Trends Report
As companies announced their prior quarter and year end figures, much of the recent industry news focused on 2004 being a record year for online advertising with hopes that the momentum would continue into 2005. Now that this year is almost 1/12 complete, news has shifted from reporting last year’s numbers towards identifying and highlighting areas that will impact the numbers for the remainder of this year. No surprise to any in the space that among the areas being mentioned is search. This week’s Trends looks at recent topics in the search space. Among the areas making headlines are the role search plays in users’ lives, which engines they like the best, how well these users actually understand the engines they use and what that all means, if anything.
On the topic of search engine use, a recent survey by Pew Internet & American Life Project found that 84% of Americans have used a search engine. Of those that have used a search engine, the study saw more than fifty percent of them use them on a daily basis with 87% overall expressing satisfaction with the results they received. Unlike those of us in the business, an almost unbelievable 84% of those surveyed said that they were not yet “largely reliant” on the Internet with 55% saying that they could find the information they desired elsewhere. Even more out of line with the attitudes in our industry, only 17% said they wouldn’t care if they lost access to the tools provided by the engines.
When it comes to which engines consumers use, it is no surprise to many that Google leads the pack. What may be surprising is the fact that Yahoo, MSN, and Ask Jeeves made headway into Google’s lead. What that really means is that Google has not increased its lead with respect to the other major engines. When reading over the reports, almost all articles lead with a headline similar to “Yahoo, MSN Gaining Ground on Google,” but it was not readily apparent as to what the gain entailed. Ultimately, it involved the other engines doing a better job at retaining their users. That is to say, they give them a compelling reason to return to them. The switching costs for users are so low that engines have reason to focus on their value proposition. North of 50% of users surveyed said they use another engine if their primary engine does not provide the information they seek. If this pattern happens too frequently, it won’t be long until the secondary engine becomes the primary engine.
The survey data referenced above speaks to the first two parts of this article, namely, what role search engines play in user’s lives and how the engines compare to one another on satisfaction, loyalty, and future usage. What these studies also uncovered was that while users may have a favorite search engine and are becoming more accustomed to leveraging them for information, these users do not truly understand their search engine’s revenue model. That is to say, users on the whole did not make the differentiation between paid and organic search listings. All of the major engines differentiate to varying degrees the paid search results from the organic, including text designating their paid status along with often a difference in background color. Even with the differentiators in place, only one in six people could tell the difference between organic search results and paid search results. More telling is the fact that less than 40% polled knew of the differentiation in the first place.
That so few people were aware of the distinction can be viewed both positively and negatively. Thinking less optimistically, in almost all media, it appears as though there is a natural tendency for people to look for ways around advertising. This would certainly seem to be the case with television. TiVo’s popularity has caused much concern for those in the television business. Similarly, the rise in pop-up blockers and their impact on overall impressions served points to users’ tendencies to avoid advertisements when possible. This suggests that as users become more aware of the advertisements they will look for ways to avoid them, meaning that click through rates on search advertisements could drop significantly over the upcoming years. If this is correct, it would present an incredible market change similar to the impact that spam filtering has had on ad supported email delivery.
Instead of thinking that as users become aware of paid search ads and when the means for its bypassing exist, people will naturally do so, an equally possible view is that even with a more informed user base, paid search clicks will not necessarily decline. If this latter view is correct, a paradigm shift in the way the industry views advertising might occur. When you compare pop-ups and television commercials to search, relevancy becomes a key distinction between the models. Google shows advertisements and makes an incredible amount of money off them but still maintains a ninety-plus percent user satisfaction rating. Were its ads annoying, users would not be happy. Were they irrelevant, users would not return. When people realize they have been making money for others when they didn’t think they were, they might feel let down or disappointed. They will, however, return because as the numbers show, they find what they are looking for and have an overall positive experience.
On Google’s site, they state as a principal tenet of their business that you can make money without doing evil. The results here suggest that you make money by focusing on what people really want. Certainly obvious but nevertheless definitely missing from much of the landscape today.
