US Search Ad Spending Falls In 4Q Amid Economic Weakness  Source: Author:

SAN FRANCISCO -(Dow Jones)- Concerns about Google Inc.'s (GOOG) fourth-quarter results were heightened Tuesday after a report showed U.S. search advertisers cut their spending 8% year-on-year in the fourth quarter.

The report from Efficient Frontier, the world's largest search engine marketing firm, marks the first time search advertising spending posted a quarterly fall since it began gathering such data. The company said its report was based on an undisclosed portion of the $750 million in annual spending the company manages globally.

Efficient Frontier said Google maintained its hold on the search advertising market - the largest segment of the Internet ad market - with a 76% market share, while Yahoo Inc. (YHOO) continued to increase its presence to 20%. Microsoft Corp. (MSFT) fell from 4.9% to 4.2% of the market.

The report comes just ahead of earnings at all three companies. Google and Microsoft are scheduled to report fourth quarter earnings Thursday, while Yahoo's results are expected Jan. 27.

CARROLLTON, TX - Advertising is about communication and image, and nothing conveys those messages more affordably, flexibly or effectively than the right sign or graphic. The effective use of signs and graphics are an integral way to extend the value of an advertising campaign, especially in these economic times. From in-store posters to vehicle graphics, trade show graphics to floor graphics, promotional banners to special event signs, at client meetings and in prospective client presentations, signs and graphics are being used to reinforce advertising messages.

Because of their relatively low cost, long life, and 24-hour-a-day work ethic, signs can carry a marketing message to more people per dollar invested than almost any other medium. A well-designed, well-placed sign can generate tens or even hundreds of thousands of impressions per day for months or years at a time -- and depending on the nature of the company and the type of sign selected, it could pay for itself with the very first customer it attracts. According to a survey of 2,475 shoppers by the U.S. Chamber of Commerce, 50% of those surveyed learned about a company from their on-premise sign.

"Signs and graphics affordably extend any advertising message," says Drue Townsend, senior vice president of marketing with international sign and graphics franchisor FASTSIGNS International, Inc. "Signs can put your advertising message in front of the customer when and where they are ready to learn or buy. With today's technology, virtually any wall, window, ceiling, vehicle, or floor surface can be turned into a work of marketing 'art' by simply utilizing a vibrant graphic."

Ad agencies are increasingly using signs and graphics to extend the value of their clients' campaigns and reinforce its message. Signs featuring large-format, full color graphics are powerful tools that grab the buyer's attention, and help put the campaign in places beyond where television, radio, the internet and other media typically reach.

The report helped push down shares of all three companies.In midday trading, Google was down 4.5% at $286.43, while Yahoo was off 3% at $11.21 and Microsoft fell 5% to $18.75.

Efficient Frontier said retail marketers increased their spending 9% in the fourth quarter, compared to 2007, but those gains were offset by a 15% decline in spending by automotive advertisers, a 20% decline by financial sector marketers and 24% decrease in the travel and entertainment sector.

The data supports Google's argument that some advertisers will increase their spending on search advertising in times of economic downturn, because consumers will flock to the Internet to seek out the best deals.

James Beriker, Efficient Frontier Chief Executive, said advertiser return on investment in most segments fell between September and October last year due to the economic downturn. This prompted advertisers to cut search budgets and focus on maintaining a positive return, suggesting that SEM advertisers have moved from a volume strategy to an ROI and efficiency strategy, in which budgets are adjusted to maintain a targeted ROI despite a reduction in search volume.

Beriker said the quarter could have been "much worse" given the economic decline. "As far as we are concerned, the bottom has not fallen out of search," he said.

-By Scott Morrison; Dow Jones Newswires; 415-765-6118; scott.morrison@ dowjones.com

    (END) Dow Jones Newswires    01-20-09 1433ET    Copyright (c) 2009 Dow Jones & Company, Inc.