Paid search has long been the backbone of UK internet advertising, accounting for well over half of the £1.3 billion spent online in the first half of last year, according to the Internet Advertising Bureau (IAB). However, brands are looking for new ways to target consumers in the web 2.0 world, bringing an end to the golden age of search.
Web giants Google, Yahoo! and MSN look set to start losing advertising revenue to sites such as MySpace, Facebook and Bebo during 2008, as brands shift their marketing budgets to cash in on the social networking phenomenon.
A new report, The Impact of Social Networking in the UK, from Experian and Hitwise, claims that web 2.0 sites will focus on improving their search functionality this year in an effort to secure fresh investment from advertisers. The fact that consumers are required to sign up to join social networks means that sites such as Facebook know far more about their users than search engines and traditional portals. They could, for example, choose to show ads only to men aged between 16 and 24 who live in London and enjoy football.
It follows that social networking sites could command much higher cost-per-click (CPC) rates for these highly targeted ads than the sponsored links that are shown on Google, Yahoo! and MSN. The search functionality on social networks is pretty basic, but MySpace, Facebook and Bebo are working to make information on companies easier to find so they can improve their targeted advertising offerings. "The growth of social networking sites could threaten the dominance of Google and other leading search engines," argues Robin Goad, director of research at Hitwise and co-author of the report.
A further cause of concern for search engines highlighted by the Experian/Hitwise report is the fact that social networks are becoming an increasingly important source of traffic for other websites, particularly music, film and TV destinations. The research shows that more than one in ten visitors to entertainment and music websites came from social networks in October last year, with Bebo being the second highest source of traffic after Google.
The growing popularity of MySpace, Facebook and Bebo is prompting advertisers to question the value of their paid-search activity, according to Vincent Potier, marketing director of Vonage. The internet telephony company is planning to put social media at the heart of its marketing strategy for 2008 in an effort to reach a wider audience than is currently possible through paid search. "We will see an end to the dominance of sponsored listings on Google over the coming year as social networking and other emerging forms of digital marketing increase in importance," insists Potier.
Personalised medium
With social networks and other community-based portals transforming the internet into a more niche, personalised medium, paid search appears to be reaching a natural plateau. After years of exponential growth, the fragmenting digital media landscape is making it harder for brands to target vast numbers of consumers with sponsored search engine listings. Three or four years ago, when CPC prices were low, marketers could achieve return on investment of up to 20 to one on campaigns comprising several thousand unbranded keywords. However, Jupiter Research estimates that the number of marketers bidding on 10,000 or more listings has doubled since 2005, leading to widespread CPC inflation and diminishing ROI levels. "After the gold rush, large numbers of advertisers have been left with fool's gold and are spending much more than they need to on paid-search activity," says Amy Lenox, partner at Trinity Communications.
Rising costs
Frustrated by the rising cost of paid-search campaigns, some advertisers have reduced the amount of business they do with Google, claiming that keyword search prices on selected terms have risen by between 40 per cent and 60 per cent during the past two years. "If brands continue running paid-search campaigns in the same way they have done for the past two or three years, then the sector will falter and eventually die," claims Paul Doleman, head of paid search at Spannerworks.
According to Harris Interactive, 80 per cent of all online activity begins at a search engine, meaning Google, Yahoo! and MSN have everything to play for. However, competition from social networking sites and a potential backlash over CPC inflation, is forcing the big search engines to adapt their offerings. In an effort to pre-empt the highly targeted advertising system being developed by Facebook, Google has already tweaked its AdWords service in the UK and US. The search giant is attempting to take sponsored listings to the next level by allowing selected brands to run demographically targeted campaigns only displaying ads to women aged between 25 and 34. The move, which reflects the demographic targeting functionality available via Microsoft's AdCenter, could signal a new era for paid search in the UK.
"Web 2.0 does not spell the end of en masse paid search but there are fundamental changes occurring that affect every advertiser and online business," says David White, chief executive of Weboptimiser.
On a fundamental level, Google, Yahoo! and MSN are engineering the evolution of search from simple text to the indexing of multimedia content, including images, video and maps. This process is seeing paid search move away from providing a 'one set of results fits all' query response towards customised results based on a user's preferences or subject of interest.
"The search experience needs to become richer and more rewarding to remain relevant to internet users," argues Amanda Davie, head of search at i-level. "The integration of multimedia content and intuitive listings is crucial to the future of the medium as far as consumers and advertisers are concerned."
Google has been leading the charge with the launch of its Universal Search service, with MSN nipping at its heels with Live 2.0. Both are intended to bring social networks, news stories, video clips and other types of content onto the results page. By altering the way consumers read search engine results pages (SERPs), these next-generation services will have significant repercussions for advertisers, prompting them to invest in rich-media listings, as well as sponsored text links. A recent experiment by Google to include rich-media ads on its results pages points to where paid search is heading. The search giant introduced ad units that any member of its AdSense program could embed into their web pages, allowing for the contextual targeting of rich-media ads. While this represents a huge leap forward, industry experts agree that a new wave of optimisation methods will need to be developed once simple text search moves into the realm of multimedia.
"As the online landscape changes, paid search will become richer, more useful, more relevant, more timely and more targeted," believes Doleman.
