The Chronology of Search

I envy the traditional media people. I really do. I sit in meetings and feel my eyes glaze over amid bantering about the latest reach and frequency data for publication X while waiting for my turn to speak. Of course the online portion is last and I think to myself, “Oh, how far we have come.” Bronx cheer.

I envy them because it seems nothing ever changes in the traditional media world; for all intents and purposes it is the same schpiel I was making exactly ten years ago when I left that world behind forever. Oh how simple my life would be and how much time I would have on my hands had I not followed the white rabbit and taken the blue pill. Alas, I dialed into The Matrix of search marketing and it is a daily trial to stay abreast of its evolution.

In search marketing, if you don’t modify your strategy weekly to account for changes in the industry, you may be doing yourself an injustice. However, maintaining both an awareness of the changes and the impact to advertisers is like trying to do a crossword puzzle while skydiving. Like any good online marketing journalist, I couldn’t have completed this puzzle without the help of the greatest editor in the business and the hard working people eMarketer standing by to open my parachute.

Here’s a breakdown of search events in the recent past, grouped into three categories: M&A activity, (self explanatory) Advertiser Impact, (those events which hit advertisers the hardest) Press Grabs (also, self defining and my favorite). As you might expect, a few things have happened since eMarketer’s report was published in July, so you’ll find the eMarketer data in blue and my assembled data in black.

Mergers and Acquisitions

The status quo for search marketing since paid search officially became the hottest thing since Starbucks has been consolidation in the industry. Using a Lion King Circle of Life analogy, I find the best way to describe the state of search marketing is this: The lions are eating up the gazelle, and the hyenas continue to step in and munch on the remains.

Topping the charts for smart moves in this arena are Yahoo!’s purchase of Overture, Google’s bid for Sprinks, and ValueClick’s acquisition of fledgling search provider Search123 along with affiliate powerhouse Commission Junction.

January 2003: Yahoo! plunked down $235 million to buy Inktomi—a search-technology provider and a Google competitor—to allow the portal to create and license its own search service. “Many analysts saw [the purchase] as a first step for Yahoo! to sever ties with Google in response to the competitive challenge it feels,” wrote Internet Advertising Report.

February 2003: Overture purchased AltaVista in a $140 million cash-and-stock transaction. By gaining AltaVista’s algorithmic search technology and paid-inclusion product, Overture can supplement its paid listings with a complete search package, and therefore better compete with Google.

April 2003: Overture completed its purchase of the Web search unit of Fast Search & Transfer (FAST)—a Norwegian developer of enterprise search and real-time filtering technologies—for $70 million in cash. The transaction also includes a performance-based cash incentive payment of up to an additional $30 million over three years.

April 2003: Google acquired Applied Semantics, a producer of software applications for semantic text processing and online advertising; this is expected to help Google strengthen its search and advertising programs, notably its fast-growing content-targeted advertising offering. In addition, the Internet Advertising Report writes, “The deal is significant considering Applied is a top 10 affiliate (based on revenue) and technology partner of Google’s paid search advertising competitor Overture.”

June 2003: ValueClick acquired Search123.com, a privately held pay-per-click search engine company, for an aggregate purchase price of approximately $5 million.

July 2003: Yahoo! announced purchase intent for Overture services setting off mass speculation relating to the future of Overture’s listing syndication relationship. The $1.6 billion deal led Yahoo’s ownership of the three major search properties Inktomi, Alta Vista and FAST.

September 2003: In a move to beef up ecommerce capability, search provider FindWhat.Com announced a plan to acquire Miva—provider of e-commerce solutions.

October 2003: Google announced a plan to acquire PRIMEDIA’s Sprinks unit and contacted investment banks about an initial public offering (IPO). The (IPO) could value the company in the range of $15 billion and $25 billion, according to separate reports in the Financial Times and Wall Street Journal. Google’s deal with PRIMEDIA alone not only gave it the Sprinks pay-per-click advertising network, it also included a four-year distribution- and revenue-sharing agreement for the targeted media company’s About.com.

October 2003: ValueClick, Inc. signed a definitive agreement to acquire Commission Junction, a privately held affiliate marketing technology and services company, a move that will double the size of its affiliate marketing division.

October 2003: In an interesting move to make the Stanford University science labs the complete search engine gene pool, Google acquired Kaltix, a ninety-day-old user-criteria based search engine. Evidently, Google wants to help make search a little more personalized.

