U.S. paid search rises 26.9 percent in 3rd quarter

U.S. paid search rose 26.9 percent year over year in the third quarter, despite weakness in the economy and markets, according to a report released Tuesday by SearchIgnite.

But while paid search increased overall by double digits during the quarter, retail advertisers increased their search spending by a modest 1.5 percent.

And more surprisingly, retailers significantly scaled back their paid search advertising for the month of September, resulting in a 10 percent drop in year-over-year retail advertising spending compared with September 2007. The decline occurred despite a slight increase in click-through conversion rates and the average value of orders for the months of August and September.

In the coming days, however, a more telling sign of retailer sentiment and their outlook for the fourth quarter will become evident, given that this sector usually ramps up its paid search advertising beginning in mid-October through mid-December, noted Roger Barnette, SearchIgnite president.

"Retail had issues throughout the year, but it hasn't affected all sectors," Barnette said, noting that travel, media, and the non-mortgage area of financial services have remained strong.

And heading into the fourth quarter, paid search advertising overall is exhibiting signs of typical growth rates, Barnette noted. During last year's fourth quarter, advertisers increased the amount they spent on search advertising by 37.3 percent.

During this year's third quarter, Google increased its lead in search advertising, capturing 72 percent of all U.S. search advertising dollars, according to the SearchIgnite report. And while Yahoo lost a small portion of its market share in the third quarter, coming in just above 20 percent, it has increased its market share during the first nine months of the year over last year. MSN, meanwhile, remains relatively flat with approximately 0.8 percent of the market.