SPONSORED SUPPLEMENT: Search Engine Marketing

Both search engine marketing tactics are right for the right circumstances.

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There`s no doubt that search engine marketing is the most successful form of marketing for online retailers. Nearly half of retailers ranked search engine marketing as somewhat or much better than other forms of marketing for their web sites in a recent survey by Internet Retailer. That proportion is surprisingly high given that 75% of users of search engine marketing have been at it for four years or less.

But as search engine marketing has become an important part of the marketing mix, retail marketing managers have needed to change their approach to managing search marketing, experts say. They can no longer approach search marketing on an ad hoc, stand-alone basis. "It`s time to start planning for search campaigns the way you do for any other marketing medium," says Sara Holoubek, chief strategy officer of search engine marketing company icrossing Inc. "You need to create a budget line item for search marketing, then look at your marketing calendar and make sure that any time you run a commercial, a print campaign or any other online campaign your search marketing fits in with it."

Two flavors

Search marketing comes in two basic flavors. So-called natural language or organic search consists of optimizing pages to make sure the search engines--Yahoo, Google and a gaggle of smaller engines--can find the site as they crawl the web. Paid search is the practice of bidding on the cost of clicks per keyword, with the higher the bid, the higher the site showing up in search results. A variation on paid search is paid inclusion. With paid inclusion, a retailer pays a search engine to crawl a site and guarantee that the content will be indexed by the engine for possible inclusion in search results, although placement within the results is not guaranteed.

Three years ago, the market appeared ready to shift to paid search. Retailers liked the fact that paying for clicks guaranteed that their sites would show up high in results faster than they would appear if a retailer optimized a site then waited for the engines to crawl it. But consumers demonstrated the inability of even the smartest marketers to predict consumer behavior--they showed a decided preference for the supposed objectivity of natural language search. So in the past year, there has been renewed interest by retailers in natural language search.

Getting the message

But experts don`t expect the pendulum to swing all the way back to natural language search. Across all search engines, natural and paid results get about equal clicks, depending on who`s doing the research. Some say it`s 50/50 and others put it at 60/40 favoring natural. Results definitely vary by engine, however, with consumers at Google, for instance, showing a 3-to-1 preference for natural results while AOL users are split 50/50. "Retailers need to address both sides of search results," says Fredrick Marckini, president of search engine marketing company iProspect.com Inc. "For a long time, they were myopically focused on paid search, which was a mistake. Now they are becoming myopically focused on organic search, which is also a mistake."

Retailers are starting to get that message. The Internet Retailer survey reported that 57% of online retailers prefer both paid and natural language search, with 23% preferring paid and 20% natural language. "Marketers have to use both," says Lisa Wehr, president of search engine marketing company Oneupweb. "It`s worth it to be No. 1 in natural language results and No. 1 in paid."

The migration

In fact, customers of search marketing company Zunch Communications Inc. experience dramatically improved click-throughs when they show up in both paid and natural results, says Tony Wright, chief interactive marketing officer. "Click rates triple when they`re in both," he says. "One reinforces the brand in the other."

If marketers need to be in both, then the challenge becomes determining when to use each. For starters, Wright says consumers will click on different results depending on their frame of mind. "Information gatherers click on natural, but shoppers who are ready to buy click on paid," he says.

In fact, a survey from Yahoo! Search Marketing, a division of Yahoo! Inc. and formerly Overture Services Inc., reports that customers use generic and specific terms at different stages in their shopping expeditions. 21% of purchasers in a survey conducted for Yahoo! by comScore Networks Inc. reported that they started their search with generic terms, such as "digital camera" or "women`s apparel," and ended it with a specific brand name. "It`s very important to understand the interplay of keywords," says Diane Rinaldo, director of the retail category for Yahoo! Search Marketing. "There`s a lot of activity with different kinds of keywords. Generic keywords may not have immediate ROI or a high conversion rate, but they are a very important part of the buying cycle."

Retailers also need to keep in mind not just the consumers` intentions but the retailer`s own needs in terms of seasonality or moving inventory. Since showing up in natural language search results takes an average of 2.5 months, retailers will want to focus on paid for moving merchandise or promoting sales depending on the time of year, experts say. "Retailers trying to move closeouts, with sale merchandise or trying to sell during a certain buying season like Mothers Day will want to use paid in those instances," Holoubek says.

Events that precipitate the use of paid search are not always predictable, however, making the ability to jump into paid search quickly very important. For instance, when the Red Sox won the World Series last year--certainly an unpredictable event given that it had not happened for 86 years--iProspect.com`s account manager for client Lids.com, retailer of baseball caps, went online and doubled Lids.com`s bids on Boston Red Sox caps and other merchandise, resulting in a jump in the sale of such products. "Paid search is phenomenally successful when responding to events," Marckini says. "When events happen that cause a spike in traffic, it`s not just interest that increases, it`s conversion rates as well. If you`re not prepared and don`t understand the seasonal ebbs and flows that create increased demand, you won`t be prepared to increase your bids and capture that opportunity."

