February 28, 2006, 12:00 AM

Are these guys making too much money?

(Page 4 of 4)

“We’re seeing better results on MSN than on Google or Yahoo,” Williams of 360i says. But MSN still needs to build its volume of search activity to compete on the same level as Google and Yahoo, both of which have indicated they may launch demographics services of their own. As of last December, Google controlled 48.8% of the search market, followed by Yahoo at 21.4% and MSN at 10.9%, Nielsen/NetRatings reports.

“I anticipate there will be continuing innovation among search engine competitors,” Nahum says. “We’re blessed with great competitors driving interest for advertisers. It’s not a situation in which any one of us will rest on our laurels.”

New technology tools

In addition, new tools such as algorithm-based automated bid management applications from Efficient Frontier and SearchForce are helping marketers to better manage keyword campaigns. SkyAuction, a site that auctions travel packages, uses SearchForce to handle the complexities of matching keyword prices with expected conversions on thousands of keywords, says SkyAuction’s search marketing manager Tom Rusling. Replacing a former system where his staff attempted to gather and analyze search engine and sales data in spreadsheets, the new tool not only has produced a marked improvement in search ROI but has also freed up staff to concentrate on what they do best: producing creative copy for search marketing ads, Rusling says.

To be sure, with all the changes in store for search marketing, no one’s talking about throwing search engine marketing into the dustbin of marketing history. “Search is still larger than any other channel, and we’ll not by any means stop advertising in search,” Vadon said, adding that it’s still Blue Nile’s top means of acquiring new customers outside of customer referrals. “But we can’t rely on that to be our only (advertising) channel.”

Moreover, Vadon says he’s taking the search marketing travails in stride. He scoffs at those who would suggest that losing the impact of search marketing could tarnish Blue Nile’s prospects for growth.

The $1 billion company

After Blue Nile surged to $44 million in its launch year of 1999, raising expectations among analysts that it wouldn’t take long to hit $1 billion, he recalled, the shine on its reputation dulled in its second year, when sales grew barely 10% to $48 million. But the slowdown coincided with the overextension of portal advertising-the marketing wonder tool of the web’s early days. As Blue Nile made the transition to other forms of advertising-search engines, in particular-sales once again started to grow steadily if no longer at a breakneck pace, reaching over $200 million in 2005.

Now that search marketing appears to have taken the route of portals in becoming less productive and less efficient as an advertising tool, Vadon says he’s confident that Blue Nile will develop new effective marketing strategies and channels. “We’re still on task to build a billion-dollar company,” he says.


Click Here for the Internet Retailer Guide to Providers of Search Engine Marketing Products and Services

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