Search marketing dominates advertisers' online budgets and will do so increasingly. That is the abridged conclusion of a report released last week by research firm eMarketer.
As the economy worsens and finance directors demand higher levels of return on investment, advertisers are expected to turn to search in greater numbers. This suggests that online is faced with having to argue its case as a medium suited to brandbuilding, not just shifting product.
Gavin Reeder, head of digital strategy at BLM Quantum and ex-head of strategic planning at Yahoo!, poses the question facing online: "The UK has a higher proportion of ad spend going into online than any other country and the question is: why is it so search-obsessed?"
One answer, according to Reeder, is that because advertisers are after quick customer acquisitions, search finds favour. Branding activity can't offer the same result and, therefore, remains largely untapped.
"Branding is an area of online that's very under exploited," says Reeder. "The industry kids itself a bit with (online ad spend) growth figures from the IAB (Internet Advertising Bureau), as so much comes from search and it's very one-dimensional. Display growth has been relatively pedestrian."
Classified growth
The latest IAB and PricewaterhouseCoopers figures (for the first half of 2007) reveal that classified advertising has almost caught up with display. Classifieds accounted for 20.8% of internet ad spend, a year-on-year growth rate of 72%, compared to display's 21.5% share, growing 33% year on year, according to the report.
Paid search, meanwhile, makes up the bulk of online ad spend with 拢762.3m in the first half of 2007, a share of 57.1%, at a 44% growth rate.
Richard Firminger, Yahoo! regional sales director for Northern Europe, says simply that search makes sense for more companies.
"Display hasn't benefited from SMEs (small and medium-sized enterprises), which search more easily does," he says. "We're still only scratching the surface of businesses with e-commerce websites investing in search."
For larger advertisers, the issue of measurement is huge. Advertisers see the reporting that search marketing can offer and plough budget that way, often treating branding as an afterthought, says Duncan Parry, director of strategy at Steak Media.
"Online branding suffers in comparison (to search) because the returns are hidden - sales cannot normally be directly attributed to the branding activity, even though brand recall boosts click-through rates on search listings and generates direct URL type-ins that lead to sales. Search has attracted increased budgets because of its transparency."
Grant MacFarlane, head of search at Havas agency Media Contacts and previously head of client services at Google, agrees. "Search often takes the glory for the purchase, as a lot of agencies can't track back to see where someone saw a banner ad that got them searching in the first place," he says. "We've seen a 15% or 20% uplift when you run display and search in tandem."
Agencies are, however, investing in tracking the entire purchase chain and demonstrating to clients how branding can boost sales when run with search campaigns.
As BLM Quantum's Reeder notes: "There is a lack of in-depth online consumer research and this often leads to lazy and uninspirational planning. Consumer understanding is key to effective media planning and agencies need to deliver in this area."
He argues that the industry should concentrate more on bringing targeting to display. "Targeting should be one of online's key strengths, but the industry is too fragmented and self-interested to deliver targeting opportunities that have the sophistication and, critically, the scale to be compelling to advertisers," he says.
Huge potential
This fragmentation may change if the proposed Google takeover of DoubleClick gets the green light from the European Commission and US regulators. By bringing its rigorous measurement tools to display, Google has the potential to make display huge, some say.
"Google is after branding budgets and the gap (between search and display) will start closing a lot after the DoubleClick deal," says Media Contacts' MacFarlane. "That one play alone will open things up for display. There is a massive market for display ads and there's millions of online ad spend that companies could be making."
Kieron Matthews, head of marketing at the IAB, says that the market faces another challenge from a potential economic downturn.
"There have been knee-jerk reactions in the past to move money from brand advertising," he says. "The IAB has been telling people not to panic - that brands need to build awareness online. I don't necessarily go online to buy something; I go online to communicate with friends or to research, and it's the job of the brand to be in media consumption habits and not just to drive a sale. It's about building brand awareness."
Building brand awareness online may not be top of advertisers' priorities when the economic crunch kicks in - but the online sector has started to realise its value and, crucially, bring the rigours of search measurement to display advertising.