The average keyword price paid by online advertisers reversed a downward trend and increased 16.5% percent to $1.48 in the third quarter, according to the Keyword Price Index from Fathom Online, a leading provider of Search Marketing services to the Fortune 1000.
In the second quarter of 2006, the average keyword price was $1.27, down from $1.39 in the first quarter of the year.
"Keyword demand is up as organizations have increased their online advertising budgets and expanded their search marketing capabilities," said Dean DeBiase, Fathom Online Chairman & CEO. "Both online advertising and search marketing are becoming strategic components of the overall marketing mix because of their growing effectiveness."
The KPI confirmed short-term and long-term trends toward higher keyword prices. In November, the Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers LLP said that Internet advertising revenues in the third quarter of 2006 rose to an estimated new record of $4.2 billion.
Third quarter revenue is a 33% increase from $3.1 billion in revenue from third quarter of last year and a 2% increase from nearly $4.1 billion in revenue in the second quarter of 2006. In July, JupiterResearch said total U.S. online advertising spending is expected to rise to $25.9 billion by 2011.
The Keyword Price Index is a weighted average of more than 20,000 active keyword prices across all major search engines covering a broad range of industries, including automotive, computing, consumer services, electronics, finance, healthcare, media, entertainment, retail, telecom, and travel.
The Keyword Price Index is designed to be a representative sample of keyword prices. Actual market prices for keywords often vary widely and depend on demand, competitive bidding and other market factors. It should not be used to make financial projections or be considered a proxy for the financial state of the Search Marketing industry.