. Rather, our clients instruct us to buy as many clicks as possible which meet their marketing targets (revenue, margin, ROI, etc). Our portfolio bidding platform is highly effective at achieving these targets.

Thus, we’d suggest that the ad spend share data presented above is a reasonable proxy for click quality. Click quality is a function of both the population using each engine, as well as the engines’ skill at matching searches with relevant ads.

The main take-away from those data is Google’s staggering dominance of paid search. Sometimes this obvious point seems forgotten in the mainstream business press. In the paid search world, Google isn’t big, Google is gigantic. And Microsoft isn’t small — Microsoft is tiny.

It seems logarithmic, like the Richter scale. In terms of share of ad dollars, Yahoo almost is four times larger than Microsoft, and Google is almost five times larger Yahoo. Rarely is the skew between the top three competitors in any field so dramatic.

A smaller take-away from these data is Yahoo has upticked in each of the last four months, gaining share at Google’s expense. However, the absolute size of that improvement is small, and doesn’t change the situation.

Which engines are driving sales to our clients? Because our analysts and our technology manage campaigns to profit targets, and because those targets are typically consistent across the engines, it follows that our clients see roughly the same percentage of revenue from each engine as the corresponding ad spend.

Here’s that graph, tracked web sales by engine by month, aggregated across all our clients.

Are the engines equally good at transforming impressions or clicks into ad revenue? Nope.

Google brings in an effective aggregate CPM of $10, versus Yahoo’s effective CPM of $6. Microsoft commands an impressive $20 eCPM, but remember that is on tiny volume.

Google enjoys an effective aggregate CPC of 52c across all our clients’ campaigns. Yahoo and Microsoft come in about 17% lower, at 44c and 43c respectively.

Technorati Tags: Business, Google, Microsoft, SEM, Yahoo