• by Aaron Goldman , Op-Ed Contributor, January 12, 2011

In my last column, I put out 10 crazy 2011 SEM predictions. Today, I'm going to play it safe with five no-brainer predictions adapted from the Kenshoo 2010 Online Retail Holiday Shopping Report that was released on Monday. 

This report is an update to the one released just after Cyber Monday and summarized in my column, "'Tis the Cyber-Season." Covering more than 3 billion total search advertising impressions, 60 million clicks and 3 million online sales transactions across the Kenshoo U.S. Retail Index, the report identifies year-over-year trends for the period beginning 21 days prior to Thanksgiving and ending the weekend after New Year's Day.

Here are some of the key findings from the report, looking at 2010 versus 2009: 

·     Search advertising budgets up 52%

·     Online sales transactions up 87%

·     Online sales revenue up 69%

·     Return on ad spend up 25%

So, what can we expect for 2011?

1. The paid search channel will continue to grow and be profitable. According to Forrester's latest U.S. Interactive Marketing Forecast, search marketing ad spend is projected to grow by $5 billion in 2011. This means paid search will account for over 60% of all online marketing budgets.

During the 2010 holiday season, the retailers surveyed in our shopping report generated, on average, $10.60 for every dollar spent on search advertising. To be sure, every retailer has varying margins, but I don't know many businesses that wouldn't be happy with that return on ad spend (ROAS).

There are many reasons why paid search performs so well but, to me, what's most remarkable is that SEM continues that good performance even as more and more marketers embrace search and compete in the channel. One would think that increased competition in an auction marketplace would cause price increases to a point of diminishing returns -- but the report actually showed a decrease in cost-per-click of 15% year-over year.

Clearly, as retailers get more sophisticated at search marketing and deploy advanced campaign management tools, they're able to manage bids more effectively and pay the right price for each keyword.

2. Local search will gain more prominence and become more competitive.  The $10.60 ROAS cited in my last prediction only considers direct online sales resulting from search ads within a pre-defined cookie window customized for each retailer. It does not include the hundreds of millions of dollars in sales influenced by search marketing but transacted offline.

For retailers that have offline locations, local search can be a great way to drive in-store traffic. Both Google and Bing are giving prime real estate to local ads on the search engine results pages. Meanwhile, Google is aggressively pursuing the small to medium-sized business (SMB) market with in-house salespeople.

To date, it's been hard enough for retailers to manage e-commerce direct-response search campaigns and/or national branding campaigns, much less to manage individual campaigns for each store location. Luckily, there are now software solutions for companies managing hundreds or thousands of stores, franchises, dealers, or SMBs to create and manage campaigns en masse. Furthermore, there are platforms that can not only measure phone calls to locations driven from search ads, but also auto-optimize to phone call metrics.

Even for companies that don't have physical locations, advanced geo-targeting can help improve Quality Scores. Simply create geo-targeted ad groups or geo-modify your keyword lists to reach niche markets. But don't forget to customize ad copy and landing pages to include the region being targeted, or you'll get dinged for irrelevancy.

3. Closed-loop attribution will give savvy marketers a competitive advantage.  Attribution was #7 on the Buzz-o-Meter from the December Search Insider Summit. But this topic is more than just the stuff of Buzzword Bingo.

Attribution has become not only an imperative, but a competitive advantage for SEM advertisers. Those who can unlock the value in upper-funnel keywords can justify bidding up on them and capturing impression share. By "unlock the value," I mean attributing sales conversions to keywords that assist in driving transactions.

There are a number of tools that enable customized attribution within the search channel. Some of the more popular methods are last-click attribution (which, frankly, is too popular), prefer last-click (which weights a majority of the sale to the last keyword clicked), and U-Shape (which gives 40% of the credit to the first and last click while splitting the rest equally among remaining clicks).

But attribution goes well beyond keywords in the search channel. Marketers must measure performance across channels like search, social, and display. De-duplicating conversions across campaigns and ad formats is no small task -- especially when using different ad serving and tracking systems. Marketers that succeed in integrating data into a holistic dashboard (BINGO!) will not only save time in terms of reporting and analysis but save money by not double-paying for the same conversion.

For evidence that attribution will be continue to be a hot area, look no further than this week's acquisition of ClearSaleing by GSI Commerce.

Now, of course, the holy grail of attribution is connecting the dots between mobile and the fixed Web, as well as offline and online. I don't think 2011 will be the year that we see these nuts cracked -- but seeds will definitely be planted.

4. Social networks will become a preferred channel for holiday shopping research.  In my last column, I predicted Facebook would create its own search engine. I wrote, "With social networks being the first place people turn to make commercial decisions these days (like what camera to buy, what movie to see, where to eat) there's too much at stake for Facebook not to own the experience -- not to mention, the monetization."

While Facebook may choose to continue its partnership with Bing (in fact, it may have to based on contractual obligations), consumers will continue to query friends and family on Facebook before turning to search engines. I've begun doing this myself to much better results. When I posted a Facebook update asking for input on digital cameras, I got no less than 20 answers from people who knew me and my needs a lot better than any search engine does.

As social networks become more than just a place to play and poke but a new way to consume the web, they become more than just a glut of poor performing ad impressions. Facebook is now a source of that coveted commercial intent that Google had cornered the market on to date.  

Remember that Forrester research I cited earlier showing the growth of SEM? Well, that same report shows that the fastest growing channel in terms of compound annual growth rate (CAGR) from 2009 to 2014 is social media at 34%. This is because social networks are now becoming the gateway to the web that search once was. 

5. The 2011 online holiday shopping season will break all records. Retailers posted huge gains during the 2010 holiday season. Per comScore, Cyber Monday generated over $1 billion in online sales, the most ever for a single day.  

As the economy continues to rebound, people get more comfortable transacting online, and retailers get more sophisticated with their search marketing, there's no reason why the 2011 holiday season will not be the biggest yet for SEM.

The only question is if you'll be ready. The time to start your 2011 holiday prep is now. Happy New Year. Giddyup!