• by Ross Fadner , November 6, 2003

If a single theme dominated the discussion during this year's Ad:Tech New York conference you wouldn't have needed a keyword to find it. Search engine marketing accounted for no less than 11 Ad: Tech panel discussions, including the closing luncheon Wednesday afternoon, sponsored by search granddaddy Google and Shopping.com.

So it shouldn't seem surprising that search ranks as the No. 2 activity performed by online users, just behind email, according to results of a new study released during the luncheon by Google. In order of magnitude, those activities are: email (91%), search (81%), research (62%), viewing local content (59%), and news (55%).

Eighty one per cent of Internet users polled use search, and by comparison to other ad mediums, search yields a profitable ROI after a mere 29 cent investment per acquired customer. Email comes closest to yielding as cheap an ROI, at 59 cents, and direct mail was last, posting a profit only after spending $10 per acquired customer.

"Search is a great mechanism for education and information; it's also a pull and not push advertising medium because customers tell us what they want," said Patrick Keane, head of sales strategy at Google.

Keane offered sound advice to would-be search marketers. When making a keyword buy, Keane (and the other panelists) reiterated again and again, "Think like a customer and not like a marketer because not only will this help you drive more traffic but more importantly, greater conversion." To that effect, he used the example of a relatively naïve Web user who might be more likely to type "get rid of computer virus" instead of "anti-virus software" when faced with a virus problem.

The Google exec also used a cost-per-click example to demonstrate positive ROI. In the example, a $20,000 investment is roughly equivalent to 20,000 clicks. Twenty thousand clicks on average yields 1,000 leads and a 5 percent lead ratio, resulting in a 2 percent conversion per 20,000 clicks and a profitable return on investment.

Iggy Fanlo, chief revenue officer for Shopping.com, echoed Keane's plea to marketers to continue to test and optimize results, because "right now the ROI is very, very compelling, and there's no risk, really, because you pay-per-click," adding, "pay-for-performance is almost a no-brainer; the concept of fixed ad budgets goes out the window with this kind of model. We've got clients giving us an open checkbook asking us to give them as much as we can, and we're both seeing resulting profits."

However, the panel didn't sing the praises of search marketing all lunch long, Kevin Lee, CEO of Did-it.com, warned marketers "search engine marketing is a zero sum game-there are winners and losers. You need to be better than your competitors to win." He underlined the more cutthroat aspects of it such as the bidding wars and the pressure to perform at the risk of being dropped by the ad servers.

In many instances, Lee noted, "The top bidder is either a brilliant marketer or a raving lunatic." But at the time of bidding, he adds, "there is no way for you to know which."

While it may seem like there might be too many cooks in the search engine kitchen these days, as an ad medium, search marketing is definitely not just a passing fad. It's very hard to argue with ROI numbers like the ones posed by the execs at the Ad: Tech show, and by the looks of things, these numbers are only going up, up, up.