• by Tameka Kee , August 11, 2008

Tech advertisers like Lenovo and Intel bumped up their paid search spending with Yahoo in the second quarter of 2008. Yahoo's gains came directly at the expense of some of Google's share of their budgets, according to new data from Covario.

The digital advertising management tech and services company studied the global spending of 12 of its major technology clients (representing more than 128 brands), and found that Yahoo's share of budget increased in both North America and Asia-Pacific (APAC) in the previous quarter. It's the first time in two years that the Web giant has grown its share of these advertisers' budgets at the expense of its rival.

While Google still commanded a lion's share (81%) of said advertisers' North American budgets in the second quarter of 2008, that's a drop from 86% in the first quarter. Yahoo's share of budget increased from 10% in the first quarter to 14% in the second.

According to Craig MacDonald, Covario's vice president of marketing and product management, the shift could signal a swing in the tide of Yahoo's search fortunes, fueled in part by the company's reorganization of its sales teams in late 2007. "They combined their display and search sales forces, and they may be starting to see some benefit from cross-selling opportunities," MacDonald said. "The account reps might be more effectively talking about--and being able to show--how spending across Yahoo's whole network can be more effectively managed."

During the quarter, the company also issued a slew of upgrades to its Yahoo Search Marketing user interface, including more detailed campaign performance reports and more streamlined functionality. But the increased spend could also be attributed to spikes in available inventory, as the Web giant's constant presence in the news may have driven up search volume across its network.

"They were so deeply ingrained in the news in the second quarter, that it appeared there was a small spike in the inventory available," MacDonald said. "It was likely fueled by people flocking to the Yahoo site to keep tabs on what was going on." And although there was a minimal lift in click-through rates (CTRs) across Yahoo, MacDonald said that the tech advertisers studied were still finding that Google's CTRs eclipsed Yahoo's by about half.

Meanwhile, the budget shifts between the two giants were magnified in APAC. Google's share of these tech advertisers' budgets plummeted from about 72% in the first quarter to 46% in the second, down by 26%. Spending on Yahoo jumped to about 50% in the second quarter, up nearly 34% and almost entirely at Google's expense.

The Web giant stole the remainder of advertisers' budgets from Baidu, the leading search engine in China. MacDonald said that Baidu's lack of an English-language interface, as well as industry standards like analytics reports and impression counts, have made many of Covario's clients pull back on their spending with the engine.

Some of the volatility in the APAC market can also be attributed to the relatively small portions of advertiser budgets that are directed there, as APAC spending only accounts for about 7-11% of Covario's tech clients' more than $225 million annual search budgets.

Still, he said that the company would be keeping an eye on the budget shifts in the coming quarters to determine whether the data indicates the start of a trend. "Yahoo has been losing market share directly to Google for some time," MacDonald said. "And spending is still not where it once was--for example, our data shows that Yahoo had 22% of these advertisers' search budgets in the first quarter of 2007. But we'll definitely be tracking this in the third quarter, and recommend that our customers continue to assess their opportunities on Yahoo."

San Diego-based Covario has been tracking spending data for these technology clients for some time, although the data in the "Covario Search Spend Analysis Vol. 2-Q2 2008" only dates back to the first quarter of 2007. MacDonald said that the company singled out the tech vertical because brands like RIM and Adobe are actively running global paid search programs, offering a view of the marketplace that extends beyond the U.S.