Dealing with the lag time

IProspect offers its iSEBA agent, an automated bid management service, to help retailers take advantage of seasonality. It learns from experience and adjusts keyword bids accordingly. "Once you`ve been through sales for the different holidays, the next time that holiday comes around, iSEBA anticipates it and raises bids automatically," Marckini says. "The longer you work with it, the more retained knowledge it has and the more effective it becomes."

In addition, retailers should use natural language search for brand building, practitioners say. "More and more smart marketers are using both in a persistent manner," Holoubek says. "Paid search allows them to conduct multiple campaigns at the same time while natural search is good for longer-term objectives related to their site and their brand. It`s like TV--you`ll do both cable and network. You won`t say yes to one and no to the other."

One area of brand building, however, where a retailer might want to consider paid search is in launching a new site. That applies equally to new retailers as to existing retailers who are creating sub-brands or micro-sites. It could easily take half a year to come to the attention of Google and other search engines who create rankings based on page content and links to sites. "With natural search, there`s a lag time before you start getting results," Wright says. "Paid would make sense there." He adds: "The right mix is different for everybody."

Knowing when to use paid search and when to use natural language search, though, creates big challenges in understanding results. And so some search marketing companies are offering more than just guidance on which keywords to buy or how to optimize pages and are now incorporating analytics software into their programs. "The challenge that most retailers have is figuring out what`s happening and what they need to do to make it better," Wehr says.

Proving it works

To that end, Oneupweb has developed a product it calls ROI Trax, which provides retailers information in an easy-to-use interface that helps them decide what`s working where. The next step for ROI Trax, Wehr says, is to include deductive reasoning capabilities. "It will understand what`s happening and help retailers deduce what the next step should be," she says. "For instance, if a particular keyword is performing better at a certain time of day with a certain landing page, it will direct more resources to creating that result."

Some search marketing companies are partnering with web analytics companies to provide insight into the success of search marketing. But the benefit that Wehr sees to one company providing both search marketing and analytics is that it creates seamless interaction between the two. "We are giving the marketing teams and our company the same tool set and encouraging interaction through that tool set," Wehr says. "If a company is using a third-party analytics product, they`re seeing only a small piece of the puzzle."

The ROI Trax service is an integral part of Oneupweb`s offering and the company won`t offer search marketing services without the ROI Trax component. "I want to be able to demonstrate to our clients that what we`re doing is working," Wehr says.

Similarly, icrossing offers a service it calls Search Intelligence that analyzes searches and applies behavioral and linguistic analysis to help retailers understand which terms and approaches will be the most successful. For instance, it examines search terms that consumers have input at search engines as well as at retailers` own sites, tracks how consumers responded to those terms and helps retailers determine which words to focus on. It developed and tested Search Intelligence last year and introduced it to the market in January. "There`s so much intelligence just out there and you don`t even have to ask for it; it`s there and it offers incredible insights," Holoubek says. "I always say that search is the world`s largest untapped focus group."

More sophistication

The market for understanding which terms work and how will get much more sophisticated as retailers develop a greater understanding of the role that search terms play in influencing behavior at their sites, says Rinaldo of Yahoo! Search Marketing. Web site analytics providers will play a particularly important part in helping retailers come to that understanding, she says. "You`re not going to convert every visitor," she says, "so you`ll have to learn how to engage each customer better." Retailers can engage customers better by collecting their e-mail addresses, for instance, or getting them to go deeper into a site, Rinaldo says. "Then you`ll find that there`s other behavior that`s of value and you may find there are keywords that are of more value than you thought," she says. "It`s all about understanding customer behavior more and not just how to message to them but also how to use search to engage more users at your site."

Much of that understanding will come from retailers` greater use of web site analytics, Rinaldo says. "We see a lot of excitement and growth coming in the analytics area," she says. "Retailers will get a better understanding of the customers who come to their sites through search." In addition, Yahoo! Search Marketing will continue to commission research to provide retailers with insights into how consumers use search and retail sites.

Understanding better how consumers use search also can result in other changes to retailers` practices, such as lengthening a cookie`s duration. Retailers place cookies on the computers of consumers who search on a certain term, then click to a retailer`s web site. Cookies usually have a limited life; they expire and then are deleted from the consumer`s machine. A retailer who understands the search-buying cycle will know better how to mange cookie expiration dates. Rinaldo reports that comScore`s survey reported that 38% of purchases took place more than four weeks after the initial search. "If your cookie duration is 30 days, but the purchase takes place in 32 days, you won`t see that that customer came to you from Yahoo! Search results," she says.

