From research sent to me by JP Morgan (this link may work):
Google recently posted an entry on its website that suggested the company would begin showing fewer ads on queries where they may not be relevant, and more ads on queries for which the ads may be useful. The changes were to take place over several weeks, beginning sometime in April.
· In 1Q, we began conducting a study to monitor changes to Google’s search engine results pages (SERPs). Our survey included 20k+ keywords, and we tracked the coverage, the number ads, and the positioning of ads.
· Our survey identified a 19% increase in the number of queries with three sponsored links above the algorithmic results. Thus far in 2Q, we have identified the 3rd link on an average of 7.6% of queries, compared to 6.4% at the end of 1Q.
· We believe Google prefers to show the 3rd link on commercial queries. The categories with the largest 3rd link exposure QTD were ‘Shopping & Classifieds’ (18.3% of queries), ‘Travel’ (12.9% of queries) and ‘Business & Finance’ (11.8% of queries).
· We believe these changes will lead to higher CTRs and CPCs, all else being equal. We are therefore increasingly confident that the company may report upside to our 2Q estimate. Google continues to be our top pick, and we believe the shares will show material appreciation by the end of the year.