SPONSORED SUPPLEMENT: Search Engine Marketing

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For many online retailers, search engine marketing has become the marketing tool of choice. From 2000 to 2003 use of paid search engine marketing grew fivefold from 5% of the online ad market to 26%, Jupiter Research reports. 35% of marketers expect to increase their search engine marketing budgets this year, according to Forrester Research.

And it’s no wonder that online marketers are moving their budgets to search engine marketing. “Almost everybody using the web uses search engines,” says Todd Daum, vice president of search engine marketing company Overture Services Inc., which was acquired by the granddaddy of search engines Yahoo Inc. last year. In fact, comScore Networks Inc. reports that 107 million online consumers use a search engine at least once a month. And another study reports that 85% of users first discover web sites through search engines. “Search engines have become part of how people shop,” Daum says.

The new reality

As a result of the importance that search engine marketing has assumed, retailers are demanding more from search engines and developers are providing more. “The biggest question retailers face is how to convert more of the traffic they’re already paying for to sales,” says Fredrick Marckini, CEO of search engine marketing company iProspect.com Inc. “When you’ve got a conversion rate of 2%, you’re converting only those who arrive ready and looking to buy.”

When the Internet was young and retailers were just discovering the power of search engines in driving traffic, few would have thought that they would pay directly for that traffic. Their costs were in indirect expenses of optimizing pages to land high in search results. Today, though, retailers are incurring costs in paying for inclusion in indexes, for placements in results and for each customer who clicks to the retailer’s web site from the search results. When direct costs come into the equation, marketers are prone to measure the direct benefits.

And that’s where search engine marketing companies have been focusing their efforts lately. For instance, online marketing company Advertising.com Inc. recently developed an automated bid management platform for search engine marketing terms. Just before the holiday season 2003, it took on the management of 1,300 terms for Hallmark Flowers. The platform analyzes results of each term on the basis of sales, bid cost, season, competitors’ bids and other factors, then determines the optimum price for bids. The result at Hallmark Flowers: three times the sales from search engine marketing efforts as anticipated.

“Advertising.com’s automated bidding platform ensures our most profitable search listings--from hour to hour, day to day, season to season,” says Lori Graham, Internet marketing manager of Hallmark Flowers. “Plus, their pay-for-performance pricing model enables us to pay only for delivered sales.”

While paid-search marketing has attained a high profile lately, some search engine marketing companies are encouraging retailers not to ignore the value of making sure their sites appear high up in natural language search listings. “Visitors who come in through natural language search convert at a higher rate than those who come in from a paid keyword,” says Robyn Walton, chief visibility officer of search engine site optimization company Visibility Factor Inc. “Searchers are typing in exactly what your content says.” Visibility Factor applies a patent-pending technology that allows search engines to more easily include data from database-driven web sites, which account for most online retailing sites, in search results. “We have a good chunk of clients who no longer do keyword buys,” Walton says.

More traditional advertising

Converting searchers to buyers has become the promised land to marketers and the companies that serve them. Search engine marketing companies have taken a variety of approaches. Among Overture’s offerings to reach that goal is its Content Match program by which online users searching on terms at sites other than search engines or portals will receive marketing messages relevant to the terms they are searching on. “Search as we’ve known it is a pull strategy; Content Match pushes the message out,” Daum says. “It puts the search listing in a context.”

For instance, a baseball fan searching a local newspaper site for stories or information about the Chicago White Sox might get a message from a sports apparel retailer with a special deal on White Sox jerseys or caps. While there is no more guarantee that a customer will click on the message than that a customer will click on any search engine results, the marketer pays only when there is a click-through. Further, Daum argues, the premise underlying the Content Match offering is closer to traditional, proven marketing tactics than is the premise that underlies search engine marketing at typical search sites. “Content Match is a more traditional type of advertising in that you are targeting your audience based on perceived behavior,” he says. In that way, it’s part of the continuum of advertising that extends from advertising in magazines or on TV shows whose demographics match an advertiser’s targeted audience. “You’re making an inference based on what they are reading,” he says.

Not geographically limited

Focusing search results can also take the form of walking an audience through the pages they need to make a buying decision. Thus iProspect.com has started offering web site development services to help retailers craft sites that align with their target markets and with the results from search engine marketing. Marketed under the concept of conversion rate enhancement, the services look at the big picture of search engine marketing. “Conversion enhancement is a rigorous process that requires the participation of higher level people,” Marckini says. “This cannot be delegated to the marketing manager or the IT manager. It requires intimate knowledge of the customer and the audience.”

