June 26, 2008, 12:00 AM

Search Engine Marketing

Burgeoning search advertising market grows new approaches

Search engine marketing was a strategy that online retailers used but did not much discuss until a 2003 industry report by investment firm Piper-Jaffray blew the cover off a sleeping giant: by 2007, Piper-Jaffray predicted, worldwide total revenue from search would reach $7 billion.

What a difference a few years can make. In North America alone, search engine marketing spending reached $12. 2 billion in 2007, according to the 2007 State of the Market Survey. And the growth curve doesn’t stop there. While cautioning that its forecast could be affected by an unpredictable economy, the Search Engine Marketing Professional Organization this year projected that North American search engine marketing spending will reach $25.2 billion in 2011.

“Search engine marketing continues to prove its worth in the larger marketing arena,” says Jeffrey Pruitt, SEMPO president.

Exceeding projections

Marketers are spending on search at levels bigger than expected. Their focus includes paid search-in which a retailer pays a fee to a search engine each time a user clicks through to the retailer’s site from a listing on search results presented by the engine-and optimizing pages for natural or non-paid search; that is, architecting the page and its content so that it is easily found and determined to be query-relevant by search engine spiders.

Forrester Research Inc. reports that 90% of U.S. online retailers it recently surveyed participate in paid search, which outranked their participation in other popular online marketing vehicles such as e-mail and comparison shopping engines. 68% supported search engine optimization efforts, which ranked search engine optimization as the fifth most popular online marketing vehicle.

According to Internet measurement service Hitwise, the number of consumers who start their shopping at a search engine instead of going directly to a retailer’s site is growing, another key indicator that both paid and natural search are important components of the online marketing mix. Among online retailers ranked by Internet Retailer as the top 500 in online sales in 2007, 72% received more traffic from search last year than in the previous year, Hitwise found. Among the top 500, 13% had received at least half of their traffic from search engines in 2007, up from 10% the previous year.

Paid search has become much more competitive today as more consumers turn to search engines to find and learn about products, and more marketers vie for consumers’ attention at those venues. That means it also is more costly to individual marketers because they must pay to gain a high position in paid search listings as prices on popular keywords go up.

More sophistication

Because of competition and the march of technology development, paid search marketing for retailers has moved on from the simple exercise of bidding for top positions on leading keywords. With soaring bid prices attached to top keywords, if marketers don’t have a more sophisticated strategy, they can burn their way though the budget and still receive very little return.

“In 2008, one needs data-driven analysis to assess performance and to target advertising buys,” says Chris Lien, chief executive officer of Marin Software, which sells an enterprise-class paid search management application for online advertisers and their agencies. “In fact, lunch has become expensive on hotly contested categories and for hotly contested keywords.”

Vendor offerings such as Marin Software’s grew out of the increasing challenge of managing a keyword program effectively as the number of keywords in individual marketers’ programs became larger. From a handful of targeted keywords in the earlier days of paid search, the number of keywords being managed in marketers’ programs has ballooned. On average, U.S. online retailers today manage keyword programs consisting of about 32,000 terms, according to Forrester; and some programs edge up into the hundreds of thousands.

Marketers have expanded keyword programs as they look for more ways for their products to be found by searchers; for instance, by adding more specific terms, such as “red cotton sweater” instead of just “red sweater,” and by adding so-called long-tail search terms-keywords for products that are purchased less frequently, but that have a higher likelihood of resulting in a sale when a searcher clicks through on one.

Managing a keyword program requires tracking the performance of each term and adjusting bids on the term relative to whether the term is getting clicks and producing sales, and also to what competitors are bidding on it. Keyword programs also must be managed across multiple search engines: Google, Yahoo, MSN and more. All of the associated revenue and click data is too much to manage in spreadsheets, so automated bidding tools and keyword management systems have become a fixture in search over the past few years.

Come back

Another trend in search marketing has given rise to another new development, the practice of re-targeting, or remarketing. To save on click costs, search program managers have indicated their interest in serving up their ads to searchers segmented according to demographics or past behavior online, in the goal of attracting a more qualified shopper pool. Retargeting or remarketing is another way to segment ads served to searchers. “After paid search, remarketing is a technique that is generating the most new customers for our clients, and our clients are starting to budget for this type of marketing,” says Suzy Sandberg, president of search engine marketing agency PMDigital.

When a consumer clicks through to a retailer’s site from a product listing in search results, she may not be ready to buy, but she’s indicated her potential interest. Remarketing is a technique that tracks shoppers after they have left a retailer’s site without making a purchase and serves them display ads for that retailer, Sandberg explains. The intention of this strategy is to prompt the customer to return to the retailer’s site to complete the purchase. SEMPO’s data suggests that interest in this new technique is strong: 40% of those responding to its recent survey who were not serving targeted ads to searches-including both behavioral and demographic targeting as well as re-targeting-plan to do so within 12 months.

New interest in optimization

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