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Consumer Goods Keyword Prices On The Increase

Staff Writer
Published: 2004-11-09

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Nowhere is the dynamic crossfire of the search engine market better revealed than in the volatile fluctuations of the costs of its keywords.

This was demonstrated clearly as Fathom Online released its October monthly Keyword Price Index showing an overall 14% increase in the price of keywords from the September average of $1.37 per keyword to $1.55 for October.

Search advertisers in some sectors of the market found that the start of Q4 was definitely more costly than September. For instance, in the consumer services category, which includes entertainment, spas, and other related goods and services, prices increased on average 78% from $.54 to $.96 per keyword. Retailers faced increases on average of 52% from $.32 to $.48. Other advertisers fared better, particularly in the automotive industry where prices dropped 10% from $1.43 to $1.39 and in telecom/broadband where the average fell 5% from $1.89 to $1.78.

"As with all free markets, prices of keywords are dictated by supply and demand," said Matt McMahon, Executive Vice-President, Media and Marketing, Fathom Online. "The dramatic increases in the consumer categories likely reflect the approaching holiday buying season, which is expected to be robust. Similarly, the car buying season is stronger in summer, so those prices decreased slightly."

Volatility in search marketing where keyword prices are based on a minute by minute auction can be influenced heavily by large bids for keywords, as marketers jockey for top listings, or by outside events and influences, Mr. McMahon noted. "Fathom Online search advertising clients know their costs and know their return on investment, so they can make cost-effective decisions on where and when to market based on our data and recommendations."

For instance, mortgage rate changes correlated strongly with the prices that mortgage companies and sellers had to pay for keywords in October. When interest rates on the 30 year mortgage dropped, marketers, sensing a big opportunity, bid aggressively to get their names listed in the top listings on the search engines. When that happened, the cost of keywords increased 36% for the month from $3.17 to $4.31, the highest priced category. "The payoff for acquiring a 30 year mortgage is rewarding, so the keyword prices are often highly cost-effective for these marketers," Mr. McMahon said.

"The usefulness of the Keyword Price Index will increase as we continue to track data in future months, and can analyze trends," says Mr. McMahon. "We will drill down further to explain in more detail the volatility and/or stability of the market and to uncover its inner workings. Meantime, we urge caution in making sweeping assumptions about the costs of search based on two months data."

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