July 30, 2003, 12:00 AM

Search Engine Marketing

Search engine marketing is hot—and lots of companies are providing services to help retailers maximize their search exposure.

If online retailers need any further proof that web search is moving to the front of the line in terms of its importance to marketing, a recent report from U.S. Bancorp Piper Jaffray should help settle the question. The research firm projects that the online search market will enjoy a compound annual growth rate of more than 30% over the next four years and represent a $7 billion industry by 2007, making it the third-largest online market after e-commerce itself and online advertising.

Those numbers should come as no surprise to anyone who’s observed a recent flurry of expansion in the industry as established providers and new players alike angle for a bigger piece of the pie. Overture Services Inc., the first big mover in the paid search arena, still dominates with an estimated $688 million in search revenue last year, but Google, which made its early reputation on algorithmic search, is in hot pursuit with its addition over the past two years of paid AdWords and paid sponsorships, which now appear, clearly identified, along with natural search results on a Google page.

Meanwhile, Overture has expanded beyond the boundaries of paid search to broaden its portfolio into other offerings. Earlier this year, Overture acquired search engine AltaVista and the Internet search business of Fast Search & Transfer, which encompasses Fast’s algorithmic web search and PartnerSite paid inclusion services, as well as multi-language linguistics capacities at the Oslo, Norway-based firm that Overture will use to help it expand internationally. The acquisitions, says Overture, give the company a full suite of paid placement, paid inclusion and algorithmic search products and services for syndication to portals, Internet service providers and other search destination sites.

Shortly after those acquisitions went down, Overture itself was acquired by Yahoo Inc., in a deal valued at $1.6 billion. “It’s a testament to the long-term staying power of search engine marketing,” says Frederick Marckini, CEO of search engine marketing firm iProspect.com Inc. “Investments this big don’t happen unless companies know the market is going to be there a long time.”

1 in 500 million

The combination also is expected to produce revenues of more than $1 billion this year for Overture. With that size of opportunity, paid search is also expected to be a major driver of revenue in the near future at portals Yahoo and MSN as they, too, seek ways to leverage search into cash.

One such avenue, payment for expedited review, is already generating extra income for most search engines by speeding up the often poky natural entry of new web site content into search engine indexes. In natural, or algorithm-based search, it’s only when the search engine spiders find, crawl and index a page that its content even has a chance of showing up in search results. Some online marketers have found the process takes months-or longer-and plenty are happy to pay for faster review that can shorten getting into indexes to a matter of days.

But getting into the indexes is only half the battle. Search engines list what some industry sources estimate as upwards of 500 million documents. Without some help, chances can be slim that search results will list high up the content a merchant wants consumers to see. “It’s like buying a ticket to a raffle with 500 million chances,” says Marckini.

It’s those odds that created the search optimization industry. Outside of paid search, search engines use algorithms to find and rank relevant content among indexed web pages. The optimization process seeks to stay current with the engines’ priorities, manipulating what may be hundreds of variable elements to make it easier for engines to recognize relevant products and listings and post them higher in search results. Everything from the template and layout of a page to the architecture that the site is hosted on and the way it serves pages to the actual content of a page is fair game for optimization to what search engines seek.

For example, search engines typically rank a page in part on keyword prominence or how early in the text of a page a keyword appears. They also look for the concentration of a given keyword on the page. Thus, “If your site is selling microwave ovens, but those words don’t appear until far down on a page, you’re not going to do well,” says Marckini.

Growing web crowds

One argument for natural search optimization is that it’s a less expensive means of getting content and products in front of consumers than the alternative, paid search. But in an increasingly crowded web universe, paid search builds on optimization by taking the increased likelihood that an engine will rank a merchant’s relevant listing high in search results and turning it into a guarantee-for a fee. Overture’s paid search offering, in which advertisers bid a cost-per-click fee for top positions under various keywords in search results Overture’s engine feeds to numerous search destinations, defined the model.

As the bidding on keywords can be fast and furious for particularly competitive terms, and some merchants and other advertisers maintain paid positions on thousands of keywords, managing the process, selecting the keywords that will drive the best results, and staying in top positions where bids and rankings may change frequently have become increasingly complex and time-consuming. Spying opportunity, service providers to online retailers that weren’t even in the search business a few years ago have now added management of paid search programs for retailers to their roster.

Affiliate marketing services company ValueClick Inc.’s BeFree, for example, added tracking of results from keyword campaigns to its lineup this year. Search engine optimization companies such as MoreVisibilty.com Inc. have bolstered their program offerings to retailers and others by securing direct feeds into Overture’s engine. Industry analysts such as Jupiter Research Inc. have recognized online search’s booming marketplace by elevating it to a dedicated practice area.

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