The rationale behind conversion enhancement is that one size of search engine results does not fit all customers. “The biggest part of any retailer’s audience needs to go through a longer buying cycle,” Marckini says. “Converting those people is when search engine marketing pays off.”

The conversion enhancement program entails a re-structuring and re-architecting of a web site with a single focus on increasing the conversion rate, says Larry Kerstein, iProspect’s director of web consulting services. Using a combination of understanding the personality types and determining the demographics and psychographics of the targeted audience, iProspect helps retailers design sites that it says will maximize conversions. Marckini says the service can increase conversion rates from the usual 2% to 22%.

“People need different evidence at different stages of their interest level,” he says. “But retailers typically build web pages with a buy-it-now mentality.”

One example of how a marketer might need to back away from the buy-it-now approach comes from a provider of a service that had geographic locations that delivered the service but who could serve customers from anywhere. The provider listed locations online, but prospective customers clicked away when they found there was not a location near them. Removing the locations from the web site prompted customers to call about locations and gave reps the opportunity to explain their services. The company ended up closing more sales.

The importance of maximizing conversions cannot be understated, Marckini says. A low conversion rate means fewer sales, less revenue and, of course, lower profits. “That reduces your ability to be competitive in the search engine market,” he says.

As the researchers’ numbers show, being competitive in the search engine market is key to succeeding online. “Search has the most impact because that’s where people are spending most of their money,” Marckini says. How vicious will that competition become? “Most people have brought a knife to a gunfight,” Marckini says. “Marketers are waging war in the search engine marketing arena.”

One of the keys to ensuring success is to measure the results of search engine marketing campaigns. While many marketers have become adept at measuring results, many still need help. To that end, Overture recently released its Marketing Console, which measures results of any marketing program. “It helps marketers understand the performance of their overall marketing campaign and the pieces of the campaigns, including pay-for-performance, e-mail and banner ads,” Daum says.

Smarter about lifecycles

Retailers feed marketing and sales data into the database and the console computes conversion rates and ROI of marketing expenditures. While it measures results of all marketing campaigns, Overture expects it will show the particular efficacy of search engine marketing. And while Overture will charge for use of the Marketing Console, it expects only to break even on the technology itself, with the benefit coming in more spending on Overture’s search engine marketing. “Overture outperforms the market in key metrics,” Daum says. “As marketers understand that, we are hopeful that they will shift money to our business.”

The Marketing Console builds on a free product, the Conversion Counter, that helps retailers understand how search engine marketing campaigns are performing. “The Conversion Counter gets marketers’ feet wet; it helps them understand basic but important keyword performance data,” Daum says.

And from there, Daum says, he expects marketers to learn more about the keywords themselves. “One of the things we’ve seen in the market has been advertisers getting smarter and smarter about keyword life cycles,” he says. For instance, he notes that a marketer just getting into a particular product line will buy broad keywords so that shoppers will associate the retailer with the product. Once the retailer is established as a source for the particular product, then the retailer can buy more specific keywords. “Once you’ve got the awareness that you carry the product, you’ll want to put more specific listings out there,” he says.

Avoid restrictive standards

Getting specific with keywords creates its own challenge, though. A by now well known story recounts how a customer of iProspect bought the term “rubbing compound” in search engines, then wondered why it didn’t generate traffic. Analysis of the company’s customers showed they were searching for a product that would remove swirl marks from their automobiles’ finish and so were searching on the problem--”swirl marks”--and not on the product.

Retailers also must make sure their company doesn’t operate under a brand standard that inhibits search engine results. For instance, Marckini recounts how one computer seller refused to use the word “laptop” in describing a portable computer. The company’s rationale was that someone once got burned by an overheated laptop battery and the company didn’t want to take the risk that promoting a computer to hold on the lap would leave it open to a lawsuit. “The problem was that laptop is the most often used query when people are looking for a portable computer,” Marckini says.

Further, he notes, avoid jargon. “Industry vernacular may not have penetrated the rest of the world,” Marckini says.

Another key to success is making sure that the bids for keywords are right. Bidding the right amount has a couple of benefits, besides the obvious one of making sure a retailer is not overpaying relative to what others will pay. For instance, a marketer may want to control how high its site appears in search results as a way to manage staffing or hit sales goals, says Advertising .com.

