“Google’s active advertiser count is a whopping 54.9 percent higher than it was in the fourth quarter of 2007, and this runs counter to what we hear in the marketplace today,” said AdGooroo Founder and Chief Gooroo Rich Stokes. “Some of this growth can be attributed to general year-over-year growth in consumer search usage, but Google has clearly adjusted their algorithm to serve more ads to consumers in each search in order to generate this impressive growth in first-page advertisers.”

“We’ve proven in previous reports that ad coverage on the search engines provides a leading indicator of advertising activity,” Stokes said. “The Q4 data we analyzed show Google has increased its ad coverage back to their January 2008 levels. In fact, we saw first page Google ads increase from a low of 2.4 ads/search in September up to 4.4 ads/search in December.”

Other key findings from the report:
– Microsoft increased its share of advertisers by an estimated 11.5 percent from Q3 2008
– Although Yahoo increased its active advertiser count, its U.S. and international share of advertisers dropped from 30.4 percent in September to 20.4 percent in November
– Q4 2008 may be the strongest quarter on record for both Google and Microsoft.

The $20 billion search deal smelled fishy from the start since, as AllThingsD points out, Yahoo’s entire market cap is worth $16 million.

The Sunday Times said the details of the proposal were still being hammered out, but would have involved Microsoft supporting a new executive team that would take the helm at the faltering Yahoo. The paper floated names including ex-AOL chairman and CEO Jonathan Miller and Levinsohn.

Microsoft’s offer to buy Yahoo for $47.5 billion was rescinded in May after Yahoo’s Jerry Yang and its board rejected the bid — to many shareholders’, notably Carl Icahn’s, intense and vocal disapproval. He now sits on Yahoo’s board and has increased his stake in the company to 5.4%.

Icahn has long rallied for a deal – any deal – with Microsoft and has started pushing search, telling Barron’s that “[If] they are interested in doing a deal on search … we should pursue that.”

The Internet search, hosting, email, networking and online shopping company will sell some assets (most likely its domains, its Danish portal and shopping biz) and shutter the rest (Web hosting and its portal biz).

Lycos Europe reportedly has around 700 staffers. The decision to sell parts and shutter the rest will have to be rubberstamped by shareholders at their meeting on December 12. Part of the deal will require Lycos Europe to return $60 million to its shareholders.

In light of all this uncertainty, what can we expect for the paid search marketing industry in the year to come?

If history serves as a guide, there’s a strong chance spending on search marketing will continue to thrive throughout a recession. Why? Because in a downturn, companies can’t afford not to spend on search. While other less measurable forms of advertising (TV, print, display) are being questioned and facing cuts, search is surviving because it’s linked more directly to revenue. For marketing programs not to face the guillotine in this economy, they must produce results. Search is extremely measurable, enabling advertisers to easily tie revenue and ROI back to the ad level. Such revenue accountability is crucial for advertisers in a down economy, when every penny counts.

In fact, the paid search industry was born (out of necessity) during the last economic downturn; Google rose to fortune from the ashes of the dot-com bust. Advertisers could no longer justify spending large sums on banner ads of dubious ROI and they needed a results-driven, revenue-generating marketing method. Search was the answer. In 2000, paid search accounted for 1.3 percent of online advertising spending, and by 2003 it accounted for 35 percent. During the lean years between 2000 and 2003, paid search advertising delivered the right value proposition to marketers who were expected to do more with less. Today, budgets in this area account for 43 percent of overall online ad spending, and are expected to maintain dominance in the years to come.

During this slowdown, now more than ever, marketers need to use online advertising methods that deliver real results, boosting revenues in a time when it matters most. Despite a softening economy and turmoil in some other ad media, U.S. spending on paid search advertising should grow solidly in 2009. In fact, eMarketer predicts that as U.S. advertisers continue to shift their budgets from traditional media to more cost-effective, measurable Internet advertising, paid search spending will not only rise in fiscal 2009, but double between 2009 and 2013 to reach nearly $24 billion.

According to an October research report from Marin Software and JupiterResearch, large advertisers would be spending more on paid search if they could: they are lacking the tools and technology to scale their campaigns. The report found that 92 percent of large search marketers spending more than $50,000 monthly on paid search advertising would increase their pay-per-click (PPC) spend on SEM programs an average of 22 percent if major technology and campaign management impediments were resolved. These impediments include insufficient personnel to manage programs, fear of risking ROI performance, inability to meet financial targets as costs per keyword rise, difficulty proving campaign effectiveness to management, and lack of available tools to handle large-scale needs.

The fortunes of Google and Yahoo may be at an uncertain juncture, just like every other company in today’s tough economic times, but all indicators seem to suggest that marketers will to continue to spend strongly on paid search advertising in the year to come. However, if a slowdown in consumer spending does occur, search marketers will need to elevate their game in order to continue to meet, if not beat, their ROI targets. That means using the best tools available to improve the financial performance of their campaigns and to operate their campaigns as efficiently as possible. That’s the best way for search marketers to hedge themselves against an uncertain future.

