A Year Is A Long Time In Search

By Martin Kelly, Editor, Search Engine Room

This coming Christmas, the Interactive Advertising Bureau estimates that Australian advertisers will splurge $500m on online advertising.

Of that, based on IAB market share figures, around $250m will be spent on Search advertising - far more than any other sector - and significantly more than last year.

Clearly, as will be revealed at Search Engine Room on November 18, 2009 has been a definitive year for search.

Search has won the online advertising war and its domination is set to continue through 2010.

So it seemed like the right time to post a personal overview about the industry that is defining online advertising. Thoughts and trends follow. Any feedback let me know on mjk@iform.com.au

Search Works, There’s No Mystery

The reason Search is winning is simple – it works better than the alternatives, even though old school advertising hacks (and the odd romantic) insist otherwise. You see, there is no real scope for creativity. Just a relentless focus on numbers and results measured through Return On Investment. Despite increased competition, it also remains relatively cheap. That said, it’s not unusual for companies to spend $20m or more a year on search advertising.

Search Works, There’s No Mystery

The reason Search is winning is simple – it works better than the alternatives, even though old school advertising hacks (and the odd romantic) insist otherwise. You see, there is no real scope for creativity. Just a relentless focus on numbers and results measured through Return On Investment. Despite increased competition, it also remains relatively cheap. That said, it’s not unusual for companies to spend $20m or more a year on search advertising.
  
The Google Machine

It’s the definition of efficiency, a numbers driven juggernaut with no room or time for sentimentality; creator of amazing technology that defines how we see the world, a hard-core business that makes billions.

Welcome to the Google Machine, which through its absolute domination has changed the rules on how to do business – and how business is done. Yet 2009 has been a testing year for Google Australia.

While it’s probably made more money in Australia this year than last, fair to say it is no longer uniformly revered.

People love the core product and add-ons like Maps and Earth but are becoming increasingly leery of Google’s power and ubiquitousness – Google is everywhere, there’s nowhere to hide.

Here in Australia Google’s approach remains reserved but friendly, isolationist rather than expansionist. Over the past 18 months there’s no question the business has turned inward, away from the industries it serves.

The Google halo also slipped a little this year when 15 staff lost their jobs after the Melbourne and NZ offices were closed as part of a global cull which shed 200 sales and marketing people.

Yet sales of its products have continued to rise and automation now does the work of the dearly departed. What a business!

Return On Investment

Advertisers love search because it is measurable. Publishers hate search because it is measureable. No contradiction here.

The harsh financial climate has seen a shift to ‘performance based advertising’ where results can be clearly measured.

This is probably the start of a fundamental long-term trend that is already causing serious angst among big publishers such as Jack Matthews from Fairfax Digital who likes nothing better than a big, flashy and very expensive branding campaign.

“Direct response is easy to measure and clicks represent the low hanging fruit of measurement,” Matthews said. “While direct response advertising can be effective, the over emphasis on the last click is undermining ... effective brand building.”

Surprisingly, Matthews has some support for this point of view among the search marketing community.

No question though that the Return On Investment mentality is here to stay.

The big issue is how major digital publishers adapt their ad models yet maintain revenue.

Growing Pains

The massive growth in paid search advertising has created a few issues for search advertisers.

A big one is search inflation thanks to increased competition for important keywords.

Depending on who you speak with, the cost of popular keywords on Google has increased by up to 300% in the last three or four years.

This is a worry but evolving ROI metrics ensure the companies can always find a way to justify the Cost Per Click.

Aligned to this is a swing back to popular, more expensive terms (because they work) away from the so-called Long Tail.

Sure, Search might be expensive but it’s still cheaper than the alternatives.

Where is Yahoo!

Yahoo! has been quiet. It’s had a tough year with job losses and poor results.

As in the United States search is very much a secondary priority to display advertising on the Yahoo!7 portal.

For example, of the 17 press releases Yahoo!7 has issued in Australia this year, only one was about search.

And even that was something of a mopping up operation that pretty much summed up its Search woes.

It concerned the launch of Yahoo!7 Local, a joint venture with News Digital company www.TrueLocal.com.au.

Both were both jilted when Google and Sensis hooked up.

Business listings from the massive Sensis-owned Yellow online business directory displaced True Local listings on Google Maps.

Yahoo! Search Marketing, the long-term supplier of ad content to sensis.com.au, was also brushed, shoved aside by the rampant Google AdSense.

AdSense is now on most major Australian publishing sites - Sensis, News Digital Media, Fairfax – leaving YSM with Yahoo, Ninemsn and Bing.

Exactly how things are progressing at YSM is difficult to know. A couple of emails to local boss Willie Pang have gone unanswered.

Bing Bong – Is Anyone There?

There’s been no discernible impact of the Aussie search market by the arrival of Bing, the new search engine developed by Microsoft.

No-one talks seriously about it, only in the abstract.

One day Bing and Yahoo hope to unite and take on Google. But that’s subject to US Government approval and could take more than a year.

Consequently, each company is now entwined in some kind of search twilight zone.

Certainly Bing’s local approach is hard to read.

It is being run by Alex Parsons at Ninemsn who has no enthusiasm to connect with the trade.

Based on available evidence, it’s unlikely this approach will change any time soon.

What’s Happening in Agency Land 

Overall it’s been a pretty good year for search marketing and optimisation agencies, though there have been redundancies – especially among sale staff that don’t hit their targets.

But the work is still out there and the better agencies are growing strongly as more companies get involved.

Agencies report increased focus on Search Engine Optimisation strategies among advertisers intimidated by rising PPC costs on Google.

But as the economy has improved, paid search has made a comeback.

There is also increasing specialisation among agencies with many of the bigger ones now solely focussing on paid search, where technology rules.

The Future

See above.

 

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