Keyword Prices Rise in Q3; Ranking Positions Drop

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Search advertisers paid more for keywords and clicks in the third quarter, according to a new report from Performics, the performance-based marketing division of DoubleClick, New York.

Cost per click rose 6 percent from July to September of 2005, according to Performics' Third Quarter Search Trend Report, and rose 30 percent year over year.

In addition, cost per keyword increased from $20 to $26 from July to September because of the "natural growth of search," said Cam Balzer, director of search strategy at Performics. "Campaigns are getting bigger and growing across the board."

One major trend the report uncovered was that keyword rank distribution has shifted since early 2005, mainly because of changes to Google's algorithmic system. The proportion of keywords that maintain the top rank for an entire month is decreasing steadily, Performics said.

"This is creating a ripple effect through paid search, with a share of first-ranked keywords slipping to second, second-ranked keywords slipping to third and so on," the report said.

The trend can be linked to both increased competition in the paid search field and changes in how Google ranks its ads.

"In the last couple quarters, Google has introduced quality-based bidding and increased the number of ads they show at the top of the page, in premium positions," Balzer said.

This pushes some keywords to lower positions.

Meanwhile, lower-ranking keywords, including some product-specific and generic words such as "shoes," have converted better during the past quarter than previously. And these keywords drove more impressions than conversions, suggesting that marketers use them for branding or "other non-direct purposes," the report said.

"Advertisers are starting to view search in a slightly broader fashion," Balzer said. "We see this reflected in a lot of direct marketing-oriented clients, in their willingness to see a slightly lower ROI on their search spend in order to gain some of that additional visibility."

Christine Blank covers online marketing and advertising, including e-mail marketing and paid search, for DM News and To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting

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