Rohan: Good News for YHOO Search

A study by Jordan Rohan at RBC and Roger Barnette at SearchIgnite suggests that Yahoo's new search platform, Panama, may finally be allowing the company to claw back some search-spend share from Google (not query share--dollar share).  This supports some anecdotal data last week, which suggested that Yahoo's share was again increasing, though not at the expense of Google:  
 
Industry-wide search spending up only 2% in Q3 on same-store basis: Total spend across all of SearchIgnite's client base was up 20% q/q at YHOO vs. only 7% at GOOG; excluding new clients added during the quarter.

Yahoo gained spending share versus Google. Yahoo's share of total spend increased from 18.5% to 20.4% in the quarter: Google's share fell from 76.4% in 2Q to 73.8% in 3Q. With the largest (enterprise) clients, YHOO's share gain in total spend across enterprise clients was even greater, jumping 240bps q/q.

Key Metrics for YHOO Improving: Yahoo showed month over month improvements in revenue per query due to rising click prices ($0.58 in Sept, up from $0.52 in June) and stable click rates (1.7%). This could be due to efforts to clean up its affiliate network. Google's average 3Q CTR was 4.0%, up from 3.4% in 2Q, while CPC declined from $0.60 to $0.53 sequentially. Interestingly, Google showed stable-to-slightly-weaker CTRs in September, possibly indicating an effect of back-to-school traffic.

No Discernible Impact From GOOG's August 21st Algorithm Change: Google could have forced higher bids for the top ad positions, but appears to have used this change sparingly (if at all) in the quarter. We continue to view Google's decision not to pull this lever as an incremental positive.