PetSmart acquired Pet360 for $130 million in cash and up to $30 million more in future performance-based payments.
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For a retailer to display its inventory in search results, its marketing and merchandising teams must work together to ensure that updated products, pricing and promotions are reflected in search campaigns. And bidding should take inventory status into account. "The most sophisticated retail search marketers are tying their inventory feeds directly to their search marketing software tools to update search ads regularly based on inventory fluctuations," says Aaron Goldman, chief marketing officer of Kenshoo, an online marketing agency. "There's no sense in buying search ads for a product that's not available."
The tilt toward localization is also tending to blur the lines between paid and organic search, with important implications for paid search campaigns, experts say. For instance, Google had been offering, to the right of search results, a push-pin map showing where stores are located. Retailers can provide address information to Google for no fee, says Kevin Lee, CEO of search marketing firm Didit. But Google launched a program in 2010 called Google Tags that lets a retailer add to the listing that pops up on organic search results a small yellow flag that helps the listing stand out from the rest, and can offer links to coupons, photos or videos. That costs $25 per month per listing.
Google also is providing more information about local product availability, says Eric Best, CEO of Mercent Corp., which helps retailers sell through such online marketplaces as Amazon.com and eBay.com, along with Google Product Search and other shopping portals. For instance, a shopper searching for "printer paper" will, toward the middle of the screen, see "shopping results for printer paper," with five different brands, along with prices and links for nearby stores where the product is stocked. Clicking on a brand takes a shopper to another page with a map of store locations and information about whether specific stores have the paper in stock.
"It's not paid search but it certainly affects paid search because every paid search ad is competing for clicks," Best says. "The lines between paid search and other forms of advertising are blurring."
While such changes make life more complicated for paid search marketers, Google also introduced a new tool in June, called Google's AdWords Campaign Experiments, that can reduce guesswork by letting a marketer more easily test campaign strategies against each other, Best says. A retailer selling different brands of jackets, for instance, could set up competing campaigns with alternate keywords, ads, ad groups and bidding strategies for each to see which brand returns more revenue for each dollar of incremental advertising spend. A retailer can shift advertising dollars to the stronger product.
All this reflects the increasingly complex world of paid search. "Retailers are being much more disciplined in the measurement of incremental revenue and profit on a product-by-product basis," Best says. "What's really driving retailers to focus on better metrics and campaign optimization is increasingly savvy shoppers who are armed with smartphones, comparison shopping apps, store finders, UPC bar code readers, and instant access to digital coupons and promotions."
With so many consumers now carrying smartphones, marketers figure to look more to place ads next to the search results that appear on mobile phone screens. It's still a relatively new marketing tactic, as market research firm IDC says mobile search spend is only running at about $487 million, with 91% of it on Google. That's a small fraction of total paid search spending, which exceeded $3 billion in the third quarter of 2010 alone, according to the Interactive Advertising Bureau, a trade group for web site publishers and advertisers.
As they test mobile paid search, retailers should recognize that Google tends to show fewer paid search ads on the small screens of mobile phones, Goldman says. An ad that appears after the third position on a computer might not show up at all in mobile search results. It's also important to keep in mind, experts say, that consumers often use mobile devices to find nearby stores that stock desired products, which puts more importance on presenting product availability.
Conversion rates also are running lower on mobile phones so far, Lee says. "Retailers need to go in with eyes open and reasonable expectations," he says. "Don't expect the same conversion rates on mobile search clicks as from a desktop."
On the plus side, cost-per-click rates on mobile search ads are 25% lower, says Cifci of Walgreens, because there are fewer bids and retailers are waiting to see how mobile search pans out. "I don't think advertisers are bidding 100% of mobile channel keywords yet," he says.
Cifci says Walgreens has seen a 25% increase in mobile ad impressions since September, but adds that the retailer finds it difficult to measure how much those ads impact sales. In part that's because consumers often do some of their shopping or research via mobile devices but then switch to PCs for purchases or visit physical stores.
Will that change as consumers get more comfortable shopping on their increasingly sophisticated mobile phones? That's just one of the big questions search marketers will be trying to answer in 2011.