Online advertising

 

THE VALUE OF SEARCH ENGINES - "Better Return On Investment" than offline advertising"

Executive Summary

After years of listening to the 'more is better' mantra, consumers are now influencing the speed and direction of search engine development towards higher levels of information quality with an almost puritanical focus on information relevancy. This global demand has made search engines second only to email as a universal online application, ensuring the technology remains increasingly relied upon as a key intermediary for online information and product research. For these reasons as well as the increasing utility of online applications, search engines are driving towards two models designed to raise the relevancy stakes between competitors even higher. Firstly, smarter algorithms based on even larger indexed databases and, secondly, self-listing vendors who are affecting the consumer's choice by proxy and achieving a competitive ROI through the pay per click model. Both are working models and both are valued by the end-user for the increased relevancy they deliver in terms of results. The benefits are not all one way however. Online search applications are the crossroads for almost two-thirds of everyone online, so any effort to better align the interests of vendors and consumers is a fast-track to a win-win outcome.

Search Engines

Almost 12.5 million Australians have potential access to the Internet. Of these, about 8.5 million, or 68 percent of the total Internet audience, use the Internet in any given month. And while most would argue that this active audience is spread throughout the Internet galaxy, across tens of thousands of domains, the reality is far more sobering. In fact, of these active users, about 74 percent use at least one of the top four search engines or catalogues. That’s market concentration on the scale not seen since banking, media or public transportation. In other words, if there were a particular crossroad you needed to effectively contact as many people online as possible, then search engines would be that choice. In the US, for example, this market reach is strongly defined between search engines and third party providers which 'power' many of these search engines. The largest providers in the US include the likes of Overture, Google and Inktomi, which means that a search conducted on sites like MSN, Yahoo!, or even a content site like CNN, will be powered by Overture with its listing of more than 3.3 billion web pages.

Search Behaviour

Given the proliferation of online searches, the average search engine user is hardly differentiated from the general online user. However, compared with other online applications and even content genres, search engines do engender a level of behavior that is somewhat different. The average search engine user will spend about 22 minutes per month searching online, spread across almost eight visits, viewing a total of 55 pages on average. Frequency of visits is particularly high for the search category, as are pages viewed. Time spent within the category is less than many other categories, yet this is a function of its purpose – to redirect users, not to entertain them. In short, the more effective the search engine is, the less time a user needs to trawl through search results. This is also an indication of a user’s expectations in regards to time spent with a search engine and the small window of opportunity a vendor has available when left to the vagaries of 'natural selection' as determined by the search engine's black box algorithm or human editing team.

Search Demographics

Users of search applications follow a traditional online demographic profile – majority male, majority aged between 21 and 49, and in terms of income, a majority earning between AUS$50,000 and AUS$75,000 per annum. Figure 3. The demographic nuances between the different search applications, however, are a little more interesting. Compared with the search category average, Google for example, has a composition in the 12 to 17-age category that is significantly higher than the average, compared with ninemsn search which is above average in the older age demographics. Yahoo is particularly strong in the 18 to 24 age group, translating into an above average share within the lower income demographics. Overall, all search applications are well entrenched in the older, more affluent demographics. These users already value the search application as a concept, but are willing to place an even higher value on more efficient search technology and more relevant search results. If increased relevancy can be achieved through initiatives undertaken by both the service provider and the vendor community, then both are playing to a very appreciative crowd.

THE CONCEPT OF SEARCH: PURSUIT FOR RELEVANCY

Encouraged by blue-sky research about how the Internet would come to dominate every facet of our lives, investments in fibre optics, e-commerce applications and wireless networks rode a crest of a wave that never quiet reached the Tsunami proportions we all believed it would achieve. But this deadweight in overcapacity is just an apparition, a blip in the greater scheme of Internet development. Why? Because its growth rate is still unparalleled, making a lack of capacity more of an issue in the near future than any previous overzealous spending of a nervous telco board. Consider the concept of a computer host, lashed onto the Internet, sending and receiving data in its own quiet way. In 1994 there were 3.2 million of these hosts spread throughout the world - hardly a threat by those who predicted a machine revolution. Now fast-forward nine years to 2003 and the number of computer hosts is now 172 million, up more than 5000 percent. If only our savings underwent the same appreciation. To humanise the scale a little better, consider that in December 1995 there were approximately 16 million people online worldwide, yet by August 2002 that figure had surpassed 600 million - a rise of 3650 percent. Consider too the billions of web pages this 'organism' is threading globally, and the Internet soon takes on a scale that will either overwhelm you, or, be seen more as an opportunity to exploit despite an argument that it is a system experiencing a decline in utility inversely proportional to its size. In other words, the larger the network becomes, the harder it is to justify the economies of search. This concept is at the core of what makes a search engine so valuable. As a piece of software, or as a strictly human catalogue, search engines prop up the Internet. Without these indexing agents, the Internet might have already imploded under its own weight and diminishing relevancy. These engines are the drones of the World Wide Web, searching and cataloguing. Some, however, are a little more effective than others in 'understanding' search commands and retrieving the appropriate information.

