Ciceron Blog Archives

Search Engine Marketing: Follow the Cash

Two weeks ago, the Search Engine Strategies conference took place in New York City. For the first time in recent memory, the search engines dominated the map -- the advertising map, that is. In fact, search engine advertising and marketing now represents between 30-40% of all online advertising dollars, depending upon whose research you read.

Before we look into why this surge is happening now, let's do a quick primer on search engine marketing and advertising. There are three tiers:

Natural Search - Those search results which the search engine "spiders" or folks (yes, actual people) categorize web sites into their main listings. These listings are clicked 70% of the time by most of us who search the web. Average click-through on the top three listings is between 40-50%.

Paid Inclusion - The type of search undergoing the greatest amount of change right now, paid inclusion is the practice of paying a search engine for the opportunity to get priority for search rankings by "feeding" content or web pages to be indexed. It does not guarantee rankings but ensures that your content will get indexed.

Pay-per-Click Advertising - A system by which you bid against your competitors for rank, usually listed as "sponsored listings" at the top or side of the search engine's natural search results. Averages a 2-3% click-through rate.

Paid listing programs such as those offered by Yahoo and Google are surging in popularity -- but they defy financial logic. In the long term, the least cost-effective of search strategies may be pay-per-click listings since as more people play the game, prices for each keyword phrase inflate. At some point, there are diminishing returns. Even now, it's getting harder to find a good deal with paid search.

(Note, however, that many marketers are perfectly willing to pay upwards of $500 per lead from a trade show but will balk at a $5 pay-per-click fee from a motivated and interested search lead. See what I mean by defying financial logic?)

Despite the head-scratching, pay-per-click search will continue to grow at a breakneck pace for the foreseeable future. Why? Because traditional media advertising agencies, for whom the Internet has proven confounding for so many years, get paid search. You pay, you get. No funny business with technology. And the ad dollars being spent on the Internet are a small pittance to those allocated towards other media. Online ad budgets still hover around 3% of total ad spending. Heck. Paid search is almost cute when compared to those bulky TV or radio buys. So getting into paid search keeps the agency in the game without having to risk the other ad dollars.

OK, that's fine...until you throw performance metrics into the mix. Paid search is, whether the agency world knows it or not, the slippery slope to metrics-based advertising and marketing, where every ad, every click, every visit, every message, and every customer conversion is measured and scrutinized against specific performance targets. You cull what doesn't work and reinvest in what does, in real time, all the time. With paid search, the metric genie's out of the bottle.

So if pay-per-click advertising only gets a 2% click-through rate, why is natural search with its better performance metrics getting ignored? Because it takes work. It takes time. It even takes a little technology. That's what Internet advertising is: advertising, marketing, branding, financial metrics, and technology all thrown together in to a modern, efficient, and accountable way of delivering content and value to consumers and dollars to businesses.

Until next month,

Andrew Eklund
CEO