SPONSORED SUPPLEMENT: Search Engine Marketing

Search engine marketing has become the number one way of marketing online. In the few years that it has been in existence it has rapidly moved from one way to market web sites to the primary way. All other methods take a backseat to search engine marketing. In fact, in an Internet Retailer survey last year, only 13% of web sites reported that they don’t use search engine marketing.

Most online retailers and search marketing agencies think those who don’t use search engine marketing are missing out on something big. The Internet Retailer survey showed that for 62% of retailers, search marketing accounts for 11% or more of sales. And 52% said it works better or much better than other marketing activities. “Paid search and natural search are the most efficient and cost effective marketing spend that marketers have ever engaged in,” says Fredrick Marckini, CEO of search engine marketing company iProspect.com. “It’s the only one where people are raising their hands and saying ‘I’m interested in what you are selling.’”

Reverse direct marketing

In fact, search marketing company iCrossing Inc. calls search marketing “reverse direct marketing.” “Customers are actively seeking businesses,” says Noah Elkin, director of industry relations for iCrossing. “Unlike in print, radio or TV advertising where you are pushing the message to consumers, consumers are expressing their interest in the products that you sell.”

Its popularity has made search engine marketing extremely competitive—so much so that some marketers and agencies are focusing on ways to maximize their appearance in results and bump other retailers to deeper pages in search results. “The challenge today is to get more listings on a page and push competitors off that page,” says David Williams, chief strategist, 360i Search. “It’s similar to grocery stores where brands try to maximize their shelf space and minimize the number of competitors.”

Retailers are realizing the importance of search marketing to the extent that agencies that provide search services are having to expand. “I recruit continuously,” says Lisa Wehr, CEO of search engine marketing provider OneUpWeb. Marckini echoed such sentiments. “We have a steady stream of paid search advocates that we interview and we are looking for more,” he says.

And its popularity is opening up possibilities for newcomers. ChannelAdvisor Corp., for instance, a leading provider of e-commerce systems that helps retailers sell on eBay, Amazon, Yahoo and other aggregating markets, bought search engine marketing company SearchMarketing.com in July. “Our customers were requesting it,” says Scot Wingo, CEO of Channel Advisor. “They liked our data feeds into eBay and other places and asked about taking a retailer-based way of approaching search.” While ChannelAdvisor is a relative newcomer to the market, Wingo notes that 50 of the retailers in the Internet Retailer Top 400 are ChannelAdvisor clients.

Drilling down

Like other industries as they mature, search is becoming more specific as well. While Google and Yahoo still rule, some companies have developed vertical search products, where shoppers who are looking for a certain type of product or service can search among just providers of that product. For instance, LookSmart Ltd. launched 161 vertical search sites in October, bringing its total to 181, including such sites as Home Living, Food, Sports, Style, and Tech & Games. “We provide the essential and not the exhaustive,” says David Hills, chief executive officer. “Over time, when people get hooked on something, they tend to go to places on the Internet that are vertical.”

But for anyone who thinks that the industry might be settling on best practices or that it has chosen leaders, participants say: “Hang on—you ain’t seen nothing yet.” “This market is way in its infancy,” says Stuart Larkins, vice president, search, of Performics, part of DoubleClick Inc. “It’s 5 years old and it’s only just beginning. The market will continue to change.”

Search engine marketing comes in many flavors these days. It’s no longer just figuring out how to get to the top of the listings in Google or Yahoo. While Google and Yahoo are still important—in fact, the most important players in the search game—marketers must now contend with many more search sites, including new, improved MSN and AskJeeves; more sophisticated comparison shopping sites such as Shopping.com and Shopzilla.com; and vertical search sites, such as LooksSmart and Google’s Froogle. “Complexity comes in this market as companies move budgets not just to interactive marketing, but specifically to search and by tying it all together and measuring the results,” Elkin says.

Multiple levels of play

Add paid results, where a retailer pays the search engine each time a consumer clicks on a link, with those willing to pay more getting higher in the results; paid inclusion, where a retailer pays a search engine to crawl a site, with no guarantee as to where the site will land in searches; and good old-fashioned web site optimization, in which a retailer designs a site so as to land high in so-called natural language search. That’s all created a market that’s more bewildering than the California freeway system with so much going on at one time that retailers can feel like they’re watching Cirque du Soleil in multiple mirrors. “It’s three-dimensional chess,” Marckini says.

Just as skilled chess players spend years honing their game, today’s search engine marketing vendors have spent years learning the intricacies of the industry. Wehr notes that, even though she hires only qualified staff with experience in marketing or retailing, OneUpWeb still invests six months in training before an account manager can touch a client’s program. “Even while growing a company and developing services, my focus has always been on maintaining depth in our level of expertise,” she says, a sentiment that others echo. “The expertise that people bring to the table is critical to success in search marketing.”

But just as almost anything to do with the Internet, search marketing requires technology. “Technology is playing a bigger role today in search engine marketing—both paid and natural,” Wingo says.