The increase is becoming more pronounced as the quarter progresses leading up to the peak holiday season, SearchIgnite found. Although it is typical for retailers to ramp up their marketing spend throughout Q4 and leading up to the holidays, 2008 showed marked differences from the prior year.
For the first half of Q4 08, the pace of spending among retailers is up 58% over Q3 spend. This compares to an increase of only 40% for comparable periods in 2007 (Q3 vs first half Q4).
“With the current economic climate leading up to the holidays, retailers are looking for ways to capture consumer spend and drive revenue in efficient ways,” said Roger Barnette, president of SearchIgnite. “We’re seeing multi-channel marketers moving more dollars into search from other areas of their marketing mix since search is still the most efficient and measurable advertising channel.”

SearchIgnite is a search management and auction campaign optimization technology company.

Users can re-rank, delete, add and comment on search results, Google wrote on its blog:

“With just a single click you can move the results you like to the top or add a new site. You can also write notes attached to a particular site and remove results that you don’t feel belong. These modifications will be shown to you every time you do the same search in the future. SearchWiki is available to signed-in Google users. We store your changes in your Google Account. If you are wondering if you are signed in, you can always check by noting if your username appears in the upper right-hand side of the page.

The changes you make only affect your own searches. But SearchWiki also is a great way to share your insights with other searchers. You can see how the community has collectively edited the search results by clicking on the ‘See all notes for this SearchWiki’ link.”

Nerdtastic!

The two companies will share ad search revenue, but it’s unclear what the split will be.

Between Yahoo’s deal with T-Mobile and AT&T, the company reaches about 105 million subscribers in the U.S.

Anupreeta Das is a reporter for Reuters.com.

More than ever, marketers around the country are taking a closer look at their advertising expenditures and asking, “What did I just get from this?!” They are facing reduced budgets and looking for the biggest bang for their advertising buck. They are increasingly intolerant of low-performing and hard-to-measure ad campaigns. They want answers today, and they want better answers tomorrow. And since CPC and CPA advertising provide more measurable ROIs than do other forms of brand advertising, marketers are expected to allocate a higher proportion of their reduced budgets to online advertising. The result is that online advertising is expected to be fairly resilient in the coming year. But that resiliency will be matched with intense scrutiny as marketers seek to maximize ROI to the fullest possible extent. As a result, marketers are expressing a renewed interest in the subject of click fraud (a.k.a. unwanted traffic) and how it is distorting their ad campaign’s performance.

Click fraud can be defined as clicks or impressions that have no economic value to the advertiser due to malicious intent on the part of the clicker. A click may be fraudulent when the clicker has no intention of converting, giving the advertiser no chance to reap a return on their investment in that click. Unfortunately, intent is difficult to determine and quantify leading to confusion in the industry as to what constitutes fraud. For instance, Seth Godin’s blog post on “thank you” clicks sparked weeks of online debates about the differences between “thank you” clicks, click fraud, and invalid clicks. Putting semantics aside, click fraud matters because fraudulent clicks reduce the ROI of an online advertising campaign, and when shrinking ad budgets become increasingly concentrated online, that sort of reduction in ROI is not acceptable.

Click fraud is already a concern among search marketers. In fact, 76% of advertisers believe that at least 5% of online advertising activity is fraudulent, according to June 2008 Canaccord Adam’s Online Ad Survey. Furthermore, according to cybersecurity researchers at the Shadowserver Foundation, more desktop machines are becoming infected with malicious software than ever before. Over the past year, the number of PCs ensnared in botnets – herds of users’ computers infected with malicious software that sends spam or performs click fraud – has more than quadrupled. Advertisers are right to be wary of click fraud.

Given that click fraud drives down advertiser ROI, marketers will become increasingly concerned with click fraud in 2009, and this could adversely affect online advertising growth much the way ID theft affected online commerce in the early days of the Internet.

As online advertising continues to account for a greater percentage of advertising spend and the economy continues to find its way, the issue of click fraud will shape how marketers choose advertising networks. However, ad networks are in a position to capitalize on this unique opportunity. By aggressively filtering out bad traffic and instilling a sense of confidence among advertisers during this time of economic uncertainty, secure ad networks are finding they can draw new advertising dollars their way. Networks looking to attract these ROI-focused marketers will recognize that third-party traffic quality solutions with the means to identify click fraud are not just helpful, but vital to their success. The revolution is underway, and it is incumbent upon all of us to ensure the online ad industry matures and reaches its potential of becoming the largest ad-spend medium in the world.

The Internet titan is going to sell space on YouTube’s search-results pages to advertisers – a boon for both advertisers and those that want to promote their videos. Advertisers and video makers are able to bid on keywords and the promoted videos (they’ll appear on the right side of YouTube search results pages, a la Google.com, along with an image and text). Advertisers are charged when viewers click on the ad.

As with Google.com, ads show up based on bids and keyword relevance.

According to comScore, YouTube had the third-highest number of search queries in September, right behind Google and Yahoo.