SearchTHIS: Why Search is Slowing

The big G has gone public and the ubiquitous excitement surrounding the latest thing to Google has died down. Search marketing might once again become just another thing people don’t seem to understand and it seems everything about search marketing that can be written, has been written.

This might be a slight departure from my usual search-aggrandizing opening but last week’s announcement of the latest Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers data along with the Interactive Advertising World conference buzz spawned a flurry of emails about what might happen with search. Most seemed optimistic but at least one senior agency executive wanted to let me know that search is officially over.

Is it? Some of the excitement is, perhaps. However, as with the initial enthusiasm surrounding online marketing, when the party was over, the ensuing hyper mediocrity meant it was time to get down to business and begin to get smart. Let’s look at the numbers and a couple of smart movers that might just keep search leading the way.

Data loves company

As the old saying goes, if you torture the numbers long enough, they will tell you exactly what you want to know. In this instance, the annual IAB report sings like a canary. Ad format spending as a percentage of total ad spending gives us a roadmap of what’s hot, but more importantly what’s not. In this example, I have combined the interstitial format of 2002 and 2003 with rich media as this year’s IAB report has done.

Keyword search not only emerged as a format in 2002 but also began to appear on advertisers' radar. By 2003 it was clear to anyone with a Web site and a dream that search had arrived. This year, growth slowed to merely astronomical, which had more than a few asking if this would be the beginning of a sobering search slumber.

Has search growth plateaued? Not according to Nate Elliot, associate analyst at Jupiter Research. “The growth is slowing, but it had no choice, you simply can't keep a two billion dollar industry growing by 100 percent every year,” Elliot says. The search format "will still grow by 34 percent this year, which is amazing expansion. TV and radio execs are ecstatic if they see 10 percent growth in any given year, so search is still doing just fine.”

Elliot predicts that display, search and classifieds will all grow by 25 or 30 percent over the next couple years, but that raises another question about growth in search spending. Clicking on search results have fueled spending so far, but where will new search growth come from?

Phone books, verticals and shopping engines, oh my!

Contextual search mapping has grown by leaps and bounds in the past year. Advertisers used to fear Jack Daniels' ads appearing on pages which contained editorials on Alcoholism. New mapping technologies are starting to make such train wrecks a thing of the past. Providers like Quigo are helping to pave the way with innovative strategies for delivering a relevant contextual platform. As relevance rises, so will spending.

Greg Sterling, analyst for the research firm, The Kelsey Group, host of the upcoming local Interactive Local Media (ILM) conference predicts the rates of directive search growth will level off in the coming years, but struggles for expansion will be most evident in non-traditional areas. “Local search has been a battleground for search engines, Internet yellow pages and city guides in the past year,” reports Sterling. “The biggest barrier to local adoption of search engines has been awareness and a truly useful tool for searchers; all that is about to change.”

Kelsey and BizRate will release their latest round of research in the coming weeks that shows significant growth in awareness of local search on search engines, which is more fuel for local search spending.  

In terms of shopping engines, Lisa Wehr, president of the search engine marketing firm Oneupweb believes verticals will be a key component to search’s future. “The largest portion of search growth may come from vertical site or business specific segments,” she says. “We have already seen limited growth in shopping engines, but we are likely to see those areas explode in the coming year.”

Shopping, business specific interests or contextual components will be key to the continued success of search, but most agree that we have seen the biggest jumps in activity or spending. History has taught us that innovation can come from the most inane and unpredictable sources. While the search format may not experience technological innovation per se, revenue growth might come from learning to use a tool that has been around for at least a hundred years: the telephone.

Goodbye, pay per click; Hello pay-per-call

Search clicking may have instigated big growth in online ad spending but advertisers may turn to the next big thing which was all-abuzz at last week’s Interactive Advertising World conference in New York, the pay-per-call format.

The performance-based pay-per-call works exactly how it sounds. For small business without a Web site, pay-per-call is a really neat way to enter online advertising, but it works well for big business too. Since many advertisers know that calls lead to sales at a much higher rate, the cost of entry for calls is likely to be much higher.

As a first mover in the pay-per-call space, Florida-based search provider FindWhat offers a unique perspective on how modern technology meets usability in adapting Alexander Graham Bell's "electrical speech machine." 

FindWhat not only gets points for being a leader in pay-per-call, but in my book, it should also receive commendation for keeping the Ft. Meyers headquarters up and running amid this year’s abominable hurricane season. Just as FindWhat isn’t dependent on the weather, Rick Szatkowski, FindWhat’s senior vice president points out pay-per-call isn’t reliant upon search.

“Success in pay-per-call is not dependent on the growth of the search market at all. Paid search marketing is but a fraction of the overall advertising spend in the United States,” Szatkowski says.

“Outside of search, consumers are 'calling' in response to direct marketing mediums all of the time. Bringing pay-per-call to market in the paid search space and leveraging it into the broader DM market provides a larger market than the online world has to offer for the foreseeable future. Consumers know how to use it, advertisers know how to convert phone leads, and have the ability to benefit from performance-based marketing across a broader base, reaching more potential customers,” Szatkowski says.

So there you have it, search marketers. It's time to smarten up and buckle down. We don't have to re-create the wheel (or the telephone), but the party is now officially over. In order to keep the search pie growing, we'll have to get creative. The good news is, everything we need is right around the corner.

iMedia 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. Ryan believes in sound guidance, creative thought, accountable actions and collaborative execution as applied to search, or any form of marketing. His principled approach and staunch commitment to the industry have made him one of the most sought after personalities in online marketing. Ryan volunteers his time with the Interactive Advertising Bureau, Search Engine Marketing Professional Organization, and several regional non-profit organizations. Meet Ryan at the Kelsey’s ILM:4 Conference, November 3-5, 2004 and Ad:Tech, NY November 8-10.