Google's move to relax trademark terms for paid search ads could increase prices for many words that have traditionally remained inexpensive. While the change means Macy's would now have an option to bid on "Nike" or "Puma," the decision could have long-term positive affects on the paid search industry and companies supporting it.
Google and the recession are forcing marketers to reevaluate strategies and campaigns. The consensus among industry experts believe more dollars will pour into search this year, compared with last, but in the short-term identify higher keyword prices, lack of visibility and market fluctuations as some of the biggest drivers for change.
Historically, trademark terms have cost less because only one company can use them. There's no competition. They also produced the highest return on investment because when someone clicks on "Nike" they typically want Nike stuff, explains Marc Barach, CMO, Marin Software, San Francisco. "It would suggest this new money for Google will prompt advertisers to spend more, but for advertisers, ROI will likely fall in the short term," he said.
Long term, Barach doesn't see Google's decision as a threat to advertisers. Regardless of the bid, he says, position in the search result partially depends on quality score. The more consumers click on the word, the higher the quality score climbs, even if the company bids less than another on the keyword term.
Google's new policy is only one aid forcing change. Chad Baldwin, director of strategic accounts, Kenshoo, says the Tel Aviv, Israel, company already sees new investments flowing into paid search, varying by industry. "For some larger companies, budgets have grown by 20% year-over-year in the month, whereas small-and-medium size businesses are playing it safe," he says. "Retail companies are pouring about 30% more of their budget in paid search."
Some companies are investing between $100,000 and $500,000 daily, he admits. While not all industries show this growth, Kenshoo admits one customer has been single-handedly trying to revive the economy by spending $3 million monthly.
Kenshoo, which has been attracting "top-tier clients," offers technology that helps build out long-tail programs. Marketers typically see high ROI on the tail. Some companies believe Google monetizes long-tail search better because query volumes are greater. It has been suggested that marketers who "blow-out" keyword lists can get 95% of performance with 5% of keywords, but marketers need to make the decision on whether the work verses reward is worth it.
In aggregate, clicks continue to hold steady. Investments remain strong relative to overall media spend and more companies say they will increase budgets when the economy improves.
But the lack of visibility has become the sore spot in an industry that still sees growth. It has become increasingly difficult to predict the future, experts say. That uncertainly creates quick shifts in strategies, though search gives marketers the ability to get in and out of campaigns quickly as tides ebb and flow.
Marketers have historically mapped out search campaign budgets with little fluctuation throughout the quarter. Today, campaigns can change quickly, sometimes month-to-month or week-to-week. "Search, in many cases, is almost being day traded to reflect changes in the marketplace," said Bryan Wiener, CEO at 360i, New York. "You see this in retail when campaigns are driven by promotions."
Wiener doesn't expect online advertising in 2009 to follow any seasonal pattern. He says consensus among colleagues suggests visibility stands between 30 and 40-days.
No one argues budgets have been cut and a greater portion has shifted to search. It remains to be seen, however, if search can hold that percentage as money returns. One clue found in search engine traffic reports suggest consumers do more browsing before buying.
In a down economy, searches in the United States increased 39.4% during April, compared with the year-ago month, according to comScore. The research firm reported that Google dominated domestic core search volume with 64.2%, up from 63.7 sequentially. Yahoo, however, lost share, with domestic core searches decreasing to 20.4% in April from 20.5% in March. Microsoft came in at 25.7% and 17.7%, respectively.