Supersizing Search

Search engine marketing was gathering steam as an online marketing strategy relatively quietly—that is, until an industry report this spring stamped a figure on what many had only suspected to be a huge potential opportunity. Forecasting that worldwide total revenue from search will balloon from $1.4 billion in 2002 to nearly $7 billion by 2007, U.S. Bancorp Piper Jaffray in March identified search as the third-largest online market, after e-commerce itself and advertising.

“It was the tipping point for search engine marketing taking off,” says Frederick Marckini, CEO of iProspect.com Inc., whose 8-year-old firm was one of the first providers of search marketing services. “The world woke up to the fact that there is a $7 billion, sleeping industry blooming, and they weren’t in it.”

Piper Jaffray’s equities research team predicts search revenues will enjoy a compound annual growth rate of more than 30% between now and then, exceeding the growth of e-commerce, services, and other online markets. Consumers in this country do some 245 million searches per day—that’s 550 million worldwide—on about 50 million unique keywords, according to Piper Jaffray. About 80% of all U.S. searches go through the top search engines: Google, Yahoo, Overture Services Inc. (recently acquired by Yahoo) and Microsoft Corp.’s MSN.

A new industry

The fight to position one site over competing sites in all those search results has sparked an industry. Service providers have for years offered online retailers help in boosting their site’s likely ranking in search results through optimization; basically, studying how various search engines determine relevancy and then arranging a page’s content to better meet those requirements.

While beneficial for the retailers who place higher in search listings and the service providers who were paid for getting them there, optimization made no direct contribution to the coffers of the engines themselves. Then the engines figured out how to derive revenue from their enormous flow of traffic with programs that can improve a site’s placement in search results, for a fee. These include pay for placement, (a position in listings or at a certain spot on the page, like Google’s AdWords) and more recently, paid inclusion, which guarantees that web content is indexed by search engines for possible inclusion in search results, though placement in results is not guaranteed.

The intermediaries

While about 70% of searches still are informational in nature, commercial searches make up 30% of all searches and are growing, Piper Jaffray says. And as revenues grow for search engine companies, intermediaries to search in pursuit of the same opportunity are proliferating at a fast clip, demanding new attention from retailers and other marketers. Noting a large and growing secondary market around paid search and search marketing, Jupiter analyst Matthew Berk says, “Where there is blood, go sharks.”

Berk ticks off a partial list of the burgeoning search-related services e-retailers can now buy: managing paid search campaigns, selecting keywords, monitoring keyword positions on all the engines, optimizing pages for “organic,” or algorithmic, search, feeding a site’s content into inclusion listings, reporting results and conversion analytics, and more.

With familiar providers and newcomers in the search space pitching some services that didn’t even exist until recently, retailers face new choices in what—and whether—to buy, and from whom to buy services. “Providers that can offer the full suite of services are in a position to do very well,” says Berk. “But these are relatively new skills and this is a new market. Some providers have been in this space ever since there was a need to optimize pages and manage paid search campaigns, but there are a lot of new players.”

The expanding market creates opportunity not just for the search engines that get a percentage with each paid keyword click, but also for various service and technology providers—the intermediaries to search—as their expanding portfolios demonstrate.

Among those angling for a bigger piece of the search pie are established players in the online marketing space who are broadening service portfolios to keep pace with developing search technology. Optimization providers who once specialized in designing web pages so their content would more easily be recognized and grabbed by natural search engines now provide paid search management services as well. Newer players entered the arena as search optimization became less of a page design issue and more of a media buy. Other service providers have moved from a narrowly defined set of marketing services to partner with other providers in more comprehensive bundled search offerings. Some technology providers are carving out niches that target discrete parts of search program management, such as managing reports from multiple engines.

Search marketing firms have partnered with web analytics providers to add measurement services to their offerings. Many now provide direct XML feeds of web page content into search engines.

Other kinds of service and technology providers are simply looking for an opening. The booming search marketplace has created a gold rush mentality, says Piper Jaffray senior research analyst Safa Rashtchy. “There is a lot of money in search and because of that, it’s attracted all sorts,” he says. “Several agencies are starting to sell search services, some without having enough experience to do it. You don’t necessarily have to have a ton of experience to sell search, but you do have to have relationships with all the major search engines and you really do have to have the ability to maximize the ROI for your client if that is what you are offering.”

What’s enough?

The improvements gained by hiring or buying any kind of help on search depend in some measure on what the retailer already has in place. A smaller retailer might get the most return out of something like a simple measuring tool that tracks keyword performance beyond click-through to conversion. Wildflower seed web retailer Ray Allen of AmericanMeadows.com optimized his site’s pages for algorithmic search, and selects and buys keywords personally—but he finds the $19.95 he pays each month to follow up on 2,000 clicks with Timberline Interactive Inc.’s ConversionRuler worth the investment. The hosted application gives him information that lets him grab opportunity by increasing bids, if needed, on keywords that produce and dropping bids on those that don’t.

Resources and scale dictate that Allen handles search marketing activity on his own, but that doesn’t work for larger companies that must drive higher volume to show any results, so they turn to more complex search initiatives. As such, they must look beyond simple search strategies that may be helpful to smaller concerns toward something more sophisticated.

Not like direct marketing

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Take the strategy of starting with a broad keyword list and then cutting out those that don’t convert. Though it’s proved useful to companies just getting their feet wet in search, companies that need to produce sales on a larger scale must look beyond that. Marckini notes that by starting broad and then refining keyword buys based solely on what converts, marketers may be missing a significant part of their market. “When you first got a MasterCard, did you sign up for it the day you got the first piece of direct mail on it, or did you see TV ads, hear radio ads, and watch a lot of friends and family members pull out a card to pay for dinner first? People search in all stages of the buying cycle, and treating search engine marketing like pure direct response marketing is fatal,” he says.

