Search Ad Spending Slides Amid Consumer Caution

NEW YORK Search advertising is showing signs that it will record a decline in the first quarter, according to an industry tech provider.

Search management provider SearchIgnite, whose clientele includes large multi-channel retailers, found that ad spending among its clients was down 4 percent in the first three months of the year when compared to the same period a year earlier. The negative picture is brightened somewhat by the positive trend SearchIgnite spotted in March, when spending rose 11 percent year over year. February spending was flat and January's was off 14 percent.

While the end of the quarter was positive, there's no guarantee that will continue in the fluid search marketplace, where advertisers can adjust budgets on the fly.

"There's a lot of volatility," said Roger Barnette, president of SearchIgnite. "Marketers have a very short-term view now. "They're making decisions month by month and in some cases week by week."

On a quarterly basis, search ad spending was down 10 percent. That's typical for the first three months following the holiday season, when ad spending is heaviest. However, the decrease this year was much wider than in years past. Last year, Q1 2009 search ad spending was down just 4 percent from the previous quarter.

While SearchIgnite charted a volatile marketplace for spending trends, it found consistency where the money went: mostly to Google. The Internet giant continued to attract 74 percent of spending while Yahoo remained at 20 percent and MSN was at less than 10 percent.

Another positive sign for Google: its many non-search engine properties are starting to pay off. SearchIgnite saw a lift in the amount of conversions marketers saw from other Google properties, such as YouTube and Google Maps.

In a sign of the economic climate, SearchIgnite charted uncertain consumer behavior. The purchase cycle lengthened, it found, with consumers less likely to buy after the first click. In fact, SearchIgnite found the time between the first click and conversion on the site was 32 percent longer in the first quarter of 2009 compared to the year-ago quarter. In a further sign of caution, the firm tracked consumers clicking on multiple ads from the same advertiser increased 28 percent.

"The consideration process is longer and more involved," Barnette said. "It probably means there's more comparison shopping online as well."