In its second-largest acquisition, Amazon buys the company for $970 million.
Marketers scramble to respond to new Google tools, local options, mobile search ... and more.
Eighteen months ago Jamie Grove joined ThinkGeek as the online retailer's director of evil schemes and nefarious plans—a job most retailers call director of marketing. The retailer assigned Grove to create the first formal paid search campaign for the retailer's ironic, pop-culture-attuned gadgets, toys and electronic gear.
"I am building things from the ground up," he says. Grove considers that a luxury, not a handicap, because he believes it will enable him to avoid mediocre practices and concentrate on what's new in paid search.
And there's plenty that's new. 2010 was a year of important changes in the world of search marketing whose impact will only be fully felt this year.
Grove and other marketers will be watching whether the newly cemented Bing-Yahoo alliance can challenge Google, while they seek to leverage new tools that allow retailers to display the inventory they have in local stores. Meanwhile, the lines between organic and paid search will continue to blur, requiring tweaks to paid search campaigns, search experts say, and growing consumer use of smartphones to access the web could force adjustments in paid search budgets.
Marketers are struggling to keep up with these changes even as they pour more money into search marketing as the economy in general, and online shopping in particular, recover from the recession. Online retailers are spending more for paid search, and getting more back in return, suggest several recent reports.
Search marketing firm SearchIgnite says its retail clients' search spending increased 36.6% during the fourth quarter compared with the same period in 2009. Retailers poured in money because click-through rates were up 17.9% and conversions rose 22.5% during the three-month period. Paid search spending for 2010 as a whole was up 18.5%, says Roger Barnette, CEO of SearchIgnite, a trend he expects to continue in 2011. "People are spending more money and getting a higher return," he says.
Google remains the search king, capturing 82.6% of paid search spend compared with 17.4% for Yahoo and Bing during the fourth quarter, SearchIgnite says. During the third quarter, the comparable split was 80.2% and 19.8%.
Value from Bing?
Meanwhile, the cost per click for paid search programs running though Google AdWords increased 4% in 2010 for clients of ChannelAdvisor, which helps online retailers sell through online marketplaces and comparison shopping sites. (Google reported the average cost per click in the fourth quarter for all advertisers was up 5%.) Google's cost-per-click averaged 38 cents in 2010, compared to 28 cents on Bing. Although Bing's CPCs increased in the early part of the year, they cooled down in the last half, likely a result of Bing taking over as the search engine for Yahoo sites last summer, says Andrew Belsky, a ChannelAdvisor senior product manager.
Search experts expect marketers to gradually shift some spend to Bing, if only to spread their bets. "Our retailers tend to not want all their eggs in one basket," says Jeffrey Scime, vice president of operations for search marketing agency Covario, adding that retailers remain cautious about the returns from Bing, in part because data from the new Bing is limited, meaning retailers can get no separate Bing and Yahoo data, as they are combined. One retailer that's started making that shift is drugstore chain Walgreen Co., which is spending about 28% of its paid search on Bing, up from about 25% for Bing and Yahoo together in 2010, says Vural Cifci, the retailer's director of search and acquisition marketing.
Marketers will be watching closely how well Bing ads convert compare to Google. At online pet supplies retailer Drs. Foster and Smith, conversions from Bing are down a couple of percentage points from the previous Yahoo and Microsoft platforms, with Google picking up the slack, says Matt Stelter, assistant manager for Internet marketing. Stelter suggests retailers bid carefully on Bing keywords until Bing ads prove their value. "The smart marketer is bidding down on those terms," he says, "while the unsophisticated retailer is keeping its bids the same."
Retailers this year will also be weighing how much time and money to invest in what Stelter's boss, Internet marketing and media manager Gordon Magee, calls the "long-tail chase." The phrase refers to very specific terms that get few clicks but tend to convert at higher rates because they are so specific, signaling a shopper's intent to buy. The key for retailers is figuring out what kinds of clicks lead to sales, Magee says.
This is particularly true as shoppers, more certain about what they want and more experienced in shopping online, become more efficient in searching for products, especially as they wind up their holiday shopping. For the second year in a row, consumers' search queries grew shorter from November to December. Longer search queries—those of five or more words—declined 4% from November to December in 2010 after declining 2% in December 2009 from the prior month. Meanwhile, one- and two-word search queries each went up 2% from November to December 2010, about the same as in 2009. "Users are getting more sophisticated with the way they search," says Steven Swaney, the senior paid search project manager at Oneupweb, a digital marketing agency.
They are also more likely to click on ads from Amazon.com Inc. as the holidays near. Amazon, the top online retailer by revenue and the leader in paid search, claimed 12.03% of paid search traffic during December among the top 500 retail sites tracked by Experian Hitwise, up from 7.98% in November.
Google made it easier for consumers to use the web to shop at local stores last year, and Walgreens will be more focused this year on local search results, says Cifci. Both Google and Bing are making it easier for retailers to show what inventory they have in local stores, and consumers are coming to expect to see that information in search results.