Q3 Data Provide Optimistic Signals for a Positive Q4

The last week at Efficient Frontier has been particularly interesting as we prepared and just released our Q3 2009 US Search Engine Performance Report. The U.S. Q3 data tells a variety of stories depending on the lens you apply. At the end of day, we believe search is on an upswing and, assuming our economy continues to stabilize, Q4 will produce growth that exceeds normal seasonal expansion. Let's take a quick look at how we arrived at our optimistic Q4 outlook.

On a Year on Year (YoY) basis, ad spending across our customer index fell by 5%. In contrast, and importantly for future trends, quarter on quarter revenue grew by 5%. So what is the net effect of 5% down YoY and 5% up QoQ positive? 
 


First, Q409 will be the first quarter where YoY comparisons will turn favorable. Q308 felt some of the effects of our economic turmoil. But remember, the Lehman Brothers failure that sparked the flames of decline hit in mid-September of 08. 
 
Next, a deeper look at trends by sector unveil an uneven pattern for spend. Travel continues to decline due to a number of factors including lower consumer demand and booking fee revenue. In contrast, spending in the autos category perked up as the Cash for Clunkers brought both consumer and advertiser demand to search. And most critical for the fourth quarter, retail showed positive spend growth QoQ and YoY as consumer search volume continues to expand in that sector.
 
Finally, advertiser sentiment is improving. The savvy marketers who make up our client base at Efficient Frontier see opportunity in the improved efficiency of search. Lower competition has helped each engine drive better ROI for our advertiser base. For example, Google is delivered 47% more ROI Q309 vs. Q308. Metrics may be loosening up with economic stability giving advertisers the power to capitalize on efficient sales volume in search.

We'll dive into more details in blog posts to come. And we welcome discussion on Q3. Are others seeing similar trends? How are advertisers approaching Q4? Leave a comment and join the conversation.

Justin Merickel
Vice President, Marketing and New Product Development