• by Wendy Davis  @wendyndavis, October 6, 2005

The average cost of search terms fell again in September to $1.44--a 4 percent drop from August's $1.50 average and a decline of 26 percent from the 12-month high of $1.95 in April, according to Fathom Online. What's more, average prices reached their lowest point since last October, when the mean cost-per-click was $1.55.

On a year-to-year basis, however, last month's $1.44 average was 5 percent higher than the $1.37 average cost-per-click marketers paid in September 2004. When the average is weighted across the eight categories tracked by Fathom, the increase comes to 19 percent.

Fathom Online Keyword Price Index: Year-over-Year

	09/04	09/05	% Change
Automotive	1.54	1.51	-2
Consumer Retail	.32	.46	44
Consumer Services	.54	.96	78
Travel /Hospitality	.64	.91	42
Investment	1.76	1.46	-17
Mortgage	3.17	3.39	7
Broadband	1.89	1.62	15
Wireless	1.09	1.22	12
Average	1.37	1.44	5

Source: Fathom Online

Still, that growth is far lower than the growth of search marketing overall; the Interactive Advertising Bureau recently reported that the search marketing ad revenues surged by 27 percent in the first six months of this year alone. Fathom's figures, combined with the IAB's, indicate that much of the increase in search spending overall is due to increased volume--more marketers buying more keywords on more sites--as opposed to higher prices.

In fact, Fathom Online's Gregg Stewart, senior vice president for channel management and marketing, proposed that the added volume likely is keeping prices down. "We continue to see more volume being pumped into this basic commodity market of words, and as volume increases, prices tend to stabilize," Stewart said.

Year-over-year, the categories posting increases were consumer services, where average cost-per-click rose to 96 cents from 54 cents; consumer retail, which rose to 54 cents from 32 cents; consumer travel and hospitality, which increased to 91 cents from 64 cents; telecom/wireless, which increased to $1.22 from $1.09; and mortgages, which rose to $3.39 from $3.17.

But those numbers don't tell the whole story, because in some categories, there were significant ups and downs in the course of the year. Mortgage-related keywords, for instance, grew progressively more expensive between last September and April, eventually reaching a high of $6.49--then began declining to last month's $3.39, which was only 7 percent more than in September of 2004.

And, while average cost-per-click for consumer services rose by 78 percent year-over-year, keywords in that category actually are at their lowest point since last October, when they also were 96 cents; those terms rose through the end of last year to reach a 12-month high of $1.36 in December, before falling through most of this year.

The categories to decline year-over-year were automotive, which averaged $1.51 last month, down from $1.54; financial/investment, which fell to $1.46 from $1.76; and telecom/broadband, which dropped to $1.62 from $1.89.

Fathom Online Keyword Price Index: Previous Six Months

	03/05	04/05	05/05	06/05	07/05	08/05
Automotive	1.42	1.40	1.50	1.53	1.49	1.68
Consumer Retail	.51	.52	.49	.53	.52	.49
Consumer Services	1.08	1.13	1.09	1.12	1.12	.99
Travel/Hospitality	.93	.92	.87	.88	.87	.84
Investment	1.86	2.03	1.81	1.89	1.73	1.63
Mortgage	5.39	6.49	4.52	4.66	4.63	3.81
Broadband	1.85	2.09	2.02	1.97	1.72	1.49
Wireless	.95	1.01	1.00	1.19	1.14	1.03
Average	1.75	1.95	1.67	1.72	1.65	1.50

Source: Fathom Online

Fathom tracks keyword prices daily. The keyword list consists of 500 generic keywords across eight categories for the top five ranked positions on selected search engines. The aggregate data contains no proper or brand names. Fathom states that the pricing fluctuations should be viewed in the context of the eight categories reported and not as a proxy for the entire search industry.