Advertiser Impact

The hard-hitting brutal truth of much of the search-marketing world is that smart marketers need to make immediate changes in search initiatives. In the early part of 2002 and into 2003, Google established itself as a dominant force picking up partnerships from competing search listing providers. Search marketing graduated from its infancy with major measurement services introducing offerings to help quantify the madness, and key search providers lost partnerships -- once again making life for advertisers a state of daily confusion.

April 2002: Google used its paid-listings program, AdWords, to woo away former Overture partners EarthLink and Ask Jeeves.

May 2002: Google’s AdWords again swiped business from Overture -- this time a very big fish: AOL.

March 2003: In the best idea since Tony Montana bulletproofing his Porsche, search-marketing pundit Kevin Ryan published his first search-marketing column in the iMedia Newsletter. The industry reacts with cautious optimism. Search providers officially elevate to “orange” alert status.

April 2003: Google added Amazon.com to its stable, signing an agreement to provide paid links and Web search on the immense ecommerce site.

April 2003: comScore Networks launched qSearch, a system that tracks and reports consumers' distinct search queries across 25 major search engines and portals.

April 2003: Yahoo! released a more search friendly site design marking its rebirth as a portal. In this new interface, search boxes follow users throughout their search experience.

May 2003: Jupiter Research announced a tool to help advertisers determine how search can fit into marketing budgets.

June 2003: Google announced its latest drive toward making contextual search a four letter word with the publisher-driven AdSense program. Big pubs Switchboard.Com and Weather soon jump into the program.

June 2003: Nielsen//NetRatings launched AdRelevance 4.0, which includes among other things Nielson’s entrance into the search measurement frappe.

June 2003: Ebay announced a plan to offer keyword-based bidding for advertisers. Banner ads will be initialized in search results and bidding starts at ten cents.

July 2003: Google and Weather.com, Website of The Weather Channel®, announced a multi-year agreement that will make Google's search technology, and targeted content and search advertisements available on weather.com.

August 2003: The last bastion of under monetized search space was discovered by Overture services as their local search product is released for testing on Overture owned Alta Vista.

August 2003: Doubleclick jumped into the sack with iProspect and TrafficLeader for algorithmic search services and Paid Inclusion respectively. This move undoubtedly alienates every other search-marketing firm on the planet.

August 2003: Overture owned Keylime Software announced the release of LimeCommerce, a search marketing analytics app, proving you can own the traffic and tout its value at the same time.

September 2003: Google began testing its local search product as a Google labs experiment. At the same time, rumors abounded about Google being in talks with CitySearch for a local content partnership.

October 2003: Terra Lycos and Google Inc., have signed a multi-year agreement making contextually targeted advertisements through the Google AdSenseTM program available on selected sites throughout the Terra Lycos Network. Google will provide relevant contextually targeted ads to pages of Terra Lycos' U.S. properties including Angelfire, HotWired, Lycos.com, Matchmaker, Quote, Raging Bull, Terra.com, Tripod, Webmonkey, WhoWhere and Wired. Through AdSenseTM, Lycos users will see advertisements targeted to the unique content of pages throughout the Terra Lycos Network.

October 2003: Overture Services will provide paid search listing to Microsoft's MSN network in the United States and United Kingdom through June 2005.

October 2003: AOL expanded its relationship with Google in both editorial and paid search. This move is made to match search capabilities with Yahoo! and MSN. The deal is said to be a multi-year agreement and no expiration date was provided.

October 2003: MSN expelled Looksmart’s paid inclusion listings from search results. In the same time frame Looksmart introduced a “sponsored listing product.

Press Grabs

At least one immutable truth exists in search: Advertisers are bombarded with press releases, each hoping to ignite the universe of online marketing. In order to bring you this information in an easy to digest package, I have perused every press release since early 2002. The information contained in many of those press releases falls into the category of nice to know, but not earth shattering.

Incidentally, this activity most often sends me into a daydream where the Yellow Rose and I leave big corporate forever. We would start our own firm; I would give myself a cool title like “Chief Strategic Innovator” and start writing some really hot press releases.

April 2002: LookSmart purchased the WiseNut search engine for $9.25 million in stock.

January 2003: As of the start of the year, Overture depends on its partnerships with MSN and Yahoo! for two-thirds of its revenue.