Advertising.com, which announced its intention of going public in April, in January released its AdBids automated pricing system that Hallmark Flowers used. The AdBid system is a self-serve interface that allows advertisers to automatically set and adjust pricing for web, search, e-mail and affiliate campaigns. By reducing the time and analytics necessary to manage campaign spending, the AdBid system enables advertisers to evaluate and control their client acquisition costs on a daily basis.

“The ability to increase or decrease campaign rates across all forms of interactive media, without the often-timely process of price negotiation and contract changes, is truly revolutionary,” Scott Ferber, chief executive officer of Advertising.com said at the time the product was released. “Typical price changes can take a week or more of paperwork, campaign evaluation, etc. AdBid cuts this process down to literally 60 seconds. We put the power of price back into the advertiser’s hands. Only interactive media can provide this level of control, and only Advertising.com can make it work.”

Powered by Advertising.com’s AdLearn yield management technology, the AdBid system enables retailers to change campaign rates on a daily basis to meet varying budget and volume goals. As rates increase or decrease, so can the advertiser’s impression, click or acquisition volume.

Managing staffing

“Call-center staffing, weekly goals, daily numbers--the volume of leads I need can vary from day to day. Advertising.com’s AdBid system allows me to control my incoming leads and marketing costs with the click of a button,” says Bob Thorgesen, director of Internet marketing for online insurance seller Eterm. “No contract changes, no complicated campaign analysis. I simply enter my new rate and hit Submit.”

Further, marketers may want to control their keyword bids as conversion rates naturally increase. For instance, Advertising.com conducted a study during the 2003 holiday shopping season that showed click-throughs went up as Christmas approached. Advertising.com studied paid-search results for three advertisers, starting 10 weeks out. Clicks and conversions increased, some dramatically, throughout the period, with one advertiser’s clicks going up 59% while its conversions went up 650%.

“The data serves as evidence of search engine marketing’s effectiveness in driving online sales, particularly during the holiday shopping season,” Advertising.com concluded. “As consumers continue to employ the Internet to meet their shopping needs, search engine marketing enables advertisers to connect their products and services with this highly qualified audience.”

Visibility Factor argues, however, that even before keyword selection begins, retailers should make sure their sites are visible to search engines. Achieving visibility in natural language search is not as easy as it sounds. The problem stems from the dynamic nature of most retail web sites. Because they are dealing with huge amounts of products and information, retailers cannot tolerate static HTML sites, which are the easiest for search engines to crawl, because the HTML approach requires constant manual manipulation of content. Rather, they employ databases to manage the data and deliver to customers exactly the pages customers want to see.

But while the architecture makes sense, it trips up search engines, who employ generic rules in crawling sites. And those rules cause spiders to become confused or caught in endless loops when they get to sites that generate pages on the fly. Crawlers that get stuck at database-driven web sites consume search engine resources, so search engines try to avoid such sites, Walton says. “There are warning signs that certain web sites will be resource suckers and so search engines stay away from those sites,” she says.

Cracking the database

Among the indicators that a site is database-driven are URLs that include session i.d.s and other unusual factors, such as question marks and strings of equal signs. Visibility Factor applies its technology to clients’ sites to clean up those URLs and to present to the search engines sites that they will want to crawl.

Visibility Factor’s technical team analyzes clients’ sites to determine the company’s objectives for the web site, then crawls the site and pre-digests all the information to establish a cached version of the web pages that are then available to search engines and customers. “If you’re driving traffic to your site from keyword buys or if you’ve done offline marketing programs to drive traffic to your site, customers will still get to your site,” Walton says. “The only difference is that we crack open your database so you can be indexed at search engines.”

Walton, noting that everything Visibility Factor does at a web site complies with search engine procedures, says that such opening of a web site to search engines is “the critical first step” before engaging in other activities to achieve visibility. “This helps you get all the search engine traffic you’re entitled to,” she says. She says Visibility Factor’s approach is complementary to other search engine marketing initiatives, such as keyword buys. Visibility Factor charges a $1,000 set-up fee for a 60-day evaluation and test. Clients pay a minimum of $500 a month for ongoing services. Visibility Factor also will work on a pay-for performance basis of 10% of sales.

Walton notes that the Visibility Factor approach does not require any changes to the web site or its underlying database--that once the relationship is established, the review and caching run automatically. “What makes us different is that we are a technology solution,” she says.