The most interesting outcome of yesterday’s strong Google earnings came from Efficient Frontier, who released a report on Q1 search engine performances:

In Q1 2008,Google accounted for 77 percent of total search spend, gaining 3.3 percentage points in share of search spending from Q1 2007. Return on investment (ROI) on Google improved by 24 percent, click-through rates (CTRs) improved by 19 percent, and cost per click (CPC) rates increased by 11 percent in the period between Q1 2007 and Q1 2008, suggesting that large-scale advertisers are benefiting from Google’s quality updates and can continue to afford its higher CPCs, particularly given the increase in ROI.

Google has improved conversions (24%), click-throughs (19%) and CPCs (11%) – a consequence of strictly enforcing advertising quality measures (which Comscore noted led to declining paid search clicks). By removing the clutter of untargeted ads (particularly on generic or branded terms) leads to more effective, premium placements (at premium prices).

Equally interesting, it appears that Yahoo has now implemented more restrictive ad pricing requirements – on a dynamic basis (just like Google). A reaction to Google’s earnings and Efficient Frontier’s data?

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