Advertising Agencies

Pay Per Click org.uk
February/2003
BY Justina Gapper

Justina Gapper is former news editor of New Media Age and media and marketing editor at netimperative. She is now a freelance internet business journalist.

Pay-for-placement (PFP) and pay-per-click (PPC) networks have helped make the search market one of the few winners of 2002. But, asks Justina Gapper, will the hunt for greater profits hurt their cause in 2003?

To say the search market has experienced a boost in the past 14 months would be an understatement. No other sec-tor in the internet industry has earned so much attention, and the monetisation of search - in all of its forms - has become a particular talking point.

Search is the second most popular online activity, with more than half of all users search-ing for information or products at least once a week according to Forrester Research, which also found that advertising on search engines generates conversion rates 2-4% higher than banners. And, with advertisers claiming that paid listings can result in conversion rates at least ten times higher than that, it's no surprise that, while advertising overall revenues have struggled, search marketing has bucked the trend, giving the likes of Yahoo!, MSN, Freeserve, Lycos and Ask Jeeves a whole new profit-centre.

Less than five years old and still in its growth phase in the UK, the paid listings sector - both placement and inclusion - has exploded in the past 12 months, with figures from eMarketer showing that 2002 was its biggest year ever worldwide, with a 144% growth to $301.9m in the US alone.

In October, pay for placement (PFP) pioneer Overture reported a profit for the third quarter running, with global revenues reaching �111.6m - double that on the same time last year. Meanwhile, its main rival Espotting expanded into nine European markets in just over a year, and now serves 11,500 advertis-ers. This growth shows no sign of slowing, with Overture opening in the world's second largest internet market, Japan, just last month and Espotting announcing aggressive expansion plans for "outside of core EU states" for next year. Jonathan Bunis, Espotting's COO said that while the company wouldn't rule out expanding its offering, it is focusing on PFP for now, which he believes will see similar growth next year: "The pie is growing in this market. More and more advertisers are starting with us and our aim is further expansion and also look-ing at other opportunities for monetisation."

And the piece of pie has just got that bit bigger with the withdrawal of BT from the pay for placement sector. Following the decision to dissolve the BTLooksmart joint venture, the company's pay per click service BidSmart is to cease operating, giving other agencies the opportunities to snap up those advertising and distribution clients. Indeed, Espotting said it was in negotiations with several of these within 24 hours of the news of BTLooksmart's closure.

While Looksmart intends to continue to oper-ate independently in Japan and the UK, its decision to pull out of the pay for placement sector surprised many, particularly Martin Turner, MD of BTLooksmart, who said the company had seen 100% growth in the last 12 months, with BidSmart signing up 500 advertisers within its first six weeks.

Certainly the pay for placement model - also known as pay per click (PPC) - has attracted a number of agencies and even the web's most reputed "independent" search engine, Google, which launched its AdWords earlier this year and is already proving a threat to the pay for placement specialists by usurping Overture as AOL's preferred sponsored listings partner.

It has since signed deals with Yahoo! in Japan and David Krane, director of corporate communications, says the growth of AdWords is one of the company's primary objectives next year: "We are working to make Google available to as many countries around the world as we can, making localised versions and localising our AdWords programme - which is currently available in six languages so that SMEs all around the world can benefit."

HIGH RANKINGS VS. TARGETED TRAFFIC

Based on an auction system where advertis-ers bid against relevant keywords, pay for placement is, as BTLooksmart's MD Martin Turner describes it "a no brainer in terms of a compelling business model" for search engines which earn cash from leads and for advertisers looking for a low-cost response-based advertising model.

But Andy Williams, head of surfing at Yahoo! UK, says the benefits of pay for placement to search engines go beyond simple economics and - despite concerns that users would boycott commercial results - have actually been effective in building relationships with con-sumers who "expect to see top quality brands in search results".

And PPC has also given the SME market the opportunity to gain visibility within search engines, particularly when purchasing highly targeted keywords that may not be of interest to the larger brands seeking high volumes of traffic.

Attracted by an advertising model that allows them to easily manage budgets and traffic, the PPC model has offered businesses a low-cost introduction to online advertising. Espotting also believes that bidding against relevant keywords provides the only platform where small businesses can sit alongside multi-nationals.