With search engine marketers finding it harder to achieve economies of scale, personalised search looks set to start gaining traction during 2008. With MySpace, Facebook and Bebo capturing an increasing share of the time consumers are spending online, the search giants are developing new ways of keeping users on their sites for longer. Google has been pushing the concept with its customisable iGoogle homepages and its new Knol service, while Yahoo! has quietly rolled out Alpha in Australia. However, the latest developments centre on new technology aimed at improving the relevancy of search results. In its simplest form, Google's personalised search service ensures that consumers get results relating to their geographic location. For example, those searching for 'football' in New York will get different results from those in London.
Relevant
In an effort to remain relevant to as many consumers as possible, the major search engines have also been racing to extend their services to mobile. Advertisers are catching on to the potential of the location-based services on offer from Google, Yahoo! and MSN that allow consumers to locate their nearest pub, club or restaurant while on the move. "Search engines are starting to take advantage of the mobile interface to provide compelling services for both consumers and advertisers," explains Erica Schmidt, global search director at Isobar.
The increasing personalisation of the internet is leading to a host of new developments that could further fragment the paid-search sector. As well as the launch of next-generation services from Google, Yahoo! and MSN, several new players are also entering the sector. SpaceTime 1.0 launched a three-dimensional web browser in January, allowing users to shuffle through different search results without having to switch between web pages. The tool enables consumers to zoom, pan and flip through different results in the same way that they can scan through album covers on an iPod Touch. Meanwhile, Mahalo claims to be breaking new ground by providing human-edited search results aimed at trumping those produced by an algorithm, while Spock.com is a 'people search engine' that pulls together data from dozens of different websites to automatically form personal profiles of individuals. All of these next-generation search services are still in their infancy, but could provide advertisers with new paid-search opportunities.
"Search will have to adapt to suit the evolving online landscape," insists Damien Anderson, head of search at Blowfish Digital. "Like a chameleon, search engine marketing will have to change its colours to meet the monetisation needs of future content originators and users."
Although the heady days of double-digit growth may be coming to end, paid search remains the backbone of the UK online advertising industry, with Group M estimating that sponsored listings will account for 65 per cent of all digital spend this year. As more content is added online, the task of navigating the web will become increasingly complex, forcing consumers to rely more heavily on search engines. At the same time, web 2.0 sites and social networks are causing the internet to evolve into a truly interactive environment in which text, images and video interplay. As a result, search and display advertising are coming closer together, providing search engine marketers with new opportunities beyond standard sponsored links.
HAVEN HOLIDAYS EXTENDS ITS SEARCH STRATEGY
Haven Holidays expanded its search strategy beyond sponsored listings, in an effort to improve its performance in the search engine rankings in the run up to the summer holiday season.
Last spring, the Bourne Leisure-owned company appointed Latitude to integrate its paid-search and SEO activity into a single, coherent strategy.
The aim was to develop a highly targeted search campaign capable of increasing the number of holidays booked through Haven's website. The brand also wanted to raise its profile across the web and boost its relevancy among consumers searching for holidays online.
Latitude began by researching the keywords with the highest traffic and conversion rates. It then analysed the achievements of Haven's competitors and studied the online behavior of its target audience, particularly in social media environments, including travel forums and review blogs.
Initially, Haven worked to improve the content on its website to match the search habits of its audience. The holiday company then used knowledge gleaned from social networking sites to improve its SEO strategy and make its paid-search activity more targeted. It also invested in anchor links on a range of search engines and third-party websites.
The resulting campaign enabled Haven's website to achieve 90 natural listings in position one on relevant keywords (holiday UK, family holiday UK and holiday park) on major UK search engines. Paid-search sales also remained high throughout the campaign, maintaining a 40 per cent share of all online sales.
Haven saw the number of visits to its website increase by 63.5 per cent year on year in August 2007, helping online bookings rise by more than 127 per cent during the same period. "Paid search and natural search worked well together to achieve a bigger share of a bigger pie with little or no cannibalisation," says Matt Brocklehurst, head of marketing at Latitude.
MARKS & SPENCER LOOKS TO SEARCH FOR INSURANCE PRODUCT
Marks & Spencer recently launched a heavyweight search engine marketing (SEM) campaign to raise consumer awareness of its latest car insurance product.
The initiative ran across Google, Yahoo! and MSN, as well as smaller vertical search engines including WebFinder. The aim was to drive traffic to the M&S website and build the brand's association with car insurance in conjunction with TV, press, outdoor, direct and digital activity.
The campaign initially boosted sales of M&S car insurance products by 267 per cent on the previous year, with customer numbers rising by 159 per cent throughout the promotional drive. Above-the-line activity ran under the straplines: "Car insurance that gives you a bit more M&S" and "Cover that goes the extra mile at no extra cost".
However, three months after its launch, M&S overhauled the search engine marketing element of the campaign in order to optimise its effectiveness. The idea was to move away from a scattergun approach towards a more targeted paid-search strategy.
Working with its affinity partner, Junction, the retail giant separated branded and generic search terms so that the performance of each could be evaluated individually, to increase conversion rates and boost return on investment.
"We knew there must be a more targeted and efficient way to undertake search marketing," says Catherine Hill, marketing director for Junction. "We experimented with an approach that let us make major savings on spend without sacrificing on traffic and sales."
The new approach resulted in M&S reducing its spend on the relatively expensive generic keywords (car insurance) in order to divert budget towards the more cost-effective branded terms (M&S car insurance). The strategy resulted in a 16 per cent dip in volumes, but a 74 per cent decrease in the cost of signing up a customer to a new policy.
M&S claims this approach to helped make the SEM element of its campaign 99 per cent more cost-effective than its above-the-line activity.
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