It’s such complexities of the search engine marketplace that have retailers looking around for outside help, but where to turn? Companies with roots in specialties as diverse as algorithmic optimization, web site design, affiliate marketing and analytics, and media-buying outlets such as advertising agencies and even public relations firms now offer search marketing services, not without some overlap.

Like many other providers who started out in algorithmic search optimization before the advent of paid search, OneUpWeb now offers management of paid search programs and direct feeds of client’s page content into major search engines. “As the technology changes, you’d better be changing with it,” says Lisa Wehr, president. “There are no longer search engine optimization companies, there are search engine marketing companies.”

MoreVisbility.com followed the same path, focusing on optimization when it launched four years ago. It then expanded into paid search and paid inclusion management services as those markets developed, forming partnerships with various search engines and portals. Today, it’s a search engine marketing company that offers a full spectrum of services. MoreVisibility’s offering doesn’t include conversion analytics that track past click-through to completed transactions, leaving that to other providers that specialize in it. “That is a whole different arena, and there are companies that have spent many millions to develop that software,” says MoreVisibility president Andrew Wetzler.

Other search marketing providers bundle the analytics into their offering as resellers. iProspect, for example, distributes a customized version of NetIQ Corp.’s WebTrends Live as the analytics reporting piece of a broad search marketing offering. Analytics provider Coremetrics Inc. has agreements covering search engine results reporting with search marketing service provider Performics Inc., among other search-focused relationships.

And the dotted lines leading to search from an increasing variety of companies that do business on the Internet don’t stop there. Traditional media buying outlets such as advertising agencies, seeing online banners supplanted by more accountable search marketing, are looking to get in on the act as well.

PR agencies, too

“Increasingly, agencies are acquiring or partnering with folks who provide any of the search engine optimization or search engine marketing services,” says Berk, adding that he’s also been approached by a public relations agency arguing that it is in the best position to provide search marketing services. A San Francisco- and Boston-based PR firm that launched in March, SEO-PR, already does that, taking search into a new realm. It charges corporate clients to algorithmically optimize marketing communications posted on the web, such as press releases, to boost their rankings in informational search queries, thus expanding their reach.

Affiliate marketing has gotten in on search as well, with providers that started out in affiliate services stretching themselves to add search marketing. Performics launched in 1998 as an affiliate marketing services provider but it wasn’t long before it expanded into keyword management. In investigating some network affiliates to determine whether unusually large sales volumes they were generating were legitimate, Performics discovered that the sales were coming from keywords purchased on engines by the affiliates.

“We decided to get directly into that business ourselves on behalf of our clients,” says Performics vice president of marketing Stuart Larkin. “There was an opportunity to drive sales for our clients and also, to protect the client’s brand by having control over where the keywords were purchased, and which ones.” Performics built its technology to submit keywords to engines and manage bidding on the backbone of its affiliate marketing technology. Today, the company positions itself as a direct marketing services organization with search, now a core competency, representing about 35% of its business and slated to hit 40% this year.

One-step shopping

One Performics client, for example, a high-end audio retailer, has expanded from affiliate marketing into search services from Performics right along with Performics’ expansion into the search market. “Algorithmic optimization didn’t seem to be doing anything for us, and though we contracted with Performics as an affiliate provider, we’ve been open to any new opportunities they bring us,” says the retailer’s online program manager. Over the past 18 months, paid search has become such a productive part of the retailer’s online marketing mix that search was recently pulled out of the affiliate program budget where it had started and given its own strategy and budget.

The time-stretched program manager says driving as many of the rapidly-burgeoning search-related functions and opportunities as possible through one vendor is critical to getting his job done. “I rely on them because they have the expertise to know what’s hot. It’s going to be virtually impossible for me to keep up with everything new that’s out there,” he says.

Vendors that have assembled a soup-to-nuts offering in search engine marketing—either by developing relevant capacities or partnering with a company that already has the capabilities—maintain that retailers who want the full suite of search services are better off getting them all from one source. With the menu of search-related services now so large, going single-source means putting a lot of eggs in one basket. “If you are a large company that truly needs all of these things, ideally you want to go through one vendor,” says Berk.

Weighing the decision

Yet while the right intermediaries can make search marketing programs more effective for retailers, turning over the reins to a single provider isn’t a decision to be made lightly. “The thinking is that somehow, these guys will have more competency in this area than I will. And that may or may not be true, depending on who the provider is,” Berk adds. An agency accustomed to media buying in other channels, for example, may tack on keyword buys as a service without having any particular qualifications to do so, while a search engine optimization company that uses spamming techniques to sidestep an engine’s natural algorithms can get a client’s listings blacklisted by the engine.

Of the factors that determine whether outsourced search marketing efforts will soar or tank, most experts say the provider’s track record is the most telling. Some providers have been involved with search marketing in its various iterations since the beginning and some were born yesterday, but with new technologies and services emerging so rapidly, longevity can’t be considered the sole predictor of success. The acid test is in the experience of the provider’s other clients. “Talk to people for whom the provider has done work. That will tell you everything about a company,” advises Berk.

If a provider is willing to tell a retailer the details and results of projects done for other clients but won’t put the retailer in direct contact with those clients, let the buyer beware, experts say. Marckini takes that cautionary note a step further, noting that most companies, anticipating such questions from prospective clients, are prepared to pull one to three names of existing clients out of their back pocket. “Ask for four or five references beyond that, and then ask for references from other clients who have worked with the account team they have put together for you,” he says. “Often, there’s a big difference between the team that pitches an account and the team that does the work. You don’t want someone who has been doing search engine marketing for a year to manage your campaigns. Every company has a success story, but make sure the team that is working on your business has a success story.”

mary@verticalwebmedia.com