Study: Google Ad Spending Increasing Even As Total Number Of Advertisers Decreases

Despite a 5% decrease in active advertisers, spending on Google is up nearly 13% among the top 80 U.S. retailers, according to new research from AdGooroo. In numerical terms, retailers' Google spend grew from approximately $264 million in the third quarter to about $298 million in the fourth quarter.

"Google experienced a quality purge this quarter and banned what we believe to be more than 30,000 advertisers, accounting for about 5.3% of its active advertiser base," said Rich Stokes, founder and CEO of the Web marketing data and keyword tools provider.

"While this typically signals a negative impact on revenues, AdGooroo also tracked increased competition for ad placement, resulting in higher ad prices for Google and unusually high click-through rates," Stokes remarked. "Google seems to be taking advantage of a strong Q4 to make some quality improvements."

While most retail categories were up, several sectors stood out as particularly strong, including traditional retailers, i.e., "bricks"; online retailers, i.e., "clicks"; and clothing, shoes, furniture, and auctions.

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Weaker categories included consumer electronics -- down 4.2% in the fourth quarter -- office products -- down 13% -- children's goods -- down 2% -- and home décor -- down 15%.

According to Stokes, the fourth quarter has traditionally been a strong one for Google, which he said has less to do with total search query volume -- which historically is about the same as November -- and more with increased competition for ad placement, i.e., higher ad prices, along with and high click-through rates.

Google did so well last year that it was able to permanently suspect an estimated 30,000 advertisers from its AdWords system in early December, without suffering any lasting damage to its ad business, according to AdGooroo.

"As this represents approximately 5.3% of active advertisers, it would be reasonable to expect a negative impact on search revenues," according to the report. Yet "it is unlikely that Google's management team would permit such a wide scale ban to take place during a weak quarter, so this almost certainly signifies strong quarter over quarter growth."

Still, ad coverage, which AdGooroo reports has been steadily climbing for the past 12 months, took a sudden dive in December -- dropping nearly 10%, from 5.48 ads per keyword in November down to 4.97 in December.

"Ordinarily, this would foreshadow a weak quarter, but we believe that this small drop will be more than offset by strong ad revenues," AdGooroo concluded.

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