February 2003: Overture reported net income of $9.5 million for Q4 2002, down from $20.8 million for the same quarter in 2001. However, for the entire year of 2002, Overture reported net income of $78.4 million, up from 2001’s net income of $20.2 million. (The company achieved its first quarter of net income profitability in Q3 2001.)

April 2003: Yahoo! reported Q1 2003 revenues of $282.9 million, of which $190 million came from marketing services, including paid search. That was up 38% from the same period in 2002.

April 2003: Overture announced that its 2003 earnings would be much lower than expected, with net income for the year projected at $22 million to $26 million, or between 35 and 42 cents per share, less than the 63 cents per share earnings forecast by Wall Street analysts. Overture blamed a variety of factors, including increased spending from its recent purchases of AltaVista and FAST, lower revenue from its U.S. paid listings, and higher-than-anticipated traffic-acquisition costs (the amount of money Overture gives to partners such as Yahoo! and MSN who carry its paid listings and make up two thirds of its revenue).

April 2003: Ask Jeeves reported revenue of $25.2 million for Q1 2003, a 57% gain from a year earlier. And net income mushroomed to $7.7 million, compared to a loss of $10.4 million in Q1 2002.

May 2003: LookSmart announced that its earnings for the year—before interest, taxes, depreciation and amortization—would hit only $13 million, down considerably from the $22 million to $25 million it had forecast. The market leader for paid inclusion said it still expects revenue in the $140 million to $150 million range. Even as it announced reduced revenues, LookSmart also said it earned a $1.1 million profit in Q1 2003, or 1 cent per share (lower, though, than the 4 cents per share market analysts expected).

May 2003: Ask Jeeves—operator of the Ask.com and Teoma search sites (the algorithmic search engine it bought in September 2001)—announced it would sell its enterprise search division and use proceeds from an upcoming $100 million debt offering for “general corporate purposes which might include potential acquisitions and investments.” The enterprise unit saw revenues decline in Q1 2003 to $3.6 million from $5.3 million in the corresponding 2002 quarter.

June 2003: AOL’s MapQuest picked up search listings for Google’s AdWordsTM program in another move to test the local search model.

July 2003: MSN and eBay partnered up for search results for some search results from MSN's homepage, Internet Explorer search, and shopping and auctions searches.

August 2003: Ask Jeeves dropped the butler and announced an effort to make search a bit more human with “Smart Answers" tools. People can now use everyday language to search. (What language were they using before?)

August 2003: Yahoo continues its move to be reborn as search utility, making search tools visible to searchers throughout the site. Yahoo is quoted as saying they want searchers too stick with them from inspiration through purchase.

August 2003: The first all-search-all-the-time industry association was formed. SEMPO, or Search Engine Marketing Professional Organization, is said to be working on standards for all forms of search marketing.

October 2003: Ecommerce superstore Amazon.com raised the curtains on a new "Search Inside the Book" feature that lets shoppers preview full text of titles. The feature, which has the approval of book publishers, puts some 33 million pages of searchable text at the disposal of Amazon.com shoppers.

Hypothesis Prognostics

Of course, I wanted to bring you the world to date with the possible exception of late-breaking changes, which cancel out earlier changes that happened only last week (gasping for air) so I couldn’t get them to my editor in time. Still the most frequent question I get from advertisers is how much more consolidation can the industry handle? Sure, there are still a few holdout candidates out there, (like FindWhat) who might be consumed by bigger providers. But, with Google about to go public, it is anybody’s game.

Ad:Tech is kicking off in New York this week and the event has always been a favorite for big announcements, so stay to tuned to iMedia as the search marketing world continues to take shape. Yours truly will be there and you can catch me on a search-marketing panel Wednesday morning.

About the author: iMedia search columnist Kevin Ryan’s current and former client roster reads like a “who’s who” in big brands; Rolex Watch, USA, State Farm Insurance, Farmers Insurance, Minolta Corporation, Samsung Electronics America, Toyota Motor Sales, USA, Panasonic Services, and the Hilton Hotels brands, to name a few. He is currently Director Market Development of IPG’s Wahlstrom Interactive where he provides guidance in directional online marketing to Wahlstrom’s prestigious list of clients and sister agency brands. Also, Kevin really, really likes his job at Wahlstrom and was only kidding about that “leave big corporate” and “Chief Strategic Innovator” title comment.

 

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