Meanwhile Overture MD Martin Child says the company is expecting further growth in the SME market next year: "The auction model works really well for niche services. We're seeing companies selling products like ink car-tridges that may have never advertised before. This is a great opportunity for people who have had no chance to get their name out into the marketplace."

PAY FOR INCLUSION

Another area in the commercial search arena tipped for growth next year is the paid for inclusion model. Introduced by search engine Inktomi, it guarantees inclusion - but not rank-ing - in the search index. Following the success of the model in the US, Ask Jeeves intends to roll out paid-for-inclusion products in the UK in the coming months, while Norwegian search engine FAST Search and Data, which powers Lycos and Tiscali, also plans to extend its products in the UK.

Google currently doesn't offer paid inclusion but Mike Grehen, author of 'Search Marketing: The essential best practice guide' believes that an IPO would change all of that: "Google is run by search purists but once it gets some more corporate involvement it will become more commercial and I think this will mean paid for inclusion into its index."

While paid for inclusion currently doesn't cur-rently guarantee advertisers ranking - with placement depending on relevant content and how well the site has been optimised -observers are concerned that search engines will be tempted to boost profits by guaranteeing index rankings for the right price. And with a recent survey by US firm iProspect finding that 56% of users don't bother to look at results beyond the second page, achieving promi-nence in search results could drive advertisers to offer very attractive incentives to search engines to boost their rankings.

FAST's Steven Baker thinks that it may prove too appealing to some: "Portals have economic problems of their own. It would be easy to give away the top ten results as commercial but it would lose users. The major portals are currently keeping the balance but some sites are all paid for and they are losing out in the long-term for short-term gain."

Ask any search engine to name the biggest issue facing it today and the majority say "relevancy". Pay for placement firms argue that commercial listings are valid as long as they pull up relevant results for the user: what's to say the very same argument won't be used for a commercial index?

AltaVista, which has finally realigned itself as a pure search engine, is horrified at such a thought and says it would never accept payment for rankings, although sites can pay to be considered for the index. Instead, AltaVista's marketing director Karl Gregory says relevancy must be achieved through advanced technology - and says the company developed its newly launched assisted search tool Prisma after months of research from its user base.

"Our research showed that stickiness and loyalty for search engines is based on users finding what they are looking for without any heavy work. Through tools and services we are trying to regain that leadership that we had three years ago," he says.

That leadership is currently firmly estab-lished in the hands of Google - a search engine once popular just among the more experienced user groups that has seen phenomenal growth in the past year through word of mouth, reputation and enviable distribution deals. Accounting for more than 55% usage share of the global search market and with a 48% reach in the UK, Google is the dominant name in search and is responsible for bringing the sector back to the forefront of internet business.

Yahoo! has seen its market share dwindle as users have abandoned the portal in favour of pure search service Google, which just happens to power Yahoo!'s web index. Despite speculation that Yahoo! would dump Google in favour of another partner, the two have just renewed their long-term agreement - for simple reasons, says Andy Williams, head of surfing at Yahoo! UK and Ireland: "We always choose best of breed partners. We started with AltaVista, then changed to Inktomi and now we are with Google. It's as simple as that."

Google may dominate for now, but there are always opportunities for contenders to emerge in a growing market and a number of new search technologies reportedly just as good as Google are set to come to the UK next year. In terms of real competition, Google itself concedes that its main threat lies in "young, smart companies investing heavily in search".

NEW TECHNOLOGIES, NEW PLAYERS

One such technology is Ask Jeeves's Teoma. Based on the 'Hits' algorithm patented by IBM, Teoma looks for "hubs" and "authorities" around the related topic, displaying the results in three different ways, including a refining tool which allows users to drill down even

further. Ask Jeeves head of business development for UK and Ireland David Graham says Teoma is "fundamental to our business and our core focus over the next year", with Ask aiming to become one of the most important players in the search technology market. Wisenut is another contender that has already received good reviews from users and search experts in the US. Bought by Looksmart last year, Wisenut is similar to Google in that it bases its rankings on link analysis, however, it includes several "secret ingredients" and is expected to be a powerful part of Looksmart's arsenal when it is rolled out in the UK next year.

