The acquisition will add more than 300 products to L’Oreal’s lineup.
Search is e-retailing’s newest path to gold, but mapping out the right route is more complicated than ever.
Search engine marketing was gathering steam as an online marketing strategy relatively quietly-that is, until an industry report this spring stamped a figure on what many had only suspected to be a huge potential opportunity. Forecasting that worldwide total revenue from search will balloon from $1.4 billion in 2002 to nearly $7 billion by 2007, U.S. Bancorp Piper Jaffray in March identified search as the third-largest online market, after e-commerce itself and advertising.
“It was the tipping point for search engine marketing taking off,” says Frederick Marckini, CEO of iProspect.com Inc., whose 8-year-old firm was one of the first providers of search marketing services. “The world woke up to the fact that there is a $7 billion, sleeping industry blooming, and they weren’t in it.”
Piper Jaffray’s equities research team predicts search revenues will enjoy a compound annual growth rate of more than 30% between now and then, exceeding the growth of e-commerce, services, and other online markets. Consumers in this country do some 245 million searches per day-that’s 550 million worldwide-on about 50 million unique keywords, according to Piper Jaffray. About 80% of all U.S. searches go through the top search engines: Google, Yahoo, Overture Services Inc. (recently acquired by Yahoo) and Microsoft Corp.’s MSN.
A new industry
The fight to position one site over competing sites in all those search results has sparked an industry. Service providers have for years offered online retailers help in boosting their site’s likely ranking in search results through optimization; basically, studying how various search engines determine relevancy and then arranging a page’s content to better meet those requirements.
While beneficial for the retailers who place higher in search listings and the service providers who were paid for getting them there, optimization made no direct contribution to the coffers of the engines themselves. Then the engines figured out how to derive revenue from their enormous flow of traffic with programs that can improve a site’s placement in search results, for a fee. These include pay for placement, (a position in listings or at a certain spot on the page, like Google’s AdWords) and more recently, paid inclusion, which guarantees that web content is indexed by search engines for possible inclusion in search results, though placement in results is not guaranteed.
While about 70% of searches still are informational in nature, commercial searches make up 30% of all searches and are growing, Piper Jaffray says. And as revenues grow for search engine companies, intermediaries to search in pursuit of the same opportunity are proliferating at a fast clip, demanding new attention from retailers and other marketers. Noting a large and growing secondary market around paid search and search marketing, Jupiter analyst Matthew Berk says, “Where there is blood, go sharks.”
Berk ticks off a partial list of the burgeoning search-related services e-retailers can now buy: managing paid search campaigns, selecting keywords, monitoring keyword positions on all the engines, optimizing pages for “organic,” or algorithmic, search, feeding a site’s content into inclusion listings, reporting results and conversion analytics, and more.
With familiar providers and newcomers in the search space pitching some services that didn’t even exist until recently, retailers face new choices in what-and whether-to buy, and from whom to buy services. “Providers that can offer the full suite of services are in a position to do very well,” says Berk. “But these are relatively new skills and this is a new market. Some providers have been in this space ever since there was a need to optimize pages and manage paid search campaigns, but there are a lot of new players.”
The expanding market creates opportunity not just for the search engines that get a percentage with each paid keyword click, but also for various service and technology providers-the intermediaries to search-as their expanding portfolios demonstrate.
Among those angling for a bigger piece of the search pie are established players in the online marketing space who are broadening service portfolios to keep pace with developing search technology. Optimization providers who once specialized in designing web pages so their content would more easily be recognized and grabbed by natural search engines now provide paid search management services as well. Newer players entered the arena as search optimization became less of a page design issue and more of a media buy. Other service providers have moved from a narrowly defined set of marketing services to partner with other providers in more comprehensive bundled search offerings. Some technology providers are carving out niches that target discrete parts of search program management, such as managing reports from multiple engines.
Search marketing firms have partnered with web analytics providers to add measurement services to their offerings. Many now provide direct XML feeds of web page content into search engines.
Other kinds of service and technology providers are simply looking for an opening. The booming search marketplace has created a gold rush mentality, says Piper Jaffray senior research analyst Safa Rashtchy. “There is a lot of money in search and because of that, it’s attracted all sorts,” he says. “Several agencies are starting to sell search services, some without having enough experience to do it. You don’t necessarily have to have a ton of experience to sell search, but you do have to have relationships with all the major search engines and you really do have to have the ability to maximize the ROI for your client if that is what you are offering.”
The improvements gained by hiring or buying any kind of help on search depend in some measure on what the retailer already has in place. A smaller retailer might get the most return out of something like a simple measuring tool that tracks keyword performance beyond click-through to conversion. Wildflower seed web retailer Ray Allen of AmericanMeadows.com optimized his site’s pages for algorithmic search, and selects and buys keywords personally-but he finds the $19.95 he pays each month to follow up on 2,000 clicks with Timberline Interactive Inc.’s ConversionRuler worth the investment. The hosted application gives him information that lets him grab opportunity by increasing bids, if needed, on keywords that produce and dropping bids on those that don’t.