Keyword Prices Tumble

Keyword prices last month averaged $1.46 per click, reflecting an 11 percent drop from the $1.64 average cost per click paid in November of 2004, according to the latest keyword price index from search engine marketing agency Fathom Online.

November marked the second consecutive month of year-to-year declines in average keyword cost. In October, the price fell to $1.45 a click--a 6 percent drop from $1.55 in October of 2004.

In the last two months, keyword prices have increased just 1 percent, according to the Fathom Online index. Last year, by contrast, the average cost per click rose 29 percent from September through November, as marketers geared up for the holidays. Fathom compiles the list based on prices of generic keywords--but not brand names or proper names.

Fathom Online Keyword Price Index: Year-over-Year

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11/04

11/05

% Change

Automotive

$1.36

$1.38

1

Consumer Retail

.60

.45

-25

Consumer Services

1.27

.90

-29

Travel /Hospitality

.93

.97

4

Finance/Investing

1.70

1.80

6

Finance/Mortgage

4.72

3.67

-22

Broadband

1.56

1.56

0

Wireless

1.00

.95

-5

Average

1.64

1.46

-11

Source: Fathom Online

"Looking at most of these categories, we're just not seeing the ramp-up we were seeing last year," said Fathom Online's Gregg Stewart, senior vice president, channel management and marketing.

One reason is that there's simply more inventory this year, Stewart said. But, he proposed, another factor might be that buyers are increasingly sophisticated, and therefore, less likely to rely on the generic keywords that Fathom's index captures. In other words, he said, marketers that started with generic keywords appear to be "migrating to more specific terms." For example, some online marketers have started adding city names to their keyword buys.

Still, revenues from search advertising have increased this year, and there is no sign that this will change. For instance, Google's third-quarter revenues reached $1.578 billion, marking a 96 percent increase from the third quarter of last year. Additionally, a new report by Piper Jaffray senior research analyst Safa Rashtchy predicts high single- to low double-digit price increases for search and branded ad inventory next year. (See "Ad Revenues To Reach $55B By 2010").

Fathom found that year-to-year, the categories posting the largest declines were consumer services (29 percent), retail (25 percent), and mortgages (22 percent). On a monthly basis, the largest drops were in wireless (10 percent), broadband (8 percent), and finance/investing (8 percent).

Fathom Online Keyword Price Index: Month-over-Month

10/05

11/05

% Change

Automotive

1.30

$1.38

6

Consumer Retail

.45

.45

0

Consumer Services

.86

.90

5

Travel /Hospitality

.97

.97

0

Finance/Investing

1.66

1.80

-8

Finance/Mortgage

3.68

3.67

Broadband

1.63

1.56

-8

Wireless

1.06

.95

-10

Average

1.45

1.46

1

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.
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