Google’s Growing Advertiser Base

The NYT reports that Google has recently disclosed in an SEC filing that it had 1 million advertisers as of 2007.  Some analysts suggest that Google’s growing scale will lead to higher ad prices:

Ben Schachter, an analyst with UBS, said he expects the current number is likely to be between 1.3 million and 1.5 million. Google declined to comment on the current size of its advertising base.

“It is a number that people have wanted to know for a long time,” Mr. Schachter said. More advertisers means more revenue — and more revenue, on average, for every search query — for a couple of reasons: a larger number of queries will have ads matched against them; and on popular queries, competition for placement will be more intense, and as a result, ad prices, which are set by auction, will be higher.

But is Google’s success really driving up ad prices?  The same piece also notes that:

Interestingly, each advertiser, on average, spent a little more than $16,000 a year on Google. That figure changed little between 2003 and 2007.

As one of the commenters on the piece noted:

If average advertiser expenses hasn’t really changed in the last 5 years, maybe Google’s argument that it’s not a monopoly because prices are determined by ad auctions, not Google’s search share, holds some weight.

Meanwhile, Google Watch notes Microsoft’s recent success in signing up Verizon, Dell, Sun and Hewlett-Packard as partners for Microsoft’s Live Search engine and asks whether Google’s success is driving potential partners into Microsoft’s arms, as Microsoft appears to be working harder to gain market share for its own search and advertising products.  So can Microsoft—and Yahoo!—regain momentum?

Perhaps 2009 will bring some answers to these questions—and more hard data about ad prices.  But whatever happens, it’s a safe bet that speculation and fierce argument will abound with every new development in the search/advertising wars.

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