Citi analyst Mark Mahaney held a conference call on Friday with six major search-engine marketing and digital ad firms. The group appeared to acknowledge some search-spending weakness, but remained upbeat about the current state of search spending on Google (GOOG).
With the exception of Efficient Frontier, most anecdotal SEM reports have remained solid if unspectacular through January and February. As noted last week, we believe the Street forecasts have already accounted for some weakness in Q1. We believe that full-year estimates are still exposed to further cuts.
From Mark’s summary of the call:
On Friday, we hosted a call with SEM firms Clickable, Covario, iCrossing, Range Online Media, and SearchIgnite. We also co-hosted a call with Interpublic’s digital marketing arm Initiative USA. Collectively, these firms are responsible for placing $1B+ in online ad spending for their clients and represent a broad industry cross-section. Among the key takeaways:
1) Search Advertising Trends Remain Strong – These sources generally – though not uniformly — agreed that they are not seeing material changes in search conversion rates or pricing. Search volumes remain robust, and advertising clients continue to shift greater share of ad budgets to search.
2) No Material Signs Of Recessionary Slowdown In Search – There was broad based agreement that advertisers have not (yet?) cut back on Search advertising spend, and the vast majority of the panel’s clients are actually looking to deploy more dollars into Search. While some Retail clients are seeing softer conditions in offline marketing channels, the sources did not identify any particular verticals that were particularly vulnerable.
3) Incremental Positive Comments On Google – The clear beneficiary of increasing mix shift to Search is Google, per the speakers. Panelists see limited threat from other Search engines, particularly in an environment of increasing focus on ROI. That said, participants have also not seen any material benefits from the quality improvements that Google is implementing (e.g. fewer sponsored links per page).
Mark also notes that comScore will release this week February data for U.S. Search Queries & U.S. Paid Clicks. It was Comscore’s January report that kicked off the latest Google free-fall, as it showed a sharp deceleration in US paid clicks from December to January.
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