Google’s Dominance & the Impact of the

Bing-Yahoo! Search Alliance

Q3 2010
U.S. Search Market Report

Overview
• Google Continues to Seize Significant Market Share: Google now
stands at more than 80% of PPC ad spend, up nearly two percentage points from
just last quarter, and taking the most dominant market share lead since
SearchIgnite began tracking spend share among the engines (2007).

• Strong Quarter for Paid Search with Solid Momentum for Q4: Paid
search spend in Q3 increased 5.8% year-over-year compared with flat growth a
year ago and exhibited positive momentum month-over-month, with July growing
4.9%, August 5.8% and September 6.7%. The growth throughout the quarter
bodes well for a strong Q4.

• Early Results from Bing-Yahoo! Alliance Positive for Advertisers:

Despite widespread speculation that CPCs for the new search alliance will hyper-
inflate, PPC ads delivered by Bing show little CPC inflation thus far and
SearchIgnite does not anticipate that they will be markedly inflated in the future.
In addition, click-through rates (CTRs) have increased for advertising served on
the combined Bing-Yahoo! search inventory, revealing that Bing’s ad serving
algorithm delivers more relevant advertising than Yahoo!, positive news for
advertisers.

A report by SearchIgnite. Follow SearchIgnite on Twitter @SearchIgnite.

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 Q3 2010

Google Continues to Seize Significant Market Share

Google continued to lead among the engines with 80.2% of U.S. search spend -- up
nearly 2 percentage points from Q210 -- and, representing 7.9% YoY growth. This is the
largest market share commanded by Google since SearchIgnite began tracking search
engine market share data (Q1 2007). As search marketing becomes a more mature
market in the US, a jump of this size in a single quarter is very significant and marks the
largest QoQ increase for Google since Q1 2009.

Microsoft’s Bing showed the most pronounced spend growth among the engines, up
21% YoY, though market share gains showed just modest improvement at 6.4% in Q310
(up from 6.2% in Q210). Yahoo! saw a 10% decline in search ad spend over Q3, with
market share dipping to 13.4% from 15.4% in Q210. This drop, along with the gain in
Bing, is partially due to testing occurring on the combined Yahoo/Bing Search Alliance.

Year Over Year Spend 
Growth by Engine
25%
21.0%
20%

15%

10%
7.9%
Change in Spend

5.8%
5%

0%

‐5%

‐10%
‐10.0%
‐15%
Google Yahoo Bing Total

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 Q3 2010

Quarterly Percentage of Advertising 
Spend by Engine
Percentage of Advertising Spend

90%
80.2%
80%
70%
60% Google
50% Yahoo
40%
Bing
30%
20%
13.4%
10%
6.4%
0%
Q1 07

Q2 07

Q3 07

Q4 07

Q1 08

Q2 08

Q3 08

Q4 08

Q1 09

Q2 09

Q3 09

Q4 09

Q1 10

Q2 10

Q3 10
Strong Quarter for Paid Search with Solid Momentum for Q4

Paid search spend in Q3 increased 5.8% year-over-year compared with flat growth a
year ago and exhibited positive momentum month-over-month, with July growing 4.9%,
August 5.8% and September 6.7%.This compares favorably to the deceleration in Q309,
when all verticals showed flat to negative spend (flat in July ’09, up 0.6% in August,
down 4.5% in September).

YoY Search Spend Growth by Month
8%
6.7%
5.8%
6%
4.9%

4%
Change in Spend

2% 3Q10
0.6% 3Q09
0.0%
0%

‐2%

‐4%
‐4.5%
‐6%

July August September

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 Q3 2010

YoY Search Spend Growth by Quarter
25%
22.0%
20%

14.3%
15%
Change in Spend

11.0%
10%
5.8%
5%
0.0% 0.1%
0%

‐2.0%
‐5%
‐6.5%
‐10%
4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10

Early Results from Bing-Yahoo! Alliance Positive for Advertisers

Yahoo! and Bing have been testing the paid search integration portion of their alliance
since mid-July. Based on SearchIgnite’s analysis of this initial Bing-Yahoo! paid search
combination, we predict the following trends on the combined platform after the paid
search portion of the alliance is complete:

• Average cost per click will increase, but only slightly

• Click through rates will increase on the combined platform

Early data shows that Bing is more effective at delivering ads on Yahoo! search engine
results pages. This has positive implications for both marketers and the Bing-Yahoo!
alliance.

Methodology
Looking at Q3, our data shows three distinct phases of Bing-Yahoo! paid search testing
(see graph below).
1. The Base Case: zero Bing ads on Yahoo sites - July 1st to July 23rd
2. Trial #1: limited (~6%) Bing ads on Yahoo sites - July 24th to August 23rd
3. Trial #2: slightly more (~8%) Bing ads across the Yahoo sites - August 24th to
Sept 30th

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 Q3 2010

Looking at the relative engine performance across the three phases provides insight into what
can be expected once the full integration is completed in late October.