The Search Concept

With growth of this magnitude, individuals gave up long ago searching for the latest in a long list of obscure subjects. Instead, as has been the case for most of the Internet's commercial development, URLs or Internet addresses have pushed potential users and customers online. These massive demonstrations of brand awareness are intended to 'direct nav' users to particular domains, though at a cost never justified in terms of qualified leads, let alone completed sales. The concept of a global network lost its appeal when the average user realised the economies of search were simply diminishing as online information increased at an exponential rate. Enter the proxies, or search engines and catalogues, which became valuable intermediaries between the user and the expanding frontier of data. Now the race was on to catalogue the most number of domains and do it at a faster rate than the expanding Internet, otherwise what was the point? The point was relevancy rather than quantity, and the competition for eyeballs and ultimately a higher return on investment would be decided by attributes such as rates of classification, site rankings, frequency of updates, database size and the cataloguing method - 'smart', human or hybrid. Delivering a list of 1,000 domains on any subject imaginable is simple, but providing a list of the 25 most relevant domains is the key. The catch is, how does the service determine what is relevant and the degree of that relevancy. It's all rather subjective really. Just how subjective? Well consider that in 2003, according to Pew Internet (2003), one in four Internet users were making search engine queries each day, surpassed only by email as the most popular online application, with at least 25 percent of these users typing in their own names to conduct an “ego search”. Overall, according to a recent study by iProspect, 75 percent of all Internet users used at least one search engine in the last month, with up to 35 percent of users alternating between engines.

The Search Evolution

The race to relevancy is being encouraged by some very real user behaviour, which in itself is very discouraging for search engines which continue to indiscriminately drop 10,000 results or so onto a PC after each search. CyberAltas (2002) reports that at least 56 percent of Internet users fail to go past the first two pages listed in any search result. This statistic is supported by separate research from the University of Pennsylvania, which concluded that the percentage of search engine users viewing only one page of results rose from 28 percent in 1997 to a massive 51 percent in 2001. Research from iProspect suggests that if no ‘desired’ result is found within the first three pages, the search engine is likely to experience some level of brand damage. Now that’s pressure. The algorithm wars, however, akin to a black box mimicking the searcher's decision making and search intention are just a technical sideshow compared to the revenue model now being played out by the major search properties. In a way the 'proxy selection' stage in this evolution is a return to the past, when promoted URLs drove eyeballs online. The initiative still comes from the searcher who triggers the results with the same search terms, however this time the search results are 'capped' with the businesses or vendors considered most relevant to the search terms. The argument is that these vendors are also showing enough savvy to reach potential customers online and preempt their wider online search with an immediate offering via the search application. Based on the search term used, the vendor goes through a self-selection process, acting as a proxy for the end-user in terms of what results are most relevant to their search. This marks the next stage in online search development, where the goal of reducing a match from one in 100 to one in ten is now very real, regardless of whether the user is searching for the smallest digital camera available or a collector's edition of the 1967 Barbie convertible.

Search Marketing

The Holy Grail of relevancy in search results comes in two parts. Firstly, users have high expectations and are not prepared to be inundated with results much beyond two pages. Secondly, relevancy has an immediate commercial impact on the vendor relying on search engines as a lead generator. How much of an impact? Well consider that the four top search engines now account for more than 90 percent of all search engine referrals to shopping sites (WebSideStory, 2003). Further, up to 55 percent of online purchases were made on sites found through search listings, versus nine percent on sites found through banner ads. In terms of total referrals, not just to shopping sites, search engines now provide 13.4 percent of global referrals – up from 7.1 percent just 12 months ago (WebSideStory, 2003). Behind many of these referrals is the need to conduct product research. In March 2003, a survey released by Doubleclick and Greenfield found 41 percent of US Internet users researched products with the assistance of search engines, which was significantly above the 28 percent who guessed the URL and 13 percent who responded to an online advertisement. And just in case you’re still uncertain about the role of search applications to deliver the answers or sales as the case maybe, consider the findings from the Consumer Daily Question Study (2002), which concluded that of the five questions we ask each day on average, the most popular ways of answering these questions were search engines (32 percent), friends and family (29 percent), salespeople (24 percent) and books (9 percent). No matter which way you cut the stats, there is no denying search engines are an integral part of a person’s daily research effort and product evaluation.

SEARCH MARKETING AS AN INVESTMENT

-Vendor as Search Proxy A vendor's paid placement in a set of search results, also referred to as pay per click (PPC), or pay per performance, is an extension of the relevancy game, only this time the positioning is based more on the attributes of the vendor, such as commercial success, customer profiling and the vendor's realisation that the Internet is a legitimate distribution channel. In other words, vendors who choose to use paid placements as part of their search engine marketing (SEM): 1. Are demonstrating their market success; 2. Understand who their customers are and their search behaviour, and 3. Understand the role of the Internet as a distribution channel and customer contact point. Again, all based on selected key words and search terms, the paid placements are far from indiscriminate. Instead they act as a further filter to the user's results, with 'normal' rankings of domains superseded by vendors who not only match the specifics of the search term but self-select because of their market savvy. In this way, a vendor's search marketing strategy is a further guide in the user's selection process.

ROI - the Definitive Measurement of Search Marketing

The payment for search listings by vendors, like the battle to differentiate through quality improvements, has undergone its own transition process. From the pay per placement, such as the simple text link based on page impressions, to the cutting edge of pay per performance, where vendors pay only for leads generated by their search listings. In the case of Overture, this latest payment model is part of a bidding system for search terms, allowing vendors to match their investment of securing a premium listing with the potential return on sales. In short, for specific search terms, the market is setting the listing price, allowing vendors and not the search provider to: Determine the price they are prepared to acquire a new customer; Control the bid price for each term; and Maximise ROI by setting their own cost per lead.

 

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