Identifying consumers at the moment they are most receptive to a product is one of the ways in which the Internet has changed shopping patterns. Unlike in a bricks-and-mortar store where a sales associate often must employ numerous skills to determine first if a customer is actually looking for something or just browsing then exactly what the customer wants, the Internet can tell a retailer precisely which product the customer is considering.
That skill is the result not of any kind of super secret divination that the
Internet is capable of, but rather of the fact that many consumers looking for
a product on the web will come to a search engine first to see who’s offering
the product the consumer wants to buy.
In fact, while active Internet users are up 6.5% this year over last, according
to Nielsen/NetRatings, traffic at search sites is up 11% over the past six months.
Jupiter Research reports that 42% of all Internet users start their quests for
particular products at search sites.
Nowhere
has that phenomenon been more apparent than at Overture Services Inc., which
provides pay-for-performance search results for such major search portals as
Yahoo.com, Lycos.com, AltaVista.com and MSN.com as well as Overture.com. In
the first quarter of this year, 587 million consumers clicked from Overture
search results to a web site that had paid for placement within Overture’s results.
And that number has grown steadily from the first quarter of 2001 (see box,
page 52) to total 1.4 billion last year.
Following the consumers
As consumers have flocked to search engines to find products, retailers have followed. Most retailers today register keywords with search engines, hoping to pop up high in the search results. They do so in one of two ways: Either they optimize their page content to show up in the results of such search engines as Yahoo.com, which displays search results based on their reviews of pages, or they pay search engines such as Overture to land high in the results.
As evidenced by the 1.4 billion leads that Overture provided to its pay-for-performance clients last year, consumers don’t seem to care if their search results are paid for by marketers or not. Thus companies like Overture have built up a new part of the industry in a relatively short time. Four-year-old Overture’s pay-for-performance customers numbered 60,000 at the end of the first quarter, up 39% from 43,000 a year earlier. “For retailers in particular, finding consumers right when they are ready to buy and putting a message before them is the perfect model,” says David Karnstedt, senior vice president and general manager of Overture’s Direct Business Division.
In a pay-for-performance search model, retailers choose the words they think consumers are most likely to enter in the search box as they start shopping. Retailers then bid for placement in the search results. Since most shoppers click on the top few results, those cost more. The search company that provides the results receives the bid amount for every customer who clicks on the link.
Among the services that pay-for-performance search engines offer is automation of bids on keywords. Thus retailers can choose keywords that they believe are most important to them and automatically outbid anyone else who wants those words by a penny. Retailers set parameters as to how high they ultimately will bid and for how long they want the word. The majority of Overture’s customers serve themselves in managing their keywords. They can go online, choose their keywords and set their autobids.
In the optimization model, retailers configure their pages so that when search engines scan the pages, they will pick up on the important words. Among the criteria that search engines have used to rank results is the frequency with which the word appears on a site. Not surprisingly, it didn’t take long for clever marketers to repeat the word hundreds or thousands of times in the background coding of a page, thus shooting their sites to the top of the list. Search engines responded by devising complex formulas for ignoring such sites in results.
Zeroing in on terms
The key to landing high in results is identifying keyword terms. And while that may seem like an easy task—after all, most retailers know what they sell—it’s not as easy in execution as it sounds. Retailers find it hard sometimes to predict how a customer will shop for a product. A survey last year identified 1.54 million unique terms that consumers searched on in one month at portal Excite.com.
On top of that, the market changes, both in what’s in season and what’s popular, Thus a retailer who is promoting certain products for back-to-school in July and August will have one set of keywords and another set to promote Halloween items in October. And one who was pushing Ricky Martin CDs a couple years ago is probably pushing Jennifer Lopez CDs today. “The retail market is dynamic,” Karnstedt says. “It changes often due to seasonality, price changes, special promotions.”
Others have a simpler time of it, since they sell specific products that are in season all year round. For instance, a hardware chain would identify tools, hammers or wrenches as keywords it would want to lock in. Retailers in the Overture program manage anywhere from five to 15,000 words, Karnstedt says. Overture collects a payment every time a consumer clicks through on any of 4.1 million terms. While some keywords at Overture.com cost into the dollars, the average cost is 24 cents per click.
Most retailers engage in a combination of pay-for-performance and page optimization when devising their search strategies. Under the pay-for-performance model, retailers get instant results, control over which search sites they appear on, and an ROI that’s easy to measure. The downside to pay-for-performance is that a retailer pays every time a customer clicks through. With page optimization, retailers get exposure where they can’t pay for results and it’s less expensive so it’s within the reach of small retailers. The negative story, though, is that retailers sometimes have a hard time keeping up with the changing criteria of the search engines, ROI is difficult to measure and it often takes time to show up in search results.
But just as retailers are adopting combined strategies, so are the search engines. Yahoo, for instance, is a customer of Overture, so someone performing a search at Yahoo on products for which Overture receives a click-through fee will see the Overture results bracketing the Yahoo results at the top and the bottom of the page. In fact, 95% of the 5 billion search queries that Overture receives in a month come from sites other than Overture.com. “We position ourselves as a distributor of search results,” Karmstedt says.
Identifying responsibility
The entire area of managing keywords is so new that there is no accepted industry practice as to who has that responsibility. Among the titles to which Overture sends activity reports are direct marketing managers, electronic commerce managers and interactive marketing managers. “It’s rare,” Karnstedt says, “for anyone to have the word ‘advertising’ in their title.”
Overture reports such information as traffic counts, clicks by terms and bids for terms. It’s up to the retailer to make the data fit the retailer’s metrics for measuring success. Among the factors that a retailer would measure would be the margin on the products it sold through clicks vs. other methods, revenue per customer, revenue per new customer and cost of acquiring customers. Whoever receives the reports and manages the process, though, must be familiar with what has worked in other media as well as in search. “The more they can tie together what they’ve been successful with in other media, the more successful they’ll be with this,” Karnstedt says.
With all its focus on marketers who are selecting keywords and paying for click-throughs and on the major sites such as Yahoo.com that distribute the results, Overture also recognizes that the consumer is its customer as well. “One way that we got to be a marquee distributor of search results is the quality of our results,” Karnstedt says. “And consumers recognize that.”
