China is one of more than 20 countries to which Newegg plans to expand its marketplace in 2017.
Driven by its success as an advertising platform and marketers’ unending quest for more of the same, search marketing could be a $7 billion industry by 2007, according to recent estimates of Piper Jaffray & Co. It’s important on many levels: as a gateway to the Internet for many consumers, a way to organize the universe of web content, and, for retailers, an effective way to reach customers while keeping their customer acquisition cost low. For despite rising complaints among marketers on the cost of paid search keywords, search advertising remains a bargain compared to some traditional offline media. Piper Jaffray estimates, for example, that the approximate cost of acquiring a customer through search at about $8.50 versus $50 for online display ads and a whopping $70 per customer via direct mail.
With growth comes evolution. Across the board, search marketing services providers say their retailer clients are savvier today about what search can do for them and about spending smarter, and they are refining their programs accordingly. The broad-brush, one-size-fits-all approach that marked search’s earlier days is giving way to a new model. That new model is distinguished by advanced targeting and audience segmentation, by greater understanding of the relative contribution of paid and natural search, and by increasing efforts to coordinate search with offline marketing efforts.
It’s all geared to meet the demands of search advertising buyers that search marketing professionals are universally describing as more sophisticated than even a few years ago. And search marketing companies are stepping up with new tools and new approaches to serve it all up.
“The last few years have been about frequency, reach, acquiring customers, building out keywords to generate a lot of traffic,” says Stuart Frankel, senior vice president of DoubleClick Inc. and general manager of its search marketing and affiliate unit Performics. “Search is going from a mass medium to something that is more targeted.”
One means of segmenting that larger search audience is by using vertical search. While general search engines such as Google and Yahoo compete on the sheer number of eyeballs they can attract, vertical search narrows the field with a niched approach to indexing that seeks to attract audiences with specific interests.
Vertical search engine company LookSmart launched 13 categories of search each with multiple vertical search sites last year, and it’s already working on the next generation of those properties. CEO David Hills, whose early career was in TV advertising sales, likens the emergence of vertical search to the emergence of cable TV and the resulting fragmentation of the broadest advertising market. “You used to have three networks and a couple of independents over and above that. Now you have advertisers that buy 30 or 40 cable networks,” he says. “Advertisers like to spread their money around. And we will be one of the companies that increasingly harnesses an audience an advertiser can buy, so they don’t have to buy everything through one or two networks.”
The expanding market
Hills sees vertical search and LookSmart’s future as a complement to general search that will ultimately serve to increase overall spending on search rather than drive spending from the larger engines to the specific. “I think we will expand advertisers’ spending. If vertical search got big enough, you would probably bring in some online spenders as cable TV bought in some advertisers who had never bought broadcast,” he says.
Another trend in segmenting the broader general search market-and one that is also bringing in more advertisers than might not otherwise do search marketing-is local search. Despite online sales that continue to grow annually at a brisk clip, from the web’s earliest days industry pundits sensed that the Internet could play an even larger role in influencing offline transactions than it does in completing them online.
ComScore Networks in June announced it was adding an offline component to help quantify the impact of online search on offline sales channels, but it’s already known just how strong that search-to-store connection is. According to mid-year 2005 data from American Interactive Consumer Survey, an ongoing project of the Milwaukee-based Dieringer Research Group, consumers spent at least $1.51 offline after doing online research for every $1 spent online. That figure does not include additional web-influenced spending on financial and insurance products. The data, says Dieringer Group senior consultant Thomas E. Miller, confirm that the Internet’s role as a consumer product information utility is larger than its role as a direct selling medium.
Local search is an effort to drive web-to-store purchase and lock shoppers in for that last mile. While still not yet in widespread use, retailers are starting to take advantage of some of the search engines’ and other platforms offerings in local search. And they are finding local search to be very different from general search programs they may have run historically.
”We think of the local search as being in two flavors,” says Frankel. “One is the small local merchant who has typically been a yellow pages advertiser. The other is a national advertiser who has a local presence in a number of markets.” Typically, says Frankel, such national advertisers are using search to not only push a national message and acquire customers at a national level, but also to take the message to the local level by buying local search results. The local campaigns are typically built around events such as regional store openings.
“Rather than the sole metric for search success being if consumers are coming to your web site and buying, we are looking at new metrics to see whether you can drive people to the store effectively through search,” Fankel says. While connecting that online and offline activity remains a challenge, he notes the national advertisers with which Performics is working on local search are leveraging coupons, search-specific promotions and other ways to create incentives for customers to provide personal information that will connect those web-to-store dots. In the near future, more information on search advertising’s impact on offline buying will be available from extrapolation and modeling of buying patterns. “We’re in the early stages of that, but marketers are already talking about it,” he adds.