In its second-largest acquisition, Amazon buys the company for $970 million.
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All the new developments in the search marketing business have added degrees of complexity to the industry. “It’s much more difficult to manage your bidding activity,” Wehr says. Among the most important recent changes that add to that complexity, Wehr notes, is the fact that the major search engines are getting tighter about allowing access to their systems using third-party tools. “You’ll need technology to assemble feeds to each shopping engine-and none of them are the same,” she says.
In addition, AskJeeves and MSN are beefing up their search offerings, which, while adding complexity to the market, is a development that some welcome. “That makes the market far more complex, but it’s a great move for advertisers because it can help keep the other engines from dominating the market so much,” Wehr says. “If their plans work, it will be an incredible opportunity for advertisers and users.”
She cautions, however, that the challengers need to be held to the same standards as the leaders Yahoo and Google-that retailers shouldn’t embrace them just because they offer an alternative to the dominant search engines. “We encourage clients to test all engines, stay at the ones that perform and back off from the ones that aren’t performing,” she says,
In addition to AskJeeves and MSN beefing up their search offerings, comparison shopping sites are coming on strong. Sites such as Shopzilla.com, Shopping.com and NexTag.com still dominate the market, but a spate of existing, smaller sites have made major pushes for traffic in the past year while some new ones have entered the market. “They all require a certain amount of technology and monitoring-you’ve got to manage bids and watch your cost per click all the time,” Wehr says. The challenge of comparison shopping sites, she adds, is that because they attract price-sensitive shoppers, retailers must balance their cost per click with their prices and margins.
An uphill battle
Most search marketing agencies today include comparison-shopping site feeds into their products and services. “Our product feed for retailing purposes sends an entire product catalog to shopping portals,” Elkin says. “As these shopping portals become more important for generating sales, it becomes more important for the retailer to have the most up-to-date product information on these sites.”
The number of comparison shopping sites is becoming so large that it’s impossible for any retailer to test them all. “I tell the new sites they are fighting an uphill battle,” Larkins says. “Retailers won’t take the trouble to integrate to the site unless the sites make it very easy for retailers to get in and prove they have consumer traffic. We tell retailers don’t go with 20 sites; stay where the distribution is.”
At the same time, though, Performics ensures that retailers won’t miss promising sites by sharing across its 300-client base experiences that other retailers and marketers have had at the site.
LookSmart is one of the venues that is creating options for retailers. Hills notes there’s a good reason for the rise of LookSmart and other vertical search engines-the number of businesses that want to advertise online continues to increase. “The macro-economic forces at work include the fact that there’s a ton of money coming online,” says Williams, a former top executive at About.com. “It’s hard for advertisers to spend what they allocate. And in aggregate they don’t like to spend billions of dollars on two or three choices.”
As an example, Hills cites the case of a travel company that had advertised on Google and in the Overture (now Yahoo Search Marketing) networks. “There were too many others competing with them for the same terms and they focused on family travel packages, so they were competing with companies that were selling a broad range of travel services,” he says. Being at a vertical search site allowed the company to be more specific in what it targeted, made the keywords more affordable and allowed the company to reach a narrower audience that more closely fit its product offering.
Akin to cable TV
Hills likens the growth in the number of choices to the explosion in cable TV-and thinks that the analogy fits the search market. “When cable started and operators began thinking about a multitude of cable networks, a lot of people thought there would be too many choices-that advertisers would never support them all,” he says. “Today there are 65 ad-supported cable networks and they reach 50-60% of the viewing audience. The lesson is: Give consumers more choices in the distribution system and they take advantage of it.”
Thus LookSmart’s 181 choices. But it leverages those choices even further by syndicating its search technology to web publishers, which in turn sell search placements to advertisers. “We don’t think of LookSmart as a consumer destination,” Hills says. “It’s a jumping off point. It’s the antithesis of a broad portal.”
LookSmart offers even deeper segmentation with its Furl.net component in which consumers save their search results and make them available to others. Hills calls it a “social bookmarking service.” When a user views the LookSmart results and the Furl.net searches that others have saved, “they see what we think is essential but also what other people have saved and think is essential,” Hills says. “It’s user-generated content that is a byproduct of doing something that is relevant to them.”
The market is about to get further complicated as Microsoft Corp. beefs up the search functionality at MSN. Among its offerings will be the ability to place ads by user demographics. If that proves successful, others will make similar offerings. “Others will follow quite quickly,” Larkins predicts. “And everyone will come out with products that are slightly different from one another.”
While the growing number of search and shopping venues has complicated the market, the growing number of marketers using search advertising has made it much more competitive. “Competition is one of the major considerations in the market today,” Larkins says. “An extremely large amount of advertisers have jumped into search advertising over the last five years. Click prices have increased dramatically.”
The keyword cycle