Google Bathing in Gravy as Marketers Squeeze Margins to Win Search Bidding Wars

Despite continued growth in search spending, ROI on search campaigns in Q1 was down 43 percent since last year, according to the latest search trend report from DoubleClick’s Performics unit. That makes sense when you think about it, since more and more advertisers are competing for the same limited pool of clicks, bidding up prices and squeezing their margins in the process. The winner in this bidding war is Google. The losers: everyone else.

Performics said the lowered ROI is also due to greater use of search as a branding channel, but I’d expect that’s a smaller factor than the rising cost of keywords for direct marketing campaigns.

In any case, average cost per click and cost per keyword both spiked. Campaigns included six times as many keywords with a cost per click above $1 and used 54 percent more keywords than they did a year ago.

The report had some other interesting findings, including that Yahoo search costs are down sharply, a further validation of Panama and Yahoo’s quality rankings. Sales and transactions through Yahoo were down, but advertisers purchased fewer clicks and spent less overall to acquire them.

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