Google and Yahoo continue to dominate the online advertising market which is slowly gnawing away at traditional media. But, surprise, both lag behind AOL and MSN when it comes to coverting ads into sales. Three studies conducted by as many Internet research organisations over the last one week have a lot more to tell.
The number of sponsored link advertising impressions on the Google and Yahoo ad platforms grew 16 per cent, from 55.4 billion to 64.3 billion, between August 2005 and January 2006. This accounts for sponsored link impressions not only on the Google and Yahoo websites, but also in their respective search and contextual advertising networks, according to Nielsen//NetRatings AdRelevance.
Although Google had more sponsored link impressions in January, Yahoo is gaining ground. During the last six months, Yahoo's sponsored links have grown 21 per cent to 23.2 billion, while Google's have grown 14 per cent to 41.1 billion.
"Despite the overwhelming market share that Google and Yahoo search enjoy, they continue to see strong growth in the volume of sponsored links," said Ken Cassar, chief analyst, Nielsen//NetRatings. "While Google, in particular, seeks to diversify its revenue, it is a positive sign that its core search advertising business remains robust."
However, according to a new Outsell survey, Google is rated as the most effective provider of keywords ads with 71 per cent of advertisers rating it extremely or somewhat effective. Yahoo received a 62 per cent effectiveness rating and MSN 46 per cent.
Chuck Richard, vice president and lead analyst at Outsell, said Google's top rank could be the result of its two-part algorithm, which combines bid price and traffic to prioritise ads, whereas Yahoo places ads by the highest bidder. Therefore, Google will replace low-trafficked ads with a high bid price with higher trafficked ads with a lower bid price.
"Companies with ad budgets of less than $1 million are shifting more of these budgets to high ROI online ad options. En masse, these smaller companies are denting the bottom lines of television and radio stations, as well as print media," said Richard. For certain applications, however, "old media" are far from dead. For instance, trade magazines, events, and direct mail marketing are rated the top three most effective tactics for both branding and lead generation.
Though advertisers increase their usage of online advertising tactics, advertisers still see traditional forms of advertising important. Marketers are particularly reliant on traditional media to generate leads and branding, the Outsell survey said.
Online spending is expected to grow 19 per cent this year, and will make up a larger proportion of the total marketing budget. In comparison, print spending is forecast to grow just 3.3 per cent and TV/radio 2.4 per cent. In 2005, online media made up 16.2 per cent of advertising budgets. This will increase to 18.2 per cent in 2006.
In November 2005, Outsell surveyed 1,200 marketers who control $2.4 billion in advertising. It combined data from marketers primarily targeting consumers, business-to-business, healthcare and government. Outsell found that 80 per cent of all advertisers use online advertising. By 2008, this is projected to grow to 90 per cent.
According to Nielsen//NetRatings, eBay is the primary sponsored link advertiser on both the Google and Yahoo sites. eBay's Shopping.com is Google's No 2 sponsored link advertiser, followed by Local.com, Target Stores and Expedia, respectively. Shopping.com is also Yahoo's No 2 sponsored link advertiser, followed by University of Phoenix, Lending Tree and Target Stores, respectively.
"Ecommerce advertisers, eBay chief among them, represent the top advertisers on both Yahoo and Google. It is becoming increasingly clear that sponsored link advertising is a necessary cost of doing business for ecommerce companies," Cassar said.
When it comes to businesses buying products and services online, however, Google and Yahoo seem to have lesser conversion rates than AOL and MSN. For the month of January, AOL Search generated the best conversion rate at business-to consumer e-commerce sites (6.17 per cent), followed by MSN (6.03 per cent), Yahoo (4.07 per cent) and Google (3.83 per cent), according to WebSideStory Index, a statistical barometer that features techno-graphic and e-commerce trends culled from the millions of users that visit websites using the company's web analytics technology, HBX Analytics. The study includes traffic from both organic and paid keywords.
"One way to explain the difference in conversion rates is demographics," said Ali Behnam, senior digital marketing consultant for WebSideStory. "With portals rich in content and services, AOL, MSN and Yahoo may tend to appeal toward a more buyer friendly demographic. Google, meanwhile, may appeal to more browsers – those with less of an intent to buy. All of this suggests search engine marketers may want to consider demographics in allocating their budgets," Behnam said.
Each of the major search engines posted conversion rates well above the median average for all search engines, which was 1.97 per cent for the month of January, according to the index. This compares with a median average of 2.30 per cent for the last three months of 2005, which WebSideStory reported last month.
One other important consideration to note in this study, WebSideStory officials said, is that the conversion rates are likely higher than industry averages because the sample sites are using best-of-class web analytics to improve their search engine marketing and optimisation. "Our clients are steeped in web analytics best practices and are not buying search engine traffic that does not deliver," said Jeff Lunsford, chairman and CEO of WebSideStory. "In addition, they understand how to convert visitors into buyers once they arrive at the site."