Furthermore, Yahoo! is offering services to make search marketing easier. For instance, its Search Optimized product allows retailers to establish goals for search programs, then optimize keyword management to meet those goals. Once the program proves it can meet the goals, retailers can turn on the automated bid feature to ensure that the retailer can continue to take advantage of keyword opportunities. "Simplicity is important," Rinaldo says. "This is a complex business, but our goal is to make it easier and more effective."

The importance of simplicity

Search companies are offering additional services and tactics beyond technology. Zunch, for instance, offers a full line of public relations services. While that may seem to be far afield from search marketing, it`s actually integral to showing up high in search results. One of the major ways in which Google determines search result rankings is by examining links to a site. The more links, Google reasons, the more important the site. Thus Zunch offers clients press releases that are search engine optimized and works with journalists to generate stories that search engines will find online. "Link structure is very important to Google," Wright says.

Zunch`s offering grows in part out of Wright`s background, which includes a stint running the interactive pr division of Weber Shandwick, one of the largest pr agencies in the country. He joined Zunch a year ago. "50% of what ranks you at Google is who links to you," he says. "If you deal only with what`s on the page, you`re missing half the battle. Interactive pr is a pull method of marketing; it creates things that people will want to link to."

Another area where Zunch is gearing up is in international. About the middle of last year, it began hiring staff with foreign language skills and expertise in international search engines. Today it has experts in Chinese, German and Hispanic markets and languages. "Next year as China opens up, there will be a huge untapped market there," Wright says. "And right now the Hispanic market is huge." He cites the case of a law firm client that optimized its web site for Spanish-language search and the next day experienced an increase in the number of Spanish-speaking consumers seeking legal services.

The importance of ROI

At the same time, local search is becoming more important as well. Marckini notes a study that shows that while a large number of consumers conduct online research into consumer electronics, only 8% of purchases take place online. One client who measured search marketing spending against both online and offline sales found an ROI "that went through the roof," Marckini says. "A best practice is for retailers with an offline component to interview in-store buyers to determine what percent researched their purchase online."

The importance of combining online results with offline results also underscores another major development in search engine marketing: Combining online campaigns with offline campaigns. "Marketers should be looking at cross-media efforts," Holoubek says. "Make sure you`re visible in search engines for whatever you`re doing in other media." That may sound obvious, experts note, but many companies are organized into separate online and offline marketing teams, with each guarding its turf and believing that marketing spend in one area diminishes the marketing spend in another.

As more marketers discover the benefits of search engine marketing, it`s inevitable that others will find ways to take advantage of the medium`s popularity. In fact, search engine click fraud is becoming a problem. Click fraud occurs when a user clicks on links in paid search results with no interest in a product or intention to buy. Each link generates a charge to the marketer. Fraudulent click-throughs are the result of either a competitor trying to deplete a marketer`s search engine budget for the month, thus forcing the victim out of the market, or an unscrupulous affiliate trying to generate clicks to fill its own coffers.

Providing the right information

So, of course, vendors are devising ways to combat such fraud. Oneupweb has just released its click fraud detection tool. It monitors repeated clicks from an identifiable host and measures the length of time the clicker spends on a page. The shorter the time, the greater the likelihood of fraud. While the search engines acknowledge the existence of click fraud--Google even going so far as to mention it in its IPO as a source of risk--the retailer is responsible for identifying that it is happening. "The onus is on the retailer to provide exactly the information that Google and Overture need to investigate click fraud," Wehr says.

No one knows for sure the extent of click fraud, but Wehr estimates it at 15-20%. At that rate, a marketer who spends $10,000 on search engine activity will be wasting $1,500-$2,000 a month. As in other areas of search engine marketing, automation is key to combating click fraud. "If you have 5,000 keywords and 1,000 pieces of creative to support them, there`s no human way to monitor fraud," Wehr says.

But it`s important to track and document fraud, because Google and Yahoo/Overture will give refunds to marketers who can prove fraud. "They`ve got to pay attention this because if retailers` conversion rates drop, Google and Overture will lose advertisers," Wehr says.

As search engine marketing becomes ever more sophisticated, experts believe that more marketers will turn to third-party marketing companies. That potential, however, remains largely untapped, meaning that search companies have huge opportunity ahead of them. The Internet Retailer search engine marketing survey shows that only a third of the market uses outside services, and that 69% rely totally on in-house resources to manage search engine marketing. 17% rely totally on marketing companies and 15% use both. "You can`t get by doing everything you need to do manually," Marckini says.

Self-funding

That message is starting to seep into the market, he says. "Even companies that manage $100,000 a month in pay-per-click spending and have been at this for two or three years are seeking out bidding agents because their teams have hit a wall," Marckini says. "Usually the most sophisticated users are the last to seek a vendor. But even these players are out in the market looking for someone to manage that spend."