Finally, FAST Search and Data already boasts an index of more than two billion pages, was the first engine to index Flash content and, according to Steven Baker, VP of FAST Search marketing service, is the only realistic rival to Google as it is constantly developing new rele-vancy algorithms.

Already providing results to Lycos and Tiscali, FAST aims to extend its UK reach fur-ther in 2003 and believes that the European market is far from sewn-up: "The European market is much more fragmented with search being spread among regional players while the US is dominated by the top four. Globally, the search market sees 350m queries a day and Google gets a third of that. We've got to get the rest - that's our aim."

Other search services hoping to gain footholds in the UK next year include Dogpile, a metasearch engine from Infospace which has already white-labelled its service for media sites The Mirror and The Telegraph. Aggregating results from a number of different search engines, metasearch engines are targeted at those estimated 49% of users (iProspect) who like to use several search engines and at new users who have not yet become loyal to one service. Alex Hurd, MD of Dogpile says a marketing plan has been outlined for a further push into the UK in 2003 with the intention to gain more white-label partners. And if going head to head with the likes of Google is too tough a challenge, 'vertical' engines could offer a new distribution channel for search engine technologies such as FAST, Wisenut and Teoma.

Mike Grehen sees 'vertical search' as an area in which we'll see considerable growth next year, referring to US site Lawcrawler.com as an example. The site is programmed to search for information only on the legal industry thereby avoiding ambiguous results from search engines with certain keywords. For example, a search on 'Madonna' can often result in information on the pop singer and the mother of Jesus.

However, Lawcrawler is powered by Google, proving Google is still the search engine of choice; and with a strategy outlined for further expansion next year and a number of new products and services - such as its shopping search tool Froogle - it doesn't plan to let its lead slip.

WIRELESS ADVANCES

The wireless search market is another area in which Google has already made inroads, having agreed deals with Palm and Vodafone and working with NTT in Japan, a country expected to lead in this area. Rival FAST claims to have been the first search company to develop a mobile search index and both Ericsson and Nokia integrated the service into their offerings last year. Wireless search services are still in the early stages and FAST's Steven Baker believes we'll see real moves in the second half of next year, which will be carrier driven.

Meanwhile the PFP agencies are already in negotiations with partners to take their revenue models onto wireless platforms. Espotting has been providing the top three search results for queries to Pogo, a handheld internet service, since February. The advertiser's logo is also displayed alongside the result which Jonathan Bunis says is an added branding incentive to the PPC revenues. Its next move is to expand into the Scandinavian and Italian markets where mobile phone use is high, but also does-n't expect any real developments for some months yet. Overture believes the real selling point for mobile search will be localised services, but with fulfilment capabilities online. It will be running trials next year with 7,000 advertisers lined up but, warns Martin Child, it could be some time before a full service is available - and it's not the technology holding that up: "The acid test is when there's a profitable market. WAP was a great example - it wasn't internet on the phone. We have to be careful that the delivery matches expectations and the market is prof-itable and ongoing."

Until mobile search becomes a reality, search engines and portals will be looking to increase revenues from existing models such as pay for placement and inclusion, in addition to working with paid listings firms and media agencies to identify new areas through which to generate revenue.

Martin Turner believes the paid for model is "the most fundamental change in online marketing for years", and despite the moves of BT and Looksmart, believes that search is clearly the most effective way of generating revenue for portals.

Online advertising looks set for a turnaround finally next year with Zenith Optimedia predicting that the industry will post its first positive gain since 2000.

Search engines face many challenges in the coming year, and until ad revenues pick up, the increased interest in search marketing from advertisers could tempt some sites to completely commercialise search listings - despite the potential loss of integrity. For this sector, getting the right balance between higher rev-enues and consumer relevance may be the biggest challenge of all.

Justina Gapper is former news editor of New Media Age and media and marketing editor at netimperative. She is now a freelance internet business journalist.

