A Search Marketing Snapshot

MarketingSherpa wants to make it very clear: They don’t do market research, they do research on marketing. That is, they independently examine what marketers are actually doing and publicize their findings either as case studies or swept together into larger trend evaluations.

The Warren RI-based company has just compiled and published its latest sweep, surveying 3,271 search engine marketers last July to get information about their search engine marketing (SEM) campaigns and search engine optimization (SEO) efforts in 2005. The data, available as MarketingSherpa’s second annual Search Marketing Survey, serve as a benchmark by which to measure the effectiveness of both pay-per-click (PPC) ads and SEO in terms of costs and conversions.

Among other data, the study found that 43% of paid search marketers rate the technique “highly effective”—9 percentage points higher than did so in 2004—and that the size of the average keyword campaign grew from 9,100 terms last year to 17,314 words in 2005. Fifty-nine percent of B-to-B marketers plan to spend more on SEO in 2006. And while in-house SEO campaigns hiked Web site traffic by an average of 38% this year, outside optimization firms produced traffic spikes of 110%.

Obviously, the results are varied. SearchLine asked MarketingSherpa president Anne Holland to extract what she considered some of the most interesting trend data from this second annual report.

First, it was surprising to her that search is not more fractionalized, given its importance to users and therefore to marketers. “Search is the third most common activity online, behind handling e-mail and surfing the Web, and yet 127 million Americans are using just four main search engines: Google, Yahoo!, MSN and Ask Jeeves,” Holland points out. “It’s like TV was in the seventies before cable.”

The problem comes when it turns out that companies active in search marketing are spending 20% of their total marketing budget—both online and offline advertising—with these four companies. That gives those companies an outsized influence over the marketing success of their advertisers; small changes in their systems, their procedures or their ranking algorithms can create a roller-coaster ride of effects for companies hoping to increase sales or win customers through search.

“There are about 150,000 marketers who are spending real money on search marketing today in the U.S.,” Holland points out. “Those 150,000 are seriously affected by the decisions of four executive vice presidents.”

And in some segments, Holland says, the field of possibilities for advertisers is even more limited. “At this time, in B-to-B, it essentially comes down to Google,” she says. “Not that they’re bad at it, but—‘Whoa!’”

The current industry structure concentrates all the negotiating power on the side of the engines, she says, and marketers may eventually want to come to grips with that.

That may change now that MSN has begun beta testing its home-grown paid-search program in the U.S., with which it intends eventually to replace the Yahoo!-supplied ads now on its results pages. But don’t expect that to mark the arrival of a slew of new search engines. For one thing, SEM is a complicated process, especially for marketers trying to do it themselves. “It’s so complicated and so different to set up campaigns with each of the engines that most marketers just settle for two,” Holland says. That complexity will only get worse with Microsoft in the picture.

Holland expects that increasing competition among the four engines may work to marketers’ advantage. Still, so many advertisers chasing a limited inventory, some of which may be sold at auction but all of which is in the hands of four companies—that’s not going to turn into a buyer’s market any time soon.

Another surprising data point to come from MarketingSherpa’s second benchmark survey is the contradiction between what marketers say about the effectiveness of SEO and what they’re in fact doing. The survey shows that advertisers think enough about the benefits of optimizing Web sites to raise their natural search rankings that they’re spending more money than ever on SEO: $660 million this year, more than twice the amount spent last year to make their Web sites more searchable.

And yet that $660 million is only about 12% of the $5.5 billion that will go this year toward paid search ads, even though a separate MarketingSherpa survey in August found PPC listings convert at only 3.6% compared to 4.2% for optimized organic results.

“Everybody knows SEO converts higher on average and produces better ROI in most cases, but that’s not reflected in current spending,” Holland says. This year’s survey asked why that should be, and got the answer: 28% of respondents said “Don’t understand SEO, overall complexity.”

“A lot of marketers get directly into PPC because SEO is technical and therefore scary,” she says. “It’s so easy to pump up a PPC campaign when you first start doing it; it’s as simple as making an ad buy.” Once these new entrants realize search marketing works, they start pouring money into it and eventually a sophisticated desire to make the medium perform better for them.

It’s that maturation that Holland thinks will favor SEO over PPC spending, which increased by about two-thirds last year compared to SEO’s 2x growth. She predicts that optimization budgets will crack $1 billion next year as more marketers strive to improve their search conversions.

Finally, MarketingSherpa’s report includes some interesting case studies that point to trends in tactics. The one that most catches Holland’s interest is the increasing practice of writing and optimizing press releases to turn up in search results and convey information directly to consumers—“beyond-the-press” releases, as it were.

According to Holland, press releases have become less effective at attracting press notice because of the wealth of other information available, from company Web sites and custom e-mail to blogs and general search. But a well-crafted press release will still show up in a keyword search and can be used to speak directly to customers. She points to one example in which Southwest Airlines used four press releases to sell $1.5 million in tickets in 90 days, with all sales traceable to links included in the releases.

MarketingSherpa asked survey participants whether they optimize their press releases for search engine spiders and found significant numbers of those players in some of the most competitive PPC markets, including computers and electronics (18.2% optimize releases), banking and finance (12.9%) and health and pharma (11.7%).

“I expect to see this become a much more widely used tactic in the coming year, especially by affiliate marketers, who are usually first to jump on the guerilla marketing techniques that work,” Holland says.

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