• by Wendy Davis  @wendyndavis, February 6, 2006

Search engine marketing agency Fathom Online has decided to start publishing its keyword pricing index quarterly instead of monthly. The company will issue its next index in April.

"Fathom believes that by providing year over year numbers on a quarterly basis, we can present a more informative picture of what trends are taking place in the search engine keyword price auction," the company said in a statement.

The company first started compiling the index in August 2004, under the leadership of Fathom Online founder Chris Churchill. Last month, Dean DeBiase was named chairman and CEO, while Churchill became vice chairman.

Fathom's index has been controversial in the last several months, mainly because the results have been counterintuitive. Fathom's most recent index in December showed an average keyword price of $1.43--marking a 16 percent drop from December 2004. But during that same time, revenues at Google increased by 86 percent.

It's plausible that search revenues could increase as prices decreased; one explanation is that an increase in the volume of keyword buys more than compensated for any decline in average pricing. But the dramatic fall-off in prices also raised questions among industry watchers about Fathom's methodology.

To compile the index, Fathom examined 500 keywords in each of eight categories--automotive, consumer retail, consumer services, travel/hospitality, finance/investing, mortgage, broadband, and wireless. Some observers say that 500 keywords is too small a number to get a valid sample.

Another methodological factor that might account for the difference between Fathom's results and some surveys is that Fathom excludes proper and brand names, like iPod and Pontiac, from its index.

Peter Hershberg, a managing partner at search engine marketing firm Reprise Media, wrote in his company's blog on Jan. 10 that Fathom's conclusions were wrong. He argued that the sample size was too small, and that brand names played too important a role in search marketing to be excluded, because they "typically deliver significant volume at higher average CPCs."

Additionally, he argued, a recent Google decision to incorporate qualitative factors--including an assessment of landing pages--into pricing, make it impossible to accurately judge that company's average prices.

In the last year, additional researchers have released keyword pricing studies, some of which have been inconsistent with Fathom's.

The Search Engine Marketing Professional Organization reported in a recent report, "The State of Search Engine Marketing 2005," that advertisers and agencies perceived that the price of keywords had increased. Researchers asked 123 advertisers and 229 agencies in December whether they had observed price changes for keywords they routinely bid on. Three-quarters of advertisers and all agencies answered that they believed prices went up.

A joint study between MediaPost and Deutsche Bank also looked at pricing. For that study, media executives were asked to estimate the average price per click that they paid for keywords; Deutsche Bank calculated that the average was 58 cents in the fourth quarter--well below Fathom's estimates, which hovered around $1.43 for the quarter.