YHOO demolishes the "declining sponsored search price" myth (quotes from 1Q05 conf call)

Yahoo (ticker: YHOO) CFO Sue Decker discussed her company's search business on its Q1 earnings conference call. She specifically addressed recent assertions from some sell-side analysts that sponsored search prices are in decline:

On the sponsored search side, growth is a function of both increasing the number of advertisers and of rising revenue per advertiser. .. Advertisers are becoming more comfortable with the medium, and in turn they are expanding their overall commitment. This is particularly true for those advertisers that are already among the largest and most sophisticated users of sponsored search, a very good indicator of the health of the business.

At this stage of the industry's development, we think these customer trends are more reliable indicators of the health of the business than exactly how much revenue per average search yields. This is because the averages are being influenced by mix issues across multiple dimensions. For example, the large number of new advertisers that are joining the network often buy an ever expanding mix of keywords that may differ from the run rate mix. As well, new search inventory is rolled out to new countries which differs from the core base. Finally the mix of keywords sold in any one quarter may vary for seasonal reasons and carry different average prices... Most of the incremental funds are currently being allocated more towards lower-priced inventory versus higher-priced inventory.

(Quotes are from the CCBN StreetEvents transcript.)