Sign up for our daily recaps of the ever-changing search marketing landscape.
Google, Yahoo, Microsoft: Year-To-Date PPC Report Card
The punch line: Google reigns dominant, providing the lion’s share of clicks, and Google clicks convert well. Microsoft offers strongly converting clicks at a lower-than-expected cost—good efficiency, but sadly almost no volume. Yahoo commands 22% of ad spend, but lags in click quality.
My agency provides paid search management for about 100 sites, some from the Internet Retailer 100, most from the IR500. About 85% of our clients are B2C; about 15% are B2B. Our client base is largely direct response advertisers—catalogers and pure-plays who buy clicks to sell product, in contrast to advertisers who buy clicks for branding or traffic.
Nearly all of our clients instruct us to run their paid search campaigns to achieve their economic goals. That is, none of our clients establish a priori budget levels by engine. Our portfolio bidding platform optimizes ad budgets, buying the most effective clicks first. Thus, an increase in ad spend on one engine, relative to the others, reflects an increase in click quality relative to the others.
We’ve aggregated our results across all our clients for these observations.
Our agency has grown steadily during 2007. Because of this growth, graphing absolute spend and clicks says more about our performance than about the performance of the engines.
To remove the effects of our own growth and of seasonality, we’ve normalized the data by dividing each engine’s data by the monthly total of the three engines, thus expressing each engine as a percentage of the monthly whole.
To simplify this analysis, we’ve excluded data from Ask, paid inclusion, and the shopping comparison engines.
In all the graphs which follow, Google is represented inblue, Yahoo inred, and Microsoft ingreen.
As we’ve previously reported, Google comprises about 73% of our total agency pay-per-click ad spend that goes to the Big Three engines. Yahoo comprises 21%, and MSN at 6% takes up the rest.
That graph looks effectively flat to me.
If our data is representative of the industry, Google is by far the dominant engine, and that’s been the case all year, despite Yahoo’s Panama launch and Microsoft’s increased focus on AdCenter.
Let’s look at tracked client sales driven by paid search, by engine.
We see Google’s driving about 73% of our clients’ aggregate PPC sales. Makes sense, as they comprise about 73% of our client’s ad spend.
Again, the three sales lines are relatively flat across the last six months.
As would be expected, other primary share metrics—monthly impressions, clicks, orders, items, etc— show the same pattern. All those graphs show three relatively flat lines, stacked BLUE / RED /GREEN, indicating Google in first place by a large margin. Not interesting.
Whatis interesting is to divide these monthly share metrics by other metrics. For example, click share divided by impression share gives a click-through rate index. Sales share divided by click share gives a sales-per-click index. And ad spend share divided by click share gives a CPC index.
So, looking at these derived indexes, 100% translates to “at expectations.”
Wall Street cares about how well each engine does at translating searches into revenue. Dividing monthly ad spend share by monthly impression share yields a CPM index.
This graph shows Google and Microsoft do equally well monetizing their search traffic, while Yahoo has been about half as effective. Basically flat year-to-date, perhaps with slight gains for Microsoft.
Dividing monthly ad spend share by monthly click share yields a CPC index. This index provides a measure of the competitiveness of the bid landscape on each engine. Advertisers prefer fewer competitors in their auctions, of course. Search engines want to bring in more advertisers to drive up CPCs. CPCs are also influenced by click quality—smart advertisers use sophisticated tools to align their bids with click quality.
This graph shows Google enjoys higher CPC index than Yahoo and Microsoft.
Lower CPCs are good for advertisers. But CPC doesn’t tell the whole story. It isn’t how much a click costs that matters; it is how much that click costs relative to how much that click sells that matters.
Dividing monthly click share by monthly impression share yields a CTR (click-through-rate) index. This gives some sense of how well each engine does in serving relevant paid ads on search results pages—if the ads aren’t useful to searchers, they won’t get clicked.
The graph shows Google performing as expected, with click share nicely aligned with impression share. Microsoft does slightly better than expected. Some of this could be noise—Microsoft provides our clients only one-thirteenth the click volume that Google does—but the green line is consistently above the blue. Yahoo lags in distant third, with clicks coming in only at 60% of the level to be expected from their impression volume.
Dividing monthly sales share by monthly click share yields a SPC (Sales Per Click) index. The SPC index provides a measure of the quality of the clicks being sold. SPC reflects both the average likelihood a click converts (conversion rate) and the average value of a conversion (average order value).
This graph shows Microsoft quality has increased to Google’s level over the course of the year. Yahoo has held steady at lower quality of traffic. That is, across our clients, Yahoo clicks provide less sales than would be expected, relative to performance on Google and Microsoft.
We can break out SPC into its two components, conversion and average order. Here are both of them:
These graphs suggest that, among our clients, Yahoo’s weak sales-per-click stems from both lower conversion and lower average order values.
Most retailers care about sales dollar volume, not sales item volume, so this graph of average items per order falls into the interesting-but-not-important category. It does show that Google and Microsoft searchers are more likely to purchase multiple items per order than Yahoo searchers.
Direct response advertisers don’t give a whit about how well the engines do monetizing their SERPS or encouraging searchers to click. Online retailers typically care about driving site revenue, and lots of it, and doing so cost-effectively.
One measure that nicely captures the “what-did-I-spend-and-what-did-I-get” trade-off is the A/S ratio. Diving ad spend by resulting sales indicates the efficiency of the advertising.
So, dividing monthly ad spend share into monthly PPC-driven sales share yields an A/S index, which measures the effectiveness of each engine for our clients. Note that lower A/S numbers are better than higher, as a lower A/S indicates higher efficiency.
Here’s that key graph:
We see that Google comes in at 100%, which is baseline. This is to be expected, given Google’s dominance, and given the portfolio optimization performed by our proprietary bid management platform.
Microsoft, with typically lower CPCs and higher SPCs, enjoys better than expected click efficiency. Microsoft’s efficiency is attractive to advertisers—the only fly-in-the-ointment is their paucity of traffic. (Microsoft has had trouble on their side getting clients launched in a timely manner—one wonders if this efficiency is due to an as-of-yet incomplete pool of advertisers.)
Yahoo comes in with the highest (worst) A/S index, resulting from their lower-than-expected click conversion and lower-than-expected resulting order size.
Your Mileage May Vary
These data represent our agency’s clients’ experience in aggregate. Our client base may not be representative of the search industry as whole. In particular, Yahoo has made strong progress selling search to traditional brand advertisers, who are under-represented in our client base of direct marketers.
So, your mileage may vary. Take all these observations with a grain of salt.
We’ll update these graphs at year’s end to see what changes.
What All This Means To Advertisers
Not much, I’d suggest. Engine-by-engine share results shouldn’t change how advertisers approach paid search. The fundamentals remain the same, regardless of where you are buying clicks:
- Use smart tracking and strong bid management to buy as many high-converting clicks as you can, regardless of engine
- If you are interested in profit, bid by your economics, not by position
- Use large term lists to exploit the long tail, paying particular attention to how you bid low-volume terms
- Build well-organized campaigns with sensible adgroups
- Test copy, landing pages, and match types
- If you are interested in profit, avoid content
- Segregate cost and sales from sales on brand terms from non-brand terms
- Obsess on site conversion—better conversion allows you to get more volume while maintaining profitability
OK. Your turn now. What’s your experience with the relative cost of clicks on Google, Yahoo, and Microsoft? What about the effectiveness of those clicks? We welcome your perspectives on your experience with the performance of the Big Three so far this year in the comments.
Opinions expressed in this article are those of the guest author and not necessarily Search Engine Land. Staff authors are listed here.