This article first appeared in the netimperative Online Search sector report, sponsored by Ask Jeeves

Pay Per Click org.uk
From
promotiondata.com

New Sources for Targeted Web Site Traffic
by Lee Traupel

Qualified traffic is the lifeblood of any web site today, especially for ecommerce sites that are selling goods or services online. But, many media buyers and/or owners of web sites are paying too much for traffic by relying on top tier PPC ("pay per click") search engines like Overture or Google's Ad Words Select programs and others.

There is a new breed of web site traffic brokers emerging in the interactive marketing world that are brokering qualified traffic to the highest bidder on a CPC ("cost per click") basis. Traffic brokers bypass tried and true business processes by flipping the business proposition 180 degrees. They don't find clients and then optimize their web site for search engines; they do it the other way around, by developing and optimizing their own domains for top tier search engines and then reselling this traffic by redirecting it to a destination of their choosing in real time.

So, is this process illegal or unethical? It's hard to say. I don't believe these processes are more disingenuous than what's occurring with hidden "sponsorship listings" via top tier search engines, including Yahoo, MSN, LookSmart, Overture, etc. The latter are now starting to take up the lion's share of the first page on search results -- these results are viewed tens of millions of times per day, with many people unaware that the results are "sponsored listings."

To muddy the digital waters even more, marketing services companies are starting to offer "trusted feed" traffic to companies who want to buy qualified traffic on a CPC ("cost per click") basis. This process is just starting to take hold in the marketplace and works by a marketing services firm contacting a prospective client and offering them "trusted feed" search engine listings on a top tier web site like MSN or LookSmart on a CPC "cost per click" basis. They (the marketing services firm) then build web site pages for their client that are based on their in-depth knowledge of what the search engines want and then submit these pages to the search engine/directory's editors who then review the sites, give the "client" a top tier listing site and then share in the CPC trusted feed revenue with the marketing services firm.

It's getting pretty murky when you start to look closely at what and how traffic originates. I don't think brokering traffic is bad or unethical as long as the web site that is the final recipient of the traffic is offering goods and services that are identical to the referring web site. And, there is a self-policing component of these types of processes -- the traffic brokers want repeat business, so it is in their self interest to make sure the redirected traffic is being sent to a similar web site.

Also, "conversion rates" (the number of people taking a specific action versus the amount of traffic) are rapidly becoming the final determinant of building a sustaining relationship between the traffic brokering firm and the recipient web site. If the traffic coverts then the recipient typically wants to buy more, if not, they will move on to another source -- this reinforces the self-policing aspects of the relationship.

So what do you look for if you want to start buying traffic from a web site traffic broker? Price is certainly a large factor in determining what your interest should be; most of us in the traffic brokering business typically offer keyword traffic at about a third or half of what you would pay via a trusted feed setup, or Overture or an Ad Words Select program via Google. Expect to pay more for filtered ("automotive, insurance, telecommunications") versus unfiltered ("shopping mall type of traffic") as the former has to be carefully filtered for specific keywords or keywords sets so it can be distributed to a larger number of web sites.

Next, make sure you get a 24/7 reporting capability that enables you to analyze your traffic in real time -- this report should show the originating keyword traffic (keywords are always embedded in the search string). And look carefully at your report; proxy traffic (or cached pages) should be filtered out so that there is no more than 5-10% of the total traffic -- you can't get away from having some proxy traffic in this day in age, even AOL is using proxy servers. Finally, look closely at your report. The timelines should have some randomness in the sequences; if you see a traffic report with keyword traffic that is spaced very closely in terms of the timeline, warning bells should go off.

Lee Traupel has 20 plus years of marketing experience - he is the founder of Intelective Communications, Inc. http://www.intelective.com, a marketing services company which provides strategic and tactical marketing services exclusively to small to medium sized companies. Lee@intelective.com Reprinted with permission from Intelective Communications - this article may be reprinted freely, provided this attribution box remains intact. (c) 2001-2002 by Intelective Communications, Inc.

Pay Per Click org.uk
From
Anthony Dine
best-buy.org

Overture Services has doubled its minimum bid price for paid search listings in the United Kingdom

by 5 pence to 10 pence in the last week. The speculation is that Overture will shortly raise the minimum bid price for paid listings from 5 cents to 10 cents in the United States. With Around 74,000 advertisers; bids for a text link start around 5 cents and can go as higher than $45.