Paid, natural search go hand in hand, says Piper Jaffray

In the rush to nail down relevant keywords in paid search programs, marketers shouldn’t be overlooking natural or algorithmic search, says U.S. Bancorp Piper Jaffray analyst Safa Rashtchy. “Paid search and algorithmic search have become intertwined now. If you want to be successful in paid search you have to be strong in algorithmic search as well,” says Rashtchy, author of this spring’s industry report from Piper Jaffray.

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Despite marketers’ increased focus on paid search, in part because of the speed with which paid search can deliver results in contrast to the lengthier process of search engine optimization, algorithmic search remains necessary because it continues to bring customers to sites, according to Rashtchy. He likens algorithmic search to staples in a supermarket, such as bread and milk; and paid search to higher-margin items such as greeting cards. “That’s where you make your money,” he says. “Algorithmic search is important because that’s how you get the customers to come in.”

Rashtchy’s report, which pegged the value of the online search market at $7 billion by 2007, has been called a tipping point that quantified what online marketers had already suspected was huge potential opportunity in paid search. But Rashtchy says it’s hard to determine whether the growth in online search is driving the growth in e-retail, or vice-versa.

“Many advertisers have thrived because search has been an efficient way to get customers. But it’s also the case that search is doing so well because e-commerce is so strong,” he says. “So many small businesses have opened on the Internet, and the Internet has trained people that they can go there and find anything. It works hand in hand. Without search, those hundreds of thousand of merchants could not be found because there would be no way to find them.”