Revolution magazine, autumn 2003: Feature on search-engine marketing

Search engine wars have been the subject of a massive amount of press coverage over the summer, with commentators marvelling at the vast sums of money changing hands as the major search engine companies and their distribution partners swap casual bed-hopping for marriage - from the $163 million FindWhat.com was about to pay to buy UKs e-spotting.com (until the deal went askew in September), to the $1.6 billion purchase of Overture by Yahoo (which is being completed as we go to press).

But what does this all mean, if anything, for the Internet advertising community? Will the recent consolidation make any difference to the audiences and quality of services being offered to them?

There is no question, Internet search is big business at the moment, and the absurd sums being spent reflect the importance being attached to Web search as a vital commercial medium. If Microsofts MSN keeps the speculators happy by attempting to snap up Google for goodness knows what ridiculous amount this new Internet boom will surely make primetime BBC news.

According to the Interactive Advertising Bureau, searching for goods and services is now the most popular activity on the Internet. No wonder advertisers want to manipulate the results of those searches to their advantage. Forget pop-up windows and banner ads why be blatant and annoying to consumers when you can pay to change editorial content? In the magazine world, this is the hardest won yet most valued prize. Why advertise, or even tread the middle ground of advertorial (which advertisers like to think of as paid for editorial), when you can work your message into the main content, which consumers assume to be independent and therefore trustworthy?

This is the business of search engine marketing (SEM). Whether you pay a search engine optimisation company to boost your chances of a high ranking in consumer searches on Google, or pay vastly over the odds to propel your Web site to a pre-agreed position in the top five returned results on Yahoo, you are flexing your marketing dollar to influence the output of what many consumers believe is a reasonably credible and unbiased source of information. The more strategic you are in the way that you approach this, and possibly (but not necessarily) the more money you pay, the better your chances of being seen and influencing a consumers potential buying decision.

And indeed a huge and growing proportion of Internet searches are made with a purchase in mind. Why else would advertisers be flocking around Internet search as the hottest new marketing medium?

So whats on offer to the online marketing community following the recent consolidation, and how is that changing?

On the surface, it would seem that there are now three dominant channels to the Internet search consumer in Europe Google, Yahoo and MSN. There are, however, other options but we will come on to these later.

Yahoo set the industry alight in July when it announced its planned takeover of search engine specialist Overture, which itself had been on a spending spree over recent months, picking up FASTs AllTheWeb and Altavista. As well as propelling the search marketing business into the spotlight with the size of its bid for Overture, Yahoos coup has further complicated an already mind-boggling market by bringing into question the future of distribution partnerships between other leading players in the market. As Yahoo begins to exploit some of the new technology and services it now owns, it will have less need for the services of its one-time valued partners which are rapidly becoming head-on rivals.

It seems very likely that in future Yahoo will end its relationship with Google and use instead one of the search systems that it owns, comments Patrick Bolger of search engine optimisation firm Top-Pile.com. It also seems likely that MSN will end its relationship with inktomi [now also owned by Yahoo].

Bolgers comments highlight the complexity of relationships that have existed until now between the various Internet search engine companies (the likes of Overture and e-spotting which provide the actual search results) and their distributors (companies like MSN and AOL). (See diagram for a better picture of the various overlapping partnerships that have existed to date).

If existing partnerships do unravel, what will this mean for the advertising community which wants to maximise its exploitation of search engine traffic?

This rewriting of the landscape would result in Google accounting for a reduced 50% of search traffic, Yahoo/inktomi 25% and MSN 25%, approximately, predicts Bolger. (It is currently thought, by leading observers of this market, that Google currently accounts for anything upwards of 75% of all Internet search queries.)

And what might this mean? First of all, advertisers will have to deal with three different search systems, as opposed to two previously. [Bolger is assuming, as many industry watchers are, that MSN will launch its own search engine in due course.] There are not just financial ramifications here; there are also technical implications. For instance, optimising your Web site for one engine may result in the site performing poorly in another search engine. This pushes companies to consider either having different versions of their sites for different search systems, or making greater use of techniques that search engines frown upon (gateway pages, cloaking, etc).

Search marketing agencies must be rubbing their hands with glee. After all, the more complex the options become, the more indispensable their services to the busy and confused media buying world.

Those who want to hedge their bets with a search strategy that includes a bit of everything will increasingly need help with this process if they want to manage it effectively and cost-efficiently. The options available to them already include search optimisation (favouring natural, algorithm-based searches - which still account for most returned results); paid placements (where companies bid on a per-click basis to secure a top five search ranking basically a cleverly disguised means of sponsorship); and whether to focus spending on one particular search portal, or spread the strategy across each of the main players. With paid placements alone ranging in price from under 1 to 17 and above (to secure top rankings by obvious key words), its easy to see how costs can get silly.

So how are the major contenders repositioning themselves in the light of all this? How are they setting themselves apart from their rivals, and what additional value are they planning to add for both the advertiser and the oft-forgotten consumer to ensure they win secure any future loyalty which might currently remain unplaced?

Danny Sullivan, a recognised search engine guru and founder of SearchEngineWatch.com, believes Google will continue to maintain the high ground, by keeping its advertising based activities at a comfortable arms length from its editorial content. While some dispute that Googles AdWords package is much different from other less overt sponsorship arrangements, Google strives to make its paid-for listings more identifiable to the casual browser and claims this makes for a better consumer experience.

