Background & Methodology:

• On July 29, 2009, Microsoft and Yahoo! announced the Search Alliance, a groundbreaking partnership wherein Microsoft would power search results and sponsored ads for Yahoo! Search. In North America, the transition to the Search Alliance occurred during October 2010. Close as it was to the holiday season, advertisers worried about its potential impact on their business. Beyond the immediate impact, advertisers also wanted to understand how this new marketplace would perform relative to Google.
• To gauge the Search Alliance’s impact, Marin evaluated several key metrics from the Marin Global Search Index, which includes over 800 clients collectively managing more than $1.8 billion in annual paid search spend.
• The study evaluated the performance of North American advertisers between August and December 2010. To factor out the effects of seasonality, key performance indicators were normalized against industry averages, using Google as the benchmark for the search industry. We also interviewed leading advertisers to gain qualitative, industry-specific insights.

Key Findings:

• Post transition, the Search Alliance is gaining ground on Google. Specifically, the Search Alliance increased its share of paid search impressions by 4% and its share of clicks by 2%, while Google’s share was reduced by the same percentage.

• The Search Alliance has resulted in improved traffic quality for advertisers, as evidenced by higher conversion rates. Excluding the impact of seasonality, conversion rates for the Search Alliance increased by 12% during the study period.

The following chart shows how two performance indicators, Conversion Rate and Cost-Per-Action (CPA) trended relative to Google.

• Increased conversion rates and lower costs-per-click delivered improved return on advertising spend (ROAS) following the transition. Costs-per-click (CPC) for the Search Alliance ended the year 20% below industry benchmarks, resulting in significantly lower cost-per-acquisition for advertisers.

• In addition to benefiting advertisers, the Search Alliance also has considerable upside potential for both Yahoo! and Microsoft. As of December 2010, the Search Alliance was delivering 21% of paid search clicks, but only capturing 18% of the corresponding ad spend in the North American market. As advertisers migrate to the new combined platform and the unified marketplace becomes more efficient, the Search Alliance has the potential to capture an additional 3% in advertising spend share – amounting to hundreds of millions in incremental media dollars.

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