Looks like the search-ad market’s recovery is happening faster than anticipated. Search engine marketing firm Efficient Frontier now says it expects search-ad spending to jump 20 percent this year, up from a previous estimate of between 15 and 20 percent growth (That estimate itself was up from the firm’s initial projection of between 10 and 15 percent growth in 2010). Efficient Frontier’s reasoning in a report due to be released tomorrow at the start of earnings season: Impressions and CPCs are both on the way up, while “economic conditions” have stabilized.
During the most recent quarter, search-ad spending jumped 20 percent year-over-year, fueled in part by a 32 percent increase in the retail category, Efficient Frontier says. Finance and automotive also saw significant increases, a contrast to tepid growth in both categories during the fourth quarter of 2009. Average cost-per-click was up 10 percent year-over-year, compared to a 9 percent drop last quarter.
Among the big players, Microsoft (NSDQ: MSFT) posted the biggest increase in search-ad spending market share; its share increased to 6.5 percent from 4.9 percent during the fourth quarter. But like its overall gains in the search market, Microsoft’s improvement is coming at the expense of Yahoo (NSDQ: YHOO) and not Google (NSDQ: GOOG), which has to be cause of some concern in Redmond. Yahoo’s share of search ad spending dropped to 18.7 percent from 22.7 percent during the fourth quarter, while Google’s increased to 74.8 percent, from 72.3 percent.
The overall 20 percent increase in search-ad spending is in line with the quarterly revenue growth most analysts expect Google to post when it reports its earnings on Thursday. We should get some more clarity then, as well as the following week when Yahoo and Microsoft both report their own figures.