Says Kate Burns, head of sales at Google UK, Googles number one objective is to provide the very best search experience to our users worldwide. This is a big job, involving such enhancements as new languages and domains, improved search quality, comprehensiveness, and freshness of information. Burns points to recent achievements here that include new localised versions of Google News and the Goole Toolbar, and Google Calculator. For our advertisers, Google will continue to provide a high-reach, high-response, high-ROI advertising experience with continue improvement in our tools and superior client service.

She notes that content-targeted advertising is another important area of focus. Here Google is honing the sophistication with which advertising can be placed next to related content pages (rather than search listings) on the Web; Burns maintains that this could present an opportunity for content publishers to generate additional revenue from pages that are otherwise difficult to monetise.

Unsurprisingly, Burns refuses to be drawn on speculation about Microsofts potential interest in the company.

For its part, Microsoft currently has the least to say about any tangible plans it has for a homegrown (or acquired) search business in future, except to emphasise that it is deadly serious about this market and intends to compete and win. Robin Kellett, MSNs UK search manager, notes that Overture continues to represent significant search marketing related business for the company, and that there are no plans to change the relationship at the current time (not least because the two companies are still honouring contractual obligations). Were investing heavily in this area and its very important to us, was all Kellett felt able to add at this stage, except to echo the Google view that there remains plenty of scope to enhance the consumers experience of search. Currently, only 50-65% of search queries get answered properly, he says. This could be significantly improved.

Martin Child, managing director at Overture Northern Europe, also has to be coy, in his case about any future offerings from the substantially boosted Yahoo stable, because the takeover deal isnt due to close until the fourth quarter of the year. With all the other acquisitions weve made, this will make us the largest advertising business on the Internet, which is very exciting, he says, noting that the expanded portfolio includes both algorithmic (organic) search expertise as well as pay-for-performance search facilities, giving the online advertiser everything he could possibly want.

Tellingly, he too emphasises the importance of a quality experience for the consumer, recounting that Yahoo has 200 editors worldwide checking every link and vetting terms so that all content returned by searches is highly relevant. Were very strict; we have rules governing the use of superlatives, capitals and colours, and we dont let advertisers disable back buttons. This is our one big point of difference. For the long term this means a better search experience, which guarantees traffic to the advertiser.

In response to speculation that the recent flurry of takeovers could lead to a fragmentation of the industry instead of further consolidation, as partnerships unravel, Child is sceptical. He says, We have 95,000 advertisers worldwide. It would be hard to come into this market from scratch and be competitive. Because the pay-for-performance models are auction-based, you need a solid base of advertisers to build up the price.

Yet Child acknowledges that contextual based searching is likely to grow in attraction, as well as geographical-based offerings. Its no coincidence, therefore, that Yahoo has just launched a new product-based search platform, to compete with other shopping-specific search sites that are emerging in the market.

[Search is] becoming the most efficient way for consumers to find products, said Rob Solomon, general manager of Yahoo Shopping, speaking to Reuters last week (24^{th Sept). Thats why Google launched Froogle, and other lesser known players are entering this subsection of the search market.}

This is a major challenge to the status quo, comments Stephanie Perino, CEO of European search engine marketing consultancy Agence Virtuelle. These dedicated search engines could lead to a fragmentation of search engine traffic with advertisers following users to the sites delivering the most relevant and useful results.

Although she believes Google will continue to dominate the mainstream search market until at least the end of 2004, or until MSN is able to put in place its own algorithmic search engine technology, Perino notes that as niche markets begin to develop, new contenders cannot be ruled out.

The big three cannot afford to be complacent, she warns. Local search engines too are going to be a big threat over the next 12 months. We are already seeing regional players such as Mirago in the UK, Kartoo in France and Search.ch in Switzerland seeing rapid increases in user numbers and becoming a valuable source of potential traffic for clients. This will push Google and others to accelerate development of local services for geo-marketing.

We may see other niche search engines starting up, too, adds David Harrison, managing director at search marketing agency WSPS. Specialist engines focusing on hotels around the world, for example. A year or so ago search wasnt important; now its something that forms a central part of most blue chip companies marketing strategies. Its the single biggest thing on the Internet at the moment.

But, before the industry loses its head over search if it hasnt already its worth remembering that this is just todays hot marketing medium. As such, the same rules apply as with any other type of marketing: without a healthy marketing mix, supported by a broader marketing strategy and some careful audience targeting, marketers could be on an expensive route to disaster.

Warren Cowan, managing director of search marketing agency Greenlight, recalls a company that secured a no 1 search placement for 17 per click under the key words serviced offices. While the term clearly described the companys main business, Cowan recalls that the number three ranking with the same search company was available for just 7. For very little difference in click-through traffic, the company could have saved itself 10 a click. Its all about spending your budget wisely and getting the best results overall. That means having a strategy and balancing your coverage.

Meaning that it doesnt actually matter very much whether Google continues to dominate the consumers choice of search facility, whether Yahoo gains ground, or whether a whole host of new entrants start to further confuse the picture. The basic rules of marketing still apply: know what you want, then where to get it and dont be dazzled by distractions along the way.

Fast facts: (optional box with some juicy stats from the IAB Interactive Advertising Bureau and from Jupiter)

Europe: sponsored search continues to fuel search advertising revenues

2002: Sponsored search spend totals 140 million (up 40% from 2001)

2003: Sponsored search spend totals 208 million (up 48% from 2002)

2004: Sponsored search spend totals 284 million (up 37% from 2003) - predicted

2005: Sponsored search spend totals 363 million (up 28% from 2004) predicted