But losses mount for the home furnishings e-retailer that went public in October.
There’s no doubt that consumers are turning to web search more than ever for the products they want to buy-or research-online. In just the past six months, for instance, consumers have conducted more than 1 billion retail-related searches at Google.com. In the past year, paid-search provider Overture Services Inc. has provided results on more than 2 billion commercial searches.
And so the big question for retailers today is how best to harness the power of all that searching.
It’s not as easy as it was when search was new and few retailers understood the importance of search. Back then, retailers could focus on their brand names and a few keywords. But as more retailers entered the competition for keywords and as search engines gained a better understanding of how to generate revenue, the business took on a degree of complexity that today is beyond management by mere humans.
Many thousands of words
For starters, some retailers now manage lists of keywords that number into the tens of thousands. For another, the costs of buying keywords at pay-per-click search engines change frequently and that creates a constant management challenge to keep at the top of the search results list. And as consumer tastes change, the relative importance of keywords goes up and down-sometimes faster than the eye can follow. “It’s a nightmare to manage all that,” says Dave Carlson, CEO of search engine marketing company Go Toast LLC, a division of eonBusiness Corp., an Internet development company.
And managing keywords is only the start. There’s a whole back end involved in making sure search results are doing what the retailer wants them to do-create sales. That involves tracking who’s coming to the site from search pages, which page they land on, what they’re viewing, and not only what they’re buying but whether they’re buying the right mix of profitable products. After retailers have sorted all that, they need to calculate the cost of acquiring customers and determine if the price they paid for keywords was worth it. Then the process starts all over again. “You really need a tool to maximize your efforts,” says Jake Baillie, vice president of search engine marketing at Priva, the online marketing arm of Chicago-based ad agency Gennera, Knab & Co.
The industry is full of stories of retailers who dug through piles of search data for campaigns they thought were successful only to find their investments weren’t paying off. “Search engine optimization is not something you can touch and feel,” says Lisa Wehr, president of search engine optimization provider Oneupweb. “You just have to wait and see what happens.” And then apply analysis to the results. “If for starters you know your average sale, profit margin and conversion rates, you can plug in the formulas and see how much money you make on each search engine keyword,” Wehr says.
The market is only going to grow, making retailers’ challenge even greater, analysts say. Search is the third largest Internet market after e-commerce and advertising, says a new report from U.S. Bancorp Piper Jaffray Equity Research. Search engine revenue reached $1.8 billion last year and will grow 35% a year through 2007, when it will reach nearly $7 billion, according to Piper Jaffray’s “The Golden Search” report. “We are still at the very early phases of the improved search technology,” the report says. And that revenue measures only the money spent directly on search activities themselves; it does not count the revenue to companies that make a business of increasing retailers’ visibility online.
Search engine marketing companies’ own experience bears out Piper Jaffray’s conclusions. “We’ve seen a dramatic shift in the marketplace,” says Tim Armstrong, vice president of advertising sales at search engine Google. “Three or four years ago, retailers who didn’t have search strategies were in the majority. Today, they are far in the minority. The vast majority have search programs running. They have gotten much more knowledgeable about how customers look for information over the Internet.”
New way of marketing
It’s also not too strong to say that online search has changed the way retailers market and advertise, observers say. “Search has changed the dynamics of marketing-online and offline,” says Paul Schulz, senior vice president of marketing and general manager of the online business of Overture. “Traditional marketing has been based on demographics, psychographics and location. We’ve turned that idea on its head. We don’t give demographic or psychographic information; we give retailers people who are in the market for their products. They’re raising their hands and they’re very specific about what they’re looking for. People are in the mood to take action.”
Further, keywords have become crucial as the Internet disrupts other ways of doing business. “The Internet does not create brand loyalty, in fact, it does just the opposite,” says Ralph Koehrer, CEO of search engine marketing company Inceptor Inc. “So you have to make sure you are creating relationships somehow.”
The search market has evolved into two markets: On the one hand are products offered by search engines such as Yahoo and Google that employ so-called algorithmic search, based on a search engine’s analysis of the content of web pages and presented in the order that the engine believes is most relevant. On the other hand are companies such as Overture Services Inc. as well as new offerings from Google which offer paid search, based on how much a marketer is willing to pay-usually on a per-click basis-to have a site land high in the search results.
Whatever the approach, keywords are the heart of search engine marketing. They are what consumers use to find web sites that have the products they want.