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Nielsen//NetRatings: Demand for search outpaces supply

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New York—The demand for paid search advertising is outpacing supply, leading to higher prices and threatening to slow growth of the medium, according to a report from Nielsen//NetRatings, an Internet audience measurement company.

Americans conducted 1.2 billion search sessions during May 2004, a 30% increase compared with May 2003. Nielsen//NetRatings predicts an increase in prices for search keywords, citing research from the Interactive Advertising Bureau (IAB) and Forrester Research. The IAB found search advertising spending grew 184% between 2002 and 2003; Forrester Research predicts a 45% increase in search spending between 2003 and 2004.

However, Nielsen//NetRatings indicated that search engine advertising is still cost-effective despite the recent price hikes. Improving search relevancy with strategies such as personalization and localization will also mitigate the effect of the price increases, the company said. "Those additional ways of searching will be created by the [search engine] companies [such as Google and Overture] that are investing now, to ensure prices don't start climbing too dramatically," said Charles Buchwalter, VP-analytics for Nielsen//NetRatings, Seattle. "That will moderate the increasing demand."

—By Carol Krol

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