AdCenter Ads Served on Yahoo
10%
9%
8%
7%
6%
5%
4%
3% BASE CASE TRIAL #1 TRIAL #2

2%
1%
0%

Base Case Analysis

Prior to integration testing by Bing and Yahoo! (7/1/10-7/23/10), CPCs are almost
identical across the two engines, illustrated in the chart below. This is the primary reason
why SearchIgnite does not anticipate CPC hyper-inflation as a result of the platform
integration.

Click-through-rates, however, are significantly higher on advertising delivered by Bing

than by Yahoo’s algorithm. The net effect is that Yahoo! and Bing will generate more
revenue per search query as a result of their alliance.

Base Case Metrics – CTR, CPC, eCPM – Separate platforms (July 1 – July 23)

2.5% CTR 2.4% $0.55 CPC $14.00 eCPM $12.52

$12.00
2.0% 1.8% $0.54
$10.00 $9.39
$0.53 $0.53
1.5% $0.53 $8.00
1.0% $0.52 $6.00
$4.00
0.5% $0.51
$2.00
0.0% $0.50 $0.00

Yahoo Base Bing Base Yahoo Base Bing Base Yahoo Base Bing Base

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 Q3 2010

Base Case vs. Phased Testing Periods

Comparing the overall performance improvement driven by the new combined ad

platform (i.e. Bing advertising delivered on Bing, and Bing ads delivered on Yahoo!
inventory) from the base case to the end of the first trial period shows that even with the
addition of the Yahoo! traffic, Bing’s CTR increased by 9% while CPCs showed only a
minor rise (see below).

Bing - Base Case vs. Trial #1 Period

4% CTR $0.7 CPC eCPM

$14.5 $14.22
$0.6
$0.53 $0.55
3% 2.6% $0.5 $14.0
2.4% $13.5 +14
$0.4
2%
$0.3 $13.0
$12.52
$0.2 $12.5
1%
$0.1 $12.0
0% $0.0 $11.5

Bing Base Bing Trial #1 Bing Base Bing Trial #1 Bing Base Bing Trial #1

As the Trial #2 period began in late August, data shows more Bing advertising being
delivered on Yahoo! inventory, creating a more indicative sample across both Yahoo!
wholly-owned and network partner sites.

Analysis of the overall performance improvement from the Base Case to the end of Trial
#2 period (9/30/10) shows similar CPC rates and increased CTRs (see chart below). The
results of Base Case to Trial #2 are likely more indicative (but not fully indicative) of what
marketers can expect to see upon full transition of the platform in late October.

Bing - Base Case vs. Trial #2 Period

4% CTR $0.7 CPC eCPM

$0.56 $14.0
$0.6 $0.53 $13.64
3% $0.5 $13.5
2.4% 2.4% +9%
$0.4 $13.0
2%
$0.3 $12.52
$12.5
1% $0.2
$0.1 $12.0
0% $0.0 $11.5
Bing Base Bing Trial #2 Bing Base Bing Trial #2 Bing Base Bing Trial #2

A potential driver of CPC inflation as a result of the Alliance may occur if there was
significant growth of new advertisers, who may not have previously participated in paid
search on Bing – therefore bidding on Bing inventory for the first time. An analysis of
SearchIgnite’s clients shows that only 6.3% of total Yahoo/Bing spend is spent by
advertisers who do not currently have a Bing account in Q3. So, while new advertisers
on the combined Yahoo/Bing advertising platform are probably coming, their potential

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 Q3 2010

impact on the market for CPC auctions will be limited – especially among mature
advertisers.

The net result for advertisers is that early indications show the Bing ad serving
technology is more effectively driving clicks from the Yahoo! audience than Yahoo‘s ad
serving technology. This means that the scale of total clicks (and spend) coming from
the combined Yahoo/Bing audience should increase, regardless of CPC changes,
assuming these early trends hold.

Methodology
This report tracked more than 55 billion impressions and more than 1 billion clicks on
Google, Yahoo! and MSN/Bing from January 1, 2006 through September 30, 2010.

This report is the latest in a series of quarterly reports from SearchIgnite, which can be
found at http://www.searchignite.com/about_research.aspx.

About SearchIgnite
SearchIgnite is the leading provider of search optimization and digital media attribution
solutions that help major marketers achieve their search marketing goals quicker and
spend their advertising budgets smarter. The company's media management technology
offers an advanced suite of tools to manage, optimize and report on paid search
campaigns in one central dashboard, as well as gather insights into the relationship
between media channels including PPC, SEO and display. Some of the world's leading
brands and advertising agencies depend on SearchIgnite to power their search
campaigns and improve their online media ROI.

For more information, please visit http://www.searchignite.com/ or follow the company on

Twitter @searchignite.

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