Not just is the technology becoming more complex, but it’s also diverse as Google and Yahoo require different technological interfaces, as do the other search engines and the comparison shopping sites. “There’s a drastic difference between Google and Yahoo,” Larkins says. “And that makes a difference in how you compete, how you look at bidding and many other areas.”

Bigger mountains

Larkins adds that requirements are also always changing. “Google and Yahoo change interfaces almost on a daily basis,” he says. “They’re always updating their API (application program interface) to improve it. So you need a nimble tech group to stay up with it.”

And, participants add, service providers who don’t keep up can fall behind very quickly. “People were prepared to climb small mountains; now there are bigger mountains and you need a whole new set of guides,” Marckini says.

That applies, Williams says, to the technology as well as to the people. “There are a lot of paid search programs that were built around older search platforms, but today they’re not sophisticated enough to operate on the Google platform,” Williams says. Noting that 360i owns its own search technology, known as Search Ignite, which it acquired in 2003, Williams adds: “We developed ours to interface easily with Google as well as Overture (Yahoo Search Marketing, today).”

And that, say most participants, makes the need for technologically savvy partners all the more important. “You need a vendor with a lot of sophisticated, mature technology, not just to manage bids but also to create feeds, do keyword discovery and all the things you do for paid search but that also allow you to optimize your campaigns for natural search,” Marckini says.

Participants caution, however, that agencies and retailers should not be so wowed by the technology that they forget the importance of the people behind the technology. “Some people think that just because the business is online, it should be technology-driven,” says Elkin, who notes that iCrossing uses technology that it developed itself. “On the contrary, we believe that the value we add is on the agency side, with our creative work, market research and analytics.”

Optimization is not dead

The market may be very complex, but one thing that most vendors of search services agree on is that retailers need to engage in both paid search and page optimization—an approach that only two or three years ago many retailers did not buy. The first round of search marketing focused on creating pages that would land high in search results. Marketers with web sites achieved that a number of ways, often by incorporating on their pages hidden text that would be found by the search engine crawlers. But the engines quickly developed rules against such practices and, rather than optimize their sites to comply with the new search rules, many retailers simply opted for paid search because it’s quick and shows almost immediate results. It appeared then that optimization would take a back seat to paid.

But the market has shifted again, and Google reports that consumers prefer natural results over paid 3 to 1. “If you’re doing paid only, you’ll miss the majority of clicks,” Marckini says. He cites the case of one client who had been getting 100,000 visitors a month. After iProspect optimized the site, traffic immediately shot up to 500,000 a month. Another retailer went from 17 million visits a month to 36 million after optimization.

Many see natural search as the foundation of any search program. “We definitely see natural search as the cornerstone to give the best long-term results,” Elkin says. In addition, natural search gives the retailer more control over its message and how it appears on the web, he says. “You control your message when you’ve optimized your pages,” he says. “It comes down to do you want to tell your story or do you want a search engine to do it.”

Cross-channel pollination

Optimization creates new opportunities for crawlers to find sites, but it’s not necessarily easy. It usually requires architectural changes, such as how pages link to each other within a site. Often it’s hard to convince IT that the changes are a priority, Marckini says. Further, such changes require that sites change how they display content. “If what looks like text on a page is really a graphic, all an engine will see is ‘file.jpg,’” Marckini says. “Sites have to replace that with text that can be read and spidered.” Further, he adds, basic instructions to users can cause some sites to not get ranked highly. “Rather than just say ‘Click here’ a link should say something like ‘For more information on whatever product, click here,’” he says.

Today, not only are retailers doing both paid and natural, but they’re also using what they learn from one to inform how they conduct the other. “A lot of retailers recognize the importance of doing both,” Marckini says. “If you buy keywords, you learn what content to optimize. When you optimize, you learn about keywords that you didn’t expect to perform. You can port that information between the two types.”

ChannelAdvisor is also taking that approach with its Natural Search Appliance product. “That allows cross-channel pollination,” Wingo says. “With the Natural Search Appliance, you can add natural terms into paid search and come up with list of great terms that you might not have thought of otherwise. This allows you to see what people are searching on at shopping engines.”

In addition, some of the search marketing companies today are engaging in other kinds of advertising which feeds into search marketing. “360i is not just a search engine optimization and paid placement company,” Williams says. “We take a broader view of online marketing. We’re involved in shopping site feeds and banners. Our perspective is that we handle all aspects of performance-based marketing.”

The portfolio approach

Those approaches feed into one another, he says. “It’s like a portfolio,” Williams says. “You have to pay attention to balancing search engine optimization against shopping feeds against paid search activities. And then you have to set aside an attack fund to try new opportunities, like pay per call.”

IRCE 2008 Conference Multi-Media CD-ROM

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

That has had a number of effects on the market. For one thing, it has made marketers smarter about the terms they bid on. The aim is to strike a balance between broad and narrow keywords. Broad keywords attract a larger body of shoppers than narrow but usually cost more since there are more retailers pursuing them. Narrower terms cost less, but they might not attract as many buyers. That forces retailers to better understand the buying cycle and how keywords fit into it. “The buying cycle can take many weeks and during that time, consumers move from generic to more specific,” Elkin says. “And then they go to branded terms just before the end.” At every step of the way, the average price of the keywords changes, he notes.

