Paying Your Way to the Top: Search Engine Advertising

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From the moment search engines began organizing content on the Internet, advertisers and marketers have wanted their site to be at the top of the listing heap.

Until recently, it was inconceivable that an organization could buy its way to the top on the major search engines such as Yahoo!, Google, MSN, and AOL. But take note: Not only is it exceedingly simple to buy listings by keyword and phrase, according to observers, search engine pay-for-performance is now a billion-dollar industry and the fastest growing form of advertising anywhere. Now whenever and wherever a business- or consumer-related search is entered, the results are likely to include ads.

"If 50,000 people are searching for what you have to offer each month, you can't afford not to be listed," explains Harry Gold, managing partner of Overdrive Marketing Communications, a Boston emarketing firm. "Search engine placement, whether paid or natural, reaches people at the critical moment: when they are seeking your information or products." Gold cites the Trusted Time Division of Symmetricom as an example. After implementing a paid placement program, Gold says, Symmetricom experienced a 400% jump in Web site traffic and a 1000% increase in online leads resulting in a dramatic 67% increase in sales.

So how does all this work? According to Danny Sullivan, editor of Search Engine Watch, "It's best to understand the network model and there are two: the Google network and the Overture network. Working with the Google AdWords program not only gets you onto Google, but also onto AOL and Earthlink, while the Overture network gets you into the Sponsor Matches program on Yahoo! as well as listed on MSN and others." What this means is that an advertiser only needs to work with two companies—Google and Overture—and they can buy listings on search engines representing the vast majority of search traffic on the Internet.

Calculated Results
Armed with a credit card and a list of keywords, anyone can log onto the Overture or the Google live bidding system, buy a top ranking and make it active—all in a matter of minutes. For example, if you were looking to drive traffic to your site, which offers market research consulting, you could simply bid on the phrase "market research." But it might be more efficient to bid on something more closely related to your offering, such as "market research services" or to choose a word or phrase that is frequently associated with market research, such as "focus group" You'd plug the keyword or phrase into the system together with your ad copy and agree to pay a certain amount each time someone clicks on your ad. There's even something sort of fun about competing against other bidders for specific search terms. The network takes the amount you're willing to pay and uses a formula to give you a position in the sponsored links section of the search results. Because of competition from other bidding companies, you may have to pay a few dollars per click to be the top link for expensive words like "market research," while the phrase "focus group" might only cost a dime per click.

With the Google AdWords program, the position is based on the CPC (cost-per-click) times the CTR (click-through-rate) to give the ad a rank. For example, if an advertiser plugs a maximum CPC of $.50 and has a CTR of 1.8% that ad's rank would be .9, but if a competitor is only bidding $.45 on the same word and had a higher CTR of 2.5 then that ad's rank would be 1.125 and would be presented higher in the search results. The AdWords Discounter system makes sure that advertisers are charged the minimum amount. For example, if two advertisers with an identical CTR plug in maximum bids of $.35 and $.28, the first advertiser would only be charged $.29 to be listed first, even though that advertiser was willing to go higher. Another important feature of the AdWords program is the ability to establish a maximum budget per day. Once an advertiser reaches the maximum spend, the system pulls the ad. This allows marketers to plan spending programs with precision.

Some see the pay-for-position search as a great equalizer. Anybody can garner the top ranking in a category if they're willing to pay. According to David Fischer, AdWords manager at Google, "A huge range of businesses has found listings beneficial; for example, small- to medium-sized businesses that haven't been able to do national or international marketing programs."

Andrew Braccia, director of business development for Yahoo! agrees about the potential benefits for smaller organizations. "The Sponsored Matches program allows small companies to increase distribution beyond just the local geography. It works incredibly well for commercial products." But larger companies are also seeing the benefit of this fast-growing advertising tool. "Sponsored Matches was born from advertisers looking for cost-effective sales on the Internet," adds Braccia. "But over time, Sponsored Matches has come to be used by big advertisers like Ford and Coke."

Ray Allen, owner of AmericanMeadows.com, a leading seller of wildflower seeds to homeowners since 1981 has seen his business transform completely since he began buying search engine listings. "We previously sold via a catalog, which was being mailed to a million-and-a-half people, but we are click-only today. It's no fun to pay 80 cents per catalog mailed. Now, by using keywords, our Web site sales are bigger and better than our catalog ever was."

AmericanMeadows.com sells seeds for 70 different wildflower varieties and Allen bids on the names of all of them and more. "Some of the keywords that work best are granular. I scoured my Weblogs and looked for searches that people did on my site. Many people put the Latin flower names into the engine. I know those are cheap clicks, so I bid for all the names of the flowers I have, including the Latin names. I have 300 paid searches going and spend a few thousand dollars a month."

Allen cites examples such as "Papaver nudicaule," which is the Latin name for the Iceland Poppy. Plugging either name into most any search engine will lead you to the AmericanMeadows.com site. Allen finds the bidding system addictive, changing bids multiple times during the day. "I can change how I spend immediately. Even with an expensive word, say 60 cents for a good keyword on Google or Overture, I'm making money every day because my average sale is 60 dollars."

An Ad By Any Other Name
The amount of cash flowing to search engines for listing has become enormous. As the business side of search engines grows, it is increasingly important for the results displayed to users to clearly differentiate paid from natural listings. In fact, the U.S. Federal Trade Commission recently made a landmark recommendation to the search engine industry around improving disclosure. For the most part, search engines have complied with the FTC recommendations. Most search engines clearly tag paid listings as sponsored and set them apart from the main listings in some way.

Peter Norvig, director of search quality at Google explains, "We make a very clear distinction [of what is a paid listing]. The Premium Program says ‘sponsored link' with a different background in the search results and the Google AdWords results are on the right with different boxes and also say sponsored link." Google did not alter its already clear approach to disclosing sponsorships as a result of the FTC complaint. According to Norvig: "We were always clear because we think of our users first."

Not everybody agrees that disclosure is so obvious. As search engines have become a ubiquitous tool for knowledge workers everywhere, individuals and the organizations supplying their information infrastructure will need to be conscious of the results search engines are presenting them.

Laura Ramos, who covers the enterprise portal space for Giga Information Group, a global IT advisory firm says, "Corporations want external content they can trust, but paid listings can be misleading. The average corporate user is savvier than the average consumer, but many could still be confused by a paid placement. The potential for risk is not insignificant."

Ramos describes a hypothetical scenario where a large organization has deployed internal and external content using a search engine inside the firewall. If an employee does a search to find benefits information about life insurance provided by her employer, but also sees paid links to other companies offering coverage, the results could be misleading and certainly not what the HR department had originally intended.

"It is distressing, but not surprising, to learn how search engines work," said John Latham, director, Knowledge Exchange of the Special Libraries Association. Paid listings on search engines, he says are "kind of like Affirmative Action. [The search engine] says the ranking is fair, but will take certain companies ahead of others. As search engines un-level the playing field in search, the role of the information professional is that much more important," says Latham. "There are so many other ways for people to get information than through Google and other search engines."

Let's say you're a professional needing to do market research on a new space your organization is considering developing a service for. You're tasked with determining the scope of the opportunity. You type "market research services" into your trusty search engine and guess what? Together with the natural search results are multiple advertisements touting such things as: "proactive competitor insight," "marketing data and techniques," "phone surveys," and of course "focus groups." Other ads promise "the key to success" and "easiest and most direct ways to get your research off the ground."

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