There’s still plenty of room for search marketing to grow, by penetrating new advertiser markets and by adapting the auction model to new kinds of online ad media. That was the consensus of representatives of the five major search engines during a panel discussion Wednesday entitled “Search Advertising: Now and Future” at Search Engine Strategies New York 2006. [For more on this story, see our DirectBuzz SES blog.]
“In real numbers, search is going to grow very significantly” said Tim Armstrong, Google’s vice president of ad sales. While the “law of large numbers” will dictate that the rate of growth will be shallower, there’s “infinite optimization” still to be done in delivering the right ads at the right price to visitors in all languages and countries. “The ceiling has yet to be hit,” he said.
“We see a lot of different sources of growth,” said Tim Cadogan, vice president of search at Yahoo! Search Marketing. Small businesses not yet online or those not yet using search engine marketing (SEM) will prove an important penetration target in the future. On the other hand, many large online advertisers—for example, the big brand advertisers and retailers-- are not yet aware of the proportion of their offline sales actually driven by search. “We’re helping people connect those dots and showing the full value generated by search,” Cadogan said. Other growth opportunities lie in mobile SEM, in global expansion and in greater use of SEM by such categories as entertainment and consumer packaged goods.
The question of the growth prospects for search engine marketing (SEM) had come up in earlier presentations, with research suggesting some flattening of the medium’s moon-shot expansion in the last two years. That assessment was reinforced on Tuesday, when Google CFO George Reyes told a Merrill Lynch analysts’ conference that profits from search ads had “largely been realized” and that “at the end of the day, growth will slow” in the company’s revenue from search marketing.
Some of those new growth areas may cause the search industry to look beyond the widely accepted pay-per-click auction model, according to Gerry Campbell, vice president and general manager of search and navigation for AOL. “There are new opportunities enabled by technology and consumer adoption on the Web,” he said, including establishing the price for searching and downloading video or for online searches that result in a phone call.
“We’ve been able to build significant businesses on the behavior of searching and clicking,” he said. “But there are phone behaviors and watching behaviors that feed out of a search environment, and I think that’s where media companies have a lot of opportunity.”
Google bought a radio advertising platform in January with the purchase of dMarc Broadcasting and has just closed a beta test auction of print ad space in magazines. Armstrong said those moves make sense because online targeting can be expanded to include other forms of advertising.
“The information that comes out of digital media such as search and contextual targeting is transferable to other media,” he said. “Advertisers wanted to see if we could apply some of the measurability and accountability of search to contextual targeting, and we launched that several years ago.” Those traits could be put to valuable use in serving print and radio ads, where advertisers commonly place only a portion of their products.
“In the offline world, it’s not unusual for advertisers to use only 5% to 10% of their products and services in their advertising messages,” Armstrong said. “The systems that the people on this panel and in the audience are building allow advertisers to use thousands and millions of SKUs to run [search] ads. You can imagine how powerful it would be to correctly target those other media. It smells like the early days of contextual, but in general, it’s clear there’s value there.”
