July 21, 2010, 1:12 PM

The big boys dominate paid search

With their famous brands and deep pockets, the big merchants dominate paid search, according to research from Internet Retailer`s forthcoming 2011 Search Marketing Guide.

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In theory, retail paid search is a wide-open system where any marketers with the right bid at the right time can purchase the keywords they want for their latest paid ads and pay-per-click campaigns.

 But in reality, as pay-per-click advertising becomes more complex and specialized, it’s the big merchants with the best-known brands, deepest pockets and most sophisticated technology that are dominating paid search marketing and the use of general keywords in major merchandising categories, according to research compiled for Internet Retailer`s forthcoming 2011 Search Marketing Guide. For the Search Marketing Guide, Internet Retailer measured the keyword use among the 250 largest retailers for paid and natural search. 

In natural search, smaller retailers with specialized names and niche products still have an opportunity to take business away from their bigger competitors by doing a better job of optimizing their web sites with more brand-specific keywords and other tactics that can improve their rankings on Google and other major search engines. But in paid search, especially in bidding for the more expensive and general keywords and phrases that can generate significant web site traffic, it’s a medium dominated by major chain retailers, catalogers, web-only merchant and consumer brand manufacturers.

 And the big retail paid search advertisers are only getting bigger. Among home furnishings retailers this year, Macy’s Inc. held the top spot in eight of 15 specific keyword listings compared with just one top listing in 2009. In sporting goods, more of the major chain and web-only retailers also surpassed niche merchants and shopping engines as the top bidders for certain keywords. In last year’s study, for the paid search term “Fishing Equipment,” AOL Shopping and NottinghamMarket.com, were frequently among the top bidders. But this year three more well-known merchants—Dick’s Sporting Goods Inc., Bass Pro Outdoor Online LLC and Overstock.com Inc.—controlled the listing.

In Internet Retailer’s latest keyword analysis merchants were assigned points every time they appeared in the first five paid and natural results within their core merchandising segments over a nine-week period and the points were added up to achieve a final score. The top 50 retailers in this search ranking include 41 household name retail brands:

  • 21 major chain retailers, including Lowe’s Cos. Inc. and Sears Holdings Corp.
  • 10 big consumer brand manufacturers, such as Dell Inc. and Hewlett-Packard
  • seven major web-only retailers, including Amazon
  • three well-known catalog companies: Musician’s Friend, L.L. Bean Inc. and Redcats USA

“Paid search is where big retailers are going to continue to spend more of their marketing budget because this is the program that best identifies the customers who are ready to make a purchase,” says Michelle Stern, client services director for search engine marketing agency iProspect. “For big retailers, a diverse paid search program with a focused inventory of general and branded keywords generates sales, supports the brands and identifies new business opportunity.”

 The big retail brands are dominating paid search because they have the marketing resources and technology to identify and then bid on and procure the category-specific keywords that can drive very specific campaigns. For example, Amazon Inc. headed up the list of the 50 biggest paid search retailers with 722 points, up 5.6% from 684 points from Internet Retailer’s 2009 keyword analysis. But more important, Amazon was also the top-ranked merchant in the paid keyword category for CDs/DVDs/Music, second in its prime merchandising category of books behind Borders Group Inc. and among the top 10 in several other mass merchandising categories, such as consumer electronics, digital media, hardware and appliances.

Amazon is able to consistently outbid and control high-traffic general keywords and phrases such as “DVDs” in the CDs/DVDs/Music category, “Art Books” in the books segment and “Screwdrivers” in hardware because it has a large and coordinated marketing staff with the resources and expertise to drill down on keyword usage patterns and use web analytics to create highly specific pay-per-click campaigns, says Udayan Bose, CEO of search marketing firm NetElixir Inc.

“Big web merchants such as Amazon, with a sophisticated bid management system and the staff and resources to create highly precise pay-per-click campaigns, can accurately predict how a paid keyword will perform at a specific time of day and on a particular search engine,” Bose says. “Because they are so sophisticated, Amazon can often outbid everyone else for longer periods of time and procure the keywords they want to drive very cost-effective paid search campaigns.”

Retailers of all sizes continue to spend heavily on paid search. For this year’s Internet Retailer keyword analysis, search engine optimization technology development firm Conductor Inc. studied more than 2 million keywords and paid ad positions to estimate monthly pay-per-click spending for the 250 biggest merchants. Among big chain retailers, Target Corp. spends an estimated $5.06 million each month on pay-per-click campaigns, while Amazon, the top web-only merchant, spends an estimated $4.76 million. In comparison, Dell, the highest-ranking consumer brand manufacturer, commits an estimated $2.22 million each month, while the largest catalog/call center company, 1-800-Flowers.com Inc., spends an estimated $1.64 million every month, says Conductor.


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