It’s also forced marketers to pay closer attention to ROI on keywords. And that, interestingly, not only has affected the prices they pay, but also has had the effect of making them more intentional about which keywords get paid treatment and which get natural language page optimization treatment. “If the terms can’t compete in the paid market, some retailers are applying them to natural search,” Larkins says. He cites a client that was able to create a return on paid search for fly fishing rods, but not on accessories. This retailer used page optimization to get accessories high in search results, and had a successful campaign with both.

The new competitiveness has also forced retailers to exploit opportunities that the market creates and that others have overlooked. For instance, Williams notes, “A lot of campaigns go dead at 8 p.m.—they’re spent out for the day. That creates bidding opportunities.” Or, he adds, “A lot of people think they should be No. 2 in search rankings, vs. No. 1 or No. 3, when the reality is that where you need to be listed is different all the time. The number of impressions is not the same across the page. It’s a non-linear model.”

Wrong assumptions

Even exploiting inefficiencies—or maybe especially exploiting them—requires technology. Often, marketers can’t know the results simply by observing them. They need the data gathering and analytical power of technology to make sense of events. To market on the Internet, retailers must make some assumptions about performance and placement, Williams notes. But he adds that without technology backing up assumptions “the assumptions often will be wrong.”

One thing that almost all participants in the search engine marketing world agree on is that very few marketers have tapped the universe of keyword possibilities. “Most search programs have more legs than a lot of people think,” says Wingo of ChannelAdvisor. “There are easily 10 to 20 keywords per SKU, but a lot of retailers’ keyword programs are at less than one keyword per SKU. Coming up with all the keywords can give your search program a long tail.” The benefit of assigning a lot of keywords to each SKU is that each product is more likely to come up in search results, since marketers can never predict what term a consumer is likely to use. “There’s lots of room for retailers to look at millions of keywords and drive a lot of higher quality traffic who will buy at their sites,” he says.

Wingo believes that identifying many keywords per product is reasonable because the retail industry is well suited to search engine marketing, more so than many other industries. “There is a rich set of data around products,” he notes. “A lot of non-retailers run out of steam in search engine marketing because there are not a lot of words they can buy. But if a retailer has 10,000 or even 100,000 SKUs, there are easily 10 to 20 times that number of keywords they can use.”

Wingo is confident of his projections of 10 to 20 keywords per SKU because of ChannelAdvisor’s background working with retailers as a provider of services to retailers who sold in the online marketplaces. And as an affiliate of eBay, ChannelAdvisor managed keyword searches on millions of terms, so the company has much experience in all the ways an item can be described in keywords, Wingo says.

The offline effect

Some retailers, however, have figured out ways to reach their limits on their keywords—or at least their keyword spending—and then they should turn to offline marketing to give a boost to their search programs, Marckini says. “We had one client who maxed out on the amount they could spend on search,” Marckini recounts, “and went to radio and print advertising without telling us. Suddenly, the bidding agent began to raise their bids and previously unprofitable terms became profitable because people had heard and seen the ads and they clicked on the advertisers’ search terms with more frequency and more intent to buy because they knew who the advertiser was from the offline ads. Ironically, it seems the fastest way to break through the paid search plateau is with offline advertising.”

Using offline advertising to boost conversion rates on keywords is not the only way that retailers need to pay attention to offline events when creating search campaigns, says Williams of 360i. “When we are working with clients to create campaigns, we need to understand their calendar of events and their seasonality,” he says. “We look at which holidays are important to them, when their catalog will drop, what will be on the cover of the catalog and what they highlight within the catalog. Those are all important offline aspects that affect their search campaigns.”

Getting ready for such search marketing is an extensive process that retailers should expect will take weeks if not months, Elkin says. “Optimization efforts should commence well in advance of a major media event,” he says. “You’ve got to allow time for the actual work to be done, for the evolution of the site and for the implementation of changes to the site and to the meta tags and other content. Once that process is completed, it takes time for the new content to be spidered and show up in rankings. It’s not something that you can predict will be done by a certain date.”

Calculating lifetime value

As if search isn’t complicated enough already, in the near future, marketers will have to gain greater understanding of search’s role in cross-channel retailing. “A recent study showed that 92% of search conversions take place offline,” Marckini says. “Another way of looking at that is that a mere 8% of searches converted at anybody’s web site.” Retailers will come to understand that and will take it into account when they are crafting search campaigns, he says. “2006 will be the year of the cross-channel conversion,” he says. “Search marketers will be finding new and innovative ways to connect to the offline experience.”

Online retailers’ perspective will also continue to widen as to what constitutes a successful search campaign, Williams says. “We’re seeing a lot more window shopping online than we’ve seen before,” he says. “So we’re seeing a lot more clicking and fewer conversions. It will be very important to add a lifetime value measurement to the back end to get a better understanding of the true value of clicks.”