Keyword Prices Fall In Q1

After surging during the holidays, the price of purchasing keywords ebbed dramatically last quarter, according to DoubleClick's most recent quarterly report about search pricing.

The "cost-per-keyword" fell to around $30 in the first quarter--from around the yearly high of $59 last December, according to the report. Year-over-year, cost-per-keyword was relatively flat. To arrive at a cost-per-keyword, Performics combines cost-per-click with the volume of clicks; the figure represents the average cost to a marketer of purchasing a keyword for the entire month.

The report confirms an earlier study, released last February, which found that keyword prices were trending down by the beginning of the year.

In its most recent report, Performics proposed that the lower prices of keywords likely stem from marketers curtailing their bids due to a drop in spending by consumers after the holidays. "Some advertisers lead the market by dropping their own bids shortly after the holidays when lower returns make those high bids unsustainable. Other advertisers follow that trend, and have their bids drop automatically when other competitors pull back first," stated the report.

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Although the cost-per-keyword was nearly unchanged from the first three months of 2005 to this year's first quarter, the number of keywords in play grew, as did the total number of clicks. Performics reported that the average number of keywords per campaign receiving at least one click per month increased by 36 percent; the total number of clicks soared 24 percent.

Performics also found that consumers didn't click on the highest-priced keywords--often generic terms--as often in the first quarter as during the holidays. While between 5 and 7 percent of all keywords were priced at more than $1, the percentage of clicks on such keywords dropped from the fourth quarter to the first.

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