Search Ad Spending Wavered in Late Q1

Spending on search ads remained strong across several verticals in the first quarter, according to reports from two search engine marketing firms. However, one of them said it measured a slowdown in March that might point to trouble in Q2.

The findings came ahead of Google’s strong earnings report this afternoon. The company nailed its first quarter, reporting net income of $1.31 billion on $5.19 billion in revenue. CEO Eric Schmidt said Google had felt no impact as a result of macro-economic conditions.

SearchIgnite said its mostly retail clients increased their year-over-year ad spend in the first quarter. Across all engines, same-advertiser spend increased 28.5 percent. However, the month-to-month breakdown reveals a decline over the course of the quarter. Spending growth was 47.6 percent in January; 33.5 percent in February; and 19.1 percent in March.

“They are for the most part dipping their toe in a little more cautiously month-over-month,” said Will Margiloff, CEO of Innovation Interactive, SearchIgnite’s parent company.

“We believe that online is insulated from a downturn from traditional marketing, and online search is double-insulated… For the most part more dollars will flow into search, even though some of the trends year-over-year won’t be as robust as others,” said Margiloff.

Spending growth trends vary depending on the industry. In its own report today, Efficient Frontier said travel sector clients increased their spend by 23 percent year-over year. Meanwhile search spending in the financial services category is down by 17 percent, compared to the first quarter last year.

Where money is being spent is another issue. Searchignite says it increased its Yahoo spend at Google’e expense in Q1, even as comScore reports Google expands its dominance in user queries. The search agency said Yahoo’s share of search spending increased by 4.6 percentage points between the end of 2007 and the end of March. During the same period, Google’s share dropped by 4.1 percentage points. Searchignite attributes some of Yahoo’s gains to the maturation of Panama.

“Yahoo technologically has put a lot of advances in its platform, and over time, provided a lot more advances for marketers,” said Margiloff. “One of the things we think is exciting about the search space is innovation at Yahoo and innovation at MSN.”

Efficient Frontier tells a quite different story. “We are seeing that click through rates and CPCs are up in Google, and they’re down on both Yahoo and MSN,” said LeeAnn Prescott, director of research. “What that indicates to us is that Google has become more efficient. Its quality measures are taking effect and becoming more beneficial to advertisers

Efficient Frontier said its advertisers have pulled money out of Yahoo and spent it on Google. Google grew its share of Efficient Frontier’s ad spend to 77 percent. Yahoo lost three points, shrinking from 21 to 18 percent. MSN remained flat at 5 percent.

Throughout the first quarter, Google’s click volume has been closely scrutinized with the release of multiple reports from comScore showing declining click growth. Investors were scared by sequential declines in clicks in January, and by low growth thatcontinued through March. Updated with Google Q1 results information.

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