Producer Price Indexes Introduced for Web Search Portals—NAICS 518112

To expand coverage of the service sector in the Producer Price Index (PPI), the Bureau of Labor Statistics (BLS) introduced new price indexes for Web search portals—North American Industry Classification System (NAICS) 518112—in July 2005. Data for these indexes, which date back to July 2004, will appear in table 5 of the PPI Detailed Report and are available online through the BLS website.

The primary output of Web search portals is the provision of a tool that allows an Internet user to locate particular sites that are of interest. In virtually all cases, Web search portals do not earn revenue from the direct sale of this tool. Industry output, therefore, is measured indirectly, through the sale of listings (inclusions in the results of keyword searches) and advertisements to companies interested in reaching the audience of Web searchers who visit the portal site.

Advertisements sold by Web search portals and Internet service providers include banner, popup, and popunder ads. Internet advertisements generally are sold in increments of “clicks” (instances in which an Internet user clicks on an advertisement to receive further information about the advertised product) or thousands of impressions (instances in which an ad appears on the screen of an Internet user). In virtually all cases, PPI measures advertising transactions with an average-price methodology: the total revenue from all of a firm’s sales of a specific type of advertisement within the current month is divided by the total number of clicks or impressions (depending on the manner in which the firm sells its ads) that occurred for the specified type of ad within the month. Average prices are calculated for ads of specified sizes that appear in specified positions on a Web page.

Listings typically are sold either in increments of clicks or for a flat rate per inclusion. In virtually all cases, PPI measures listings transactions with an average-price methodology: the total revenue from all of a firm’s sales of a specific type of listing within the current month is divided by the total number of clicks or paid inclusions (depending on the manner in which the firm sells its listings) that occurred for the specified type of listing within the month.

In the few cases in which it is not possible to collect average prices for advertising or listings transactions, an estimated transaction price is collected. Respondents provide pricing information for a recent transaction of a specific ad or listing. In subsequent months, the respondents estimate what they would charge for the specific ad or listing if it were to be transacted each month. This estimation is based on the current economic climate and on the prices that respondents received for similar ads and listings.

Average pricing is preferred for advertising and listings transactions to account for heavy discounting. Web search portals frequently offer discounts to sell all their available advertising and listings space. Whereas list prices for Internet advertising and listing services typically remain flat throughout the year, transaction prices for these services fluctuate greatly based on short-term changes in demand and supply. The average-price methodology allows the index to reflect these changes.

Last Modified Date: January 3, 2006