Search Marketing: What's the Problem?

The media spotlight that shines so brightly on Google may be blinding many observers to problems that lie ahead for search marketing.

There is no question that Google rules the search market. Back in 2004 — the year that Yahoo! bought Overture, the company that originated paid search advertising — Google garnered "only" a 32.9% share of total US search ad spending. Its slice of the pie increased by nearly 16 percentage points last year. eMarketer projects that more than 57% of all search advertising dollars will go to Google this year.

As the Boston Globe wrote in May 2005, "How do you compete with a rival whose name has become synonymous with Internet search?".In fact, according to a recent survey from Ponemon Institute, nearly three-quarters of US Internet users literally 'google'.

"It's a rare day when no news or feature about search engines appears in the trades or mainstream media. Much of the attention involves Google, its video search site, its toolbar, its legal case against the Federal government or its controversial project to index as many of the world's books as possible," says David Hallerman, eMarketer Senior Analyst and author of the new report, Search Marketing: Players and Problems. "But search is more than Google — or even Yahoo! and MSN — more than sponsored link advertising and more than direct response marketing."

As popular as search might be, more Internet users spend time on content and communications sites than on search sites. Ongoing research from the Online Publishers Association (OPA) and Nielsen//NetRatings show that in Q4 2005, search had a 77.3% reach among US Internet users. That was a 1.1% increase, however, from Q1.

The key difference between search and the other three site categories comes down to engagement — people spend far less time with search than with other types of activities, only 4.7% of their total time online in Q4 2005, according to the OPA/Nielsen data — or a mere 215 million hours versus nearly 1.9 billion on communications sites, for instance.

As David Vice, author of The Google Story explains, "Google's business model is to get you off Google's site as quickly as possible and on to whatever it is you are looking for on the Web."
"All is not rosy in the search business," says Mr. Hallerman. "Concerns about click fraud and privacy are two sticking points that will potentially chip away at, if not halt, the growth of search engine marketing."

Measured not by a count of clicks but by companies, 42% of all advertisers told SEMPO they've been victimized by click fraud, surpassed by 51% of agencies claiming the same problem.

If not brought under control, click fraud could challenge the basic business model of paid search, since "fraudulent clicks don't convert," as Matt McMahon, executive vice president at Fathom Online, told MediaPost. Disenchanted search advertisers would follow, leading to lower bids, smaller paid search campaigns, and — among savvy marketers — greater investment in search optimization.

Just last week, to settle a class-action lawsuit over alleged click fraud, Google said it would offer $90m in advertising credits to marketers who claim they were charged for invalid clicks and not reimbursed.

"And if government demands for search data — such as the federal request that Google is currently fighting in US courts — continue, that could undermine the trust that most Internet users have in search engines," says Mr. Hallerman. "Disenchanted individuals would lead to fewer searches, fewer clicks (on both paid and organic listings), fewer dollars for the search engines, and fewer reasons for marketers to include search in their online campaigns."

Find out about the potential problems and the growth prospects, read eMarketer's new report, Search Marketing: Players and Problems.

Article from www.eMarketer.com, 21 March 2006