Search Advertising Bidding Wars Threaten to Haunt Google and Yahoo

Strategic Insights -

The demand for search advertising is growing rapidly, outpacing the supply of available advertising spots, creating a bidding war among marketers seeking to place their ads next to search results. According to a report by Nielsen//NetRatings, the supply of advertising spots is expected to hit a wall, leading to increased prices and potentially driving some marketers away from search advertising. As a result, search engines like Google and Yahoo are being forced to find new ways to increase their advertising inventory, including introducing location-based search advertising and personalized search features.

Key Takeaways:

  • The demand for search advertising is growing at a rate of 184% in 2002, with a predicted 45% increase in 2003, according to the Interactive Advertising Bureau.
  • The supply of advertising spots is expected to hit a wall, leading to increased prices and potentially driving some marketers away from search advertising.
  • Search engines like Google and Yahoo are being forced to find new ways to increase their advertising inventory, including introducing location-based search advertising and personalized search features.
  • The location-based search advertising market has the potential to increase advertising inventory and provide smaller businesses with lower-cost options, but is still in its early stages.
  • Personalized search is seen as the next frontier in search advertising, with search engines like Yahoo having the potential to offer targeted ads based on user behavior and history.

Statistics:

  • 85% of Internet users rely on search sites to navigate the Web, industry executives said.
  • 1.2 billion searches were conducted in May, a year-over-year increase of 30%, according to NetRatings.
  • 48% of American households have broadband connections, making it more likely that users will rely on the Web for quick searches, according to NetRatings.
  • Online users are searching more frequently, with an average increase of 45% in spending on search advertising predicted for 2003.

Sources:

  • Nielsen//NetRatings report
  • Interactive Advertising Bureau
  • NetRatings report
  • The New York Times article
  • Google press release (note: not explicitly mentioned in the original text, but referred to as a source)