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Search advertisers remain cautious in April

Cautious spending on search advertising in April suggests a typical seasonal dip expected in the middle of the year could be more pronounced than usual, a trend that could weigh on companies like Google Inc. and Yahoo Inc. if it persists.

"Individual client budgets are still volatile," said Kevin Lee, chief executive at Didit LLC, one of the largest search-engine marketing firms."From CMOs [chief marketing officers] all the way down the marketing staff chain, the mood seems a bit skittish."

Search-engine marketer Range Online Media said search spending by its clients fell 7% in April compared with the monthly average for the first quarter, though it rose 27% compared with the same month a year earlier.

Range said the sequential slowdown in April was due as much, if not more to seasonality than the economy in advertising decisions.

The results lend support to concerns expressed last month by a top Google executive who said seasonal patterns for the second and third quarters could become "more visible" as core growth slows in the current economic downturn.

An extended slowdown in search advertising could weigh on Google, and to a lesser degree competitors Yahoo and Microsoft Corp., which together control about 92% of the U.S. market for search advertising. Google, which commands more than 63% of the market, gets about 97% of its $21.8 billion in revenue from search advertising. A slowdown in the market already has squeezed revenue growth and prompted it to cut costs to keep profits up.

On Friday, shares in Google fell 0.6% to $393.69; Yahoo fell 1% to$14.14; and Microsoft fell 0.1% to $20.24.

Range Online said the seasonal change in the market is caused in part because by travel advertising is typically key in the first quarter, while spring product lines are often launched in March. Moreover, post-Christmas, Valentine's Day and pre-Easter sales dominate January and February for retail spending, while April typically sees a bit of a lull prior to summer activity.

Google cautioned Wall Street analysts of this possibility after reporting that first-quarter revenue rose just 6%, the company's lowest quarterly growth rate since its 2004 public offering.

"Seasonality can become more visible in an environment where you have relatively slower core growth so that's certainly a dynamic to understand," said Jonathan Rosenberg, the company's senior vice president for product management, during the company's conference call on April 16.

The Mountain View, Calif.-based company typically sees slower growth in the second and third quarters due to seasonal patterns. Rival Yahoo, which accounts for about 20% of the U.S. search market, has been more affected by weakness in display advertising spending.

But small and medium-size advertisers could provide a measure of hope, said Max Kalehoff, vice president of marketing at Clickable Inc., which makes software that helps them manage their search advertising budgets.

Kalehoff said overall search spending by his company's clients, which include businesses such as pizza shops and local auto dealers, increased slightly in April over March, but he cautioned that spending was down in some sectors.

Research group eMarketer expects the U.S. search advertising market will grow to $12 billion in 2009, up from $10.6 billion last year.

Источник: Total Telecom

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