The Business of Search Engines and Advertising – Look Out!
The major search engines are changing the way they do business with the advertising community. Many SEOs and SEMs have waited patiently for the search engines to recognize the benefits our sector brings. Now that search is sexy however most will be disappointed to find that, even though the major search firms are enthusiastically talking to marketers, they are not talking to SEOs or SEMs. The major search firms are now breaking bread with some of the largest advertising firms; the big-fish, dark-suited ad-men. As search grows into a multi-billion dollar a year industry, the ability to harness the power of massive advertising budgets seems to have become the true measure of relevance in the business of search. This may present the greatest challenge the SEO sector has ever faced, a challenge the search engines will likely find a double-edged sword.
The future of search involves money, lots and lots of money. Even at the idealistic Googleplex campus, money is considered both a necessary evil and a pleasant obsession. Efforts to make search a profitable enterprise have been around since the first banner was displayed at Infoseek but it took nearly a decade to find the highly profitable model of pay-per-click programs. With the innovation of contextual distribution of paid ads and the corresponding trends towards localized and personalized search, business interest in paid-advertising propelled Google and Overture’s businesses from sexy to super-model status. Today, public interest in search is at its highest peak and continues to grow. Ironically, (if my email in-box can be considered a representative sample), most people seem interested in how organic search results are generated while the most interesting developments are being developed to facilitate paid search. Localized search is thought to be worth nearly $1Billion over the next two years. As search engines begin to offer personalized results, deliverance of user-targeted advertising brings the promise of even more advertising revenues. The key to the rapid growth of paid-search advertising is the massive distribution of ads across a wide array of platforms such as Gmail, newspapers and privately owned websites. When you can absolutely guarantee a listing will be shown beside the Top10 and in literally millions of other locations under ad-specific keyword phrases, it is easy to get Big Business’ attention. When you only charge them if a user actually clicks on the ad, the sale becomes that much simpler. As budgets become bigger and placement campaigns become more complex, the search firms are moving in the logical direction, towards the piles of money. This necessary tendency has had an effect on search engine marketing and the firms that provide it.
The major search engines are not terribly interested in organic optimization or the small search engine marketing companies any more. At least not this quarter. While there is great value in high organic rankings, that value is only seen by those who have high rankings, not by the search firms themselves. SEM firms offering PPC management face difficulties with the search firms as the small business part of the sector (the vast majority of SEO and SEM shops), simply don’t bring enough revenues on a case by case basis to make supporting or encouraging them worthwhile. Many SEMs have experienced $5000/month expectations from the AdWords support team. In order to get the a listing across the top of the results at Google, one had better be prepared to commit over $10K per month or your business is just not interesting enough. For the past year, both Google and Yahoo have treated the organic results as a loss-leader product. While it is very important for both firms to continue to produce the strongest, most relevant results possible, organic search doesn’t pay the bills, it merely draws the viewers and establishes the credibility of their brand. Google and Yahoo will continue to work to improve the quality of their listings. Ask, MSN and Vivisimo will continue to present competitive products and all will continue to develop the best possible organic listings possible, however, each of the major search firms are enthusiastically courting the attentions of the big-fish advertising agencies.
As noted in an article by Pamela Parker, “Overture, Google Reach Out to Agencies“, in today’s ClickZ news, both Google and Yahoo are actively approaching large advertising agencies. The larger advertising agencies have participated in the search engine marketplace as the market was too free flowing and anarchic to easily explain to their clients or to quantify costs. Traditional advertising firms base a large part of their revenues on the number of times viewers see, read or hear a particular ad. This was the revenue model (cost per impression) when banner ads first appeared on the web. As the number of impressions gained by a specific site through organic results was next-to-impossible to track without using cumbersome URL strings, traditional advertising agencies tended to have no idea how to work out fees for services. They also found it difficult to work with SEO and SEM firms as each sectors’ common revenue models have not mixed well. The advent of pay-per-click programs offers the larger agencies the tracking and reporting capabilities they need to offer search-advertising marketing opportunities to their larger corporate clients.
Another factor which has recently changed was a lack of broadband access in the United States which inhibited interest in online advertising by the larger firms. Now that the Internet is as or more popular than the broadcasting networks, the big-fish firms are very interested.
This is of particular concern to the small business SEO and SEM firms as the entire search spectrum was a mystic monopoly enjoyed by the sector. If a huge, Eastern seaboard based corporation was interested in search engine marketing two years ago, they would have been forced to approach a much smaller company that specialized in the unique niche markets of SEO and SEM. Today, much of the work of an SEM firm is being done in-house at the biggest ad agencies on Madison Avenue. Now, like the original web design market, that nice, comfortable niche market has gone mainstream and becomes less unique while being demystified.
The major search engines flirtation with big-money advertisers is a natural move in the industry. After spending the last decade and literally hundreds of billions of dollars making the tools, it is time for a round of profit taking for patient investors. Now that the dark-suits controlling the biggest advertising budgets are wide-eyed with interest and looking for creative ways to spend their client’s advertising fortunes, it would be fiscally irresponsible for the search engine as businesses to ignore them. Unfortunately, the price of profit is often seeing the second side of the double edged sword, credibility. The search engines will have pay extra attention to general user attitudes and perceptions lest they forget why the viewers visit in the first place and what forms brand loyalty. This factor may be the salvation of the smaller search engine optimization and marketing firms. As long as the search engines are committed to providing high quality free results, there will be a place to strive for placements. If the search engines fail to keep up with the free listings however, they will lose credibility just as quickly as AltaVista , Lycos and even Yahoo did when they transited from search tools to information portals in the late 90’s.
Jim Hedger is a senior editor for ISEDB.com. Also he is a writer, speaker and search engine marketing expert based in Victoria BC. Jim works with a limited group of clients and provides consultancy services. He has worked as an SEO for over 5 years and welcomes the opportunity to share his experience through interviews, articles and speaking engagements. Hedger can be reached at jim.hedger@gmail.com
