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Small-business advertisers spent on average $2,373 on search advertising in the third quarter of 2010, up 43% from the $1,658 spent in the same period a year earlier, and up 6.4% from the $2,231 spent in the second quarter of 2010, according toWebVisible study based on its small-biz clients.

Though the growth is strong, it's lower than levels recorded in the three previous quarters, when year-over-year (YoY) spending was up 159% in Q210, 91% in Q110, and 111% in Q409.

The slowdown likely signals that small business search advertisers are closing in on the optimum level of spending they need, WebVisible notes. Additionally service providers are refining their ability to determine efficient spend amounts in order for advertisers to achieve the highest return on spend.

Advertisers increased investments on keyword inventory: The average keyword count per advertiser, which represents root keywords (vs. individual bid units with geographic modifiers), increased to 78 keywords in the third quarter, up 41% from Q309, and up 4% from previous quarter.

Below, other findings from the State of Small Business Online Advertising for the third quarter of 2010.

Search Engine Trends: Bing Rising

Spending shifted toward Bing (up 37% quarter on quarter (QoQ)), Yahoo, and Ask in the second quarter, and away from Google: 

  • Bing accounted for 14.5% of search ad spend, up 3.7 points from the previous quarter.
  • Google accounted for 52.4%, down 5.9 points QoQ, and down 8.0 points YoY.
  • Yahoo accounted for 28.3%, off 1.4 points QoQ, and up 2.1 points YoY.
  • Ask accounted for 4.8% of search ad spend, up 3.5 points QoQ, and up 2.4 points YoY.

Click-Through Rates

Yahoo's CTR (click-through rate) improved 28% in the third quarter over 2Q10 levels, while CTRs for Bing and Google were down 27% and 5%, respectively.

Such a convergence of CTR is starkly contrasted with CTR a year ago, when Bing's CTR was 84% greater than Google's and CTR on Yahoo was 63% of Google's.

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CPCs on Google increased 9% in the third quarter over Q309 levels, while Yahoo's increased 22% and Bing's increased 10% during that period. CPCs on Bing and Yahoo increased QoQ, 19% and 14%, respectively, while CPCs on Google were up 4%.

The convergence of CPCs over the past year is similar to the convergence of CTR shown above. Together the findings suggest that the October 2010 Yahoo and Bing merger will result in a more homogenous search marketplace, with essentially two engines offering similar pricing and CTR, reaching collectively more than 90% of the search audience at any given time, WebVisible notes.

Spending by Category

Consistent with previous quarters, the most popular small business ad category in the third quarter was attorneys, accounting for 9.9% of total advertising. General contractors and dentists followed, accounting for 7.6% and 5.9% of total advertising, respectively.

Strong YoY spending increases by dentists (up 16.5%) and physicians (up 35%) in the third quarter likely signals a return of confidence among consumers for required and discretionary medical care spending.

The automotive category, which includes auto dealers and repair shops, increased 41% YoY, and 9.3% QoQ.

About the data: Findings are based on data collected from over 12,000 of WebVisible's US advertisers from 3Q09 to 3Q10 who accounted for nearly $23 million in US small business ad spending in the third quarter of 2010.

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