11.22.2006

Paid Search Programs Finally Growing Up

... and that's what I wrote on March 31, 2004 again for Search Engine Watch.


The search industry has come a long way since the days of running poorly targeted banner advertisements on search results pages. Enhanced keyword targeting capabilities and powerful new bidding and ROI analysis tools have raised the value of search as a promotional channel for online -- and increasingly offline -- merchants.

Yet with all of the progress to date, paid search programs are still in their infancy and their rapid evolution continues. Two fundamental changes currently underway are blurring the traditional metrics and definitions that have divided paid listing and paid inclusion programs.

Evolution Toward a Common Metric: ROI

Today's marketers, helped by a variety of sophisticated automated bidding and analysis tools, are becoming increasingly savvy in calculating the performance of their search marketing initiatives. Some of the new technologies that are enabling ever more precise targeting of listings to maximize ROI include:

  • Keyword research: This concept -- long an integral part of search marketing campaigns -- is expanding to include match type flexibility, exact terms, phrases, broad matching, and keyword exclusion features.
  • Geo-targeting: Yahoo and Google have been hard at work developing local search services allowing marketers to target paid listings based on geographic locations.
  • Day-parting: Campaign management platforms, such as GoToast and Kanoodle, are adding day-parting and scheduling rules to serve up and take down listings based on the time of day.
  • Network targeting: Campaign management services such as MyGeek, expose click-through reporting by destination site, allowing marketers to opt out of Web properties delivering lesser return on their advertising investments.

With these new tools, the metrics search marketers use to measure campaign success are evolving from impression counts and click-through rates to more sophisticated and predictable return on investment methodologies based on cost per click. In fact, some pay-per-click engines already provide advertisers with tools to calculate conversion rates from impressions to orders and ROI using tracking URLs or by inserting scripts on landing and action pages. Overture and Google already go one step further, suggesting forecasted traffic levels and cost estimates for specific keyword combinations, match types and bid amounts.

Together, these forces are causing search marketers to focus less on what ranking they have achieved across the various engines through site optimization, paid inclusion and paid listings, and instead on the amount of qualified traffic generated by a given level of investment. As a result, the distinctions commonly made between the various search-marketing programs in existence today are being superceded by a gradual movement toward a common ROI measurement.

With the ability to calculate ROI across a greater array of campaigns, search marketing is becoming increasingly complicated as advertisers seek the right mix of programs to optimize their return. In response, paid search agencies such as Referencement.com, MarketLeap, Decide Interactive, Quigo and others are stepping in to efficiently aggregate management and reporting of multiple campaigns and, in the process, further obscuring the details of the individual programs themselves.

Optimizing Relevancy and Yield

A second trend that is blurring the definitions traditionally associated with paid inclusion and paid listing programs is being driven by the efforts of search engines to enhance relevancy and maximize yield.

Search engines today are increasingly monitoring impression and click metrics, a practice initiated by AskJeeves DirectHit technology a few years ago, to improve relevancy of organic results by promoting and demoting individual links based on popularity. As demonstrated by the Google AdWord program, integrating popularity parameters to paid content ranking takes search engines one step closer to optimizing relevancy of results, and yield per page.

In addition, search engine crawlers are increasingly leveraging ever-smarter linguistic technology to analyze and categorize page content, improving the relevancy of organic results. Concept and entity extraction, advanced contextual categorization, spelling and stemming adjustments, phrase extraction and stop words recognition are increasingly equally leveraged to optimize targeting of paid content, improving on relevancy and maximizing click through rates.

Search personalization will also affect ranking of organic results, as well as dramatically impact advertisers' control over paid placement. Whether inferred from explicit user profile, implicit past behavior or current application context, a better understanding of user intent will contribute to a better experience and improved click-through rates.

In an increasingly yield-driven context where content targeting gets more sophisticated and matching more scientific, paid listing results could very well be demoted to the extent of overlapping with paid inclusion results, blurring the definitions traditionally associated with these programs.

The Bid for Traffic Model

As emphasis on ROI as the common success metric across all search marketing initiatives increases, and the distinctions that have traditionally defined paid listing and paid inclusion programs continue to blur, these programs will gradually become superceded by a practice I call, "bid for traffic." Ultimately, advertisers will be able to target impressions by dictating an ROI level acceptable to them such as "8% over advertising spend," without the need to understand the unique distinctions and characteristics of the various programs available to search marketers today.

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