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Search Results: More Valuable Than Ad Placements?

  |  November 22, 2000   |  Comments

As unglamorous as search traffic may be from a creative perspective, paid links (especially performance based) continue to offer more options to advertisers for bringing quality traffic to their sites. What's the value for end users?

Search-generated traffic is perhaps the best quality traffic that can be driven to a web site. My September 13 article discusses a number of reasons why search traffic is so qualified, mainly because it brings in visitors who are actively seeking something relevant to a site's content.

When users perform searches, they are seeking something pertinent to your site's offerings, so this is the best time to acquire them. Being listed within a search engine's results presents your site to a user when he or she is actively seeking it out rather than interrupting the user with banner ads. For this reason, companies work very hard to optimize their rankings within major search engines.

All new advertisers have great expectations for their media launch, as they should. But it's common for new advertisers to be disappointed with their conversion rates once they begin an online campaign for the first time, especially those who have been around a few years.

Many new advertisers will simply use their company's historical data (traffic, unique visitors, and conversion rates) and scale them accordingly when forecasting returns from their online campaign. But this is often an unrealistic benchmarking tool, mainly due to the source of the original traffic.

If a company has never advertised before, then most of its current visitors were brought to the site through search results and referrals. Advertisers should balance online campaigns to compensate for conversion rates with larger volumes.

This brings us to paid search sites, such as GoTo.com, at which advertisers bid for position in search results. There are many similar sites, but none that deliver the volume of visitors GoTo.com does.

GoTo.com's model works on a cost-per-click basis; advertisers pay the listing fee only when users click through on their search results. Although this advertising option offers very little from a creative standpoint (as much as clients love their creative work), conversions (a sale, registration, application, download, etc.) tend to be very high from these listings. Furthermore, because this is a cost-per-click model, the cost of placing links on such sites is usually quite reasonable.

GoTo.com signed a major deal in September with America Online, Netscape, and a few other affiliated sites to provide the top-two to -three search results for user queries on these sites. These listings are generally called "recommended," "suggested," or "sponsored" links. All placements have now been implemented and are allowing GoTo.com advertisers to spend more on search-relevant ad traffic. The net effect so far has allowed GoTo.com to run approximately three times the traffic it could before the deal.

GoTo.com took its initiatives a few steps further last week by signing similar agreements with Lycos, HotBot (a Lycos property), and AltaVista. GoTo.com's listings will be placed before the actual search results, just as it has done with its previous developments.

The links provided by GoTo.com on other sites account for the majority of its business, with a very small proportion of its advertisers' budgets running on GoTo.com's actual web site. Although there are certain search engines whose users tend to respond and convert better than others, most advertisers will take as much search-related traffic as they can get regardless of the source, especially if they can pay on a performance basis.

Apparently, GoTo.com is taking a proactive approach, seeking more link distribution partners for its paid results to allow its advertisers to spend more. But what are the true ramifications of the deal?

From GoTo.com's perspective, it has found key strategic partners to post its links, allowing it to sell more ad inventory to paying advertisers (some 32,000 are on board). Advertisers (e-commerce sites in particular) are now able to spend a greater proportion of their dollars on search placements that generally yield solid conversions. The partnered search engines now have a new, fairly consistent revenue source.

The end user, as is often the case these days, is the party that will likely suffer most. Search engines are getting cluttered with biased sponsored links that continuously make it harder for users to find what they're looking for.

There will undoubtedly always be a need for search engines. As unglamorous as they may be from a creative perspective, paid links (especially performance based) continue to offer more options for advertisers to bring in quality traffic to their sites.

The true value often lies in the fact that links appear to be site content rather than ads and therefore seem more credible (hence the high conversions on the back end, similar to the value of traditional PR versus advertising). It is likely that similar links will continue to represent a greater portion of many search engines' revenue models because search results are in higher demand than ever before and often seem more valuable than ad placements.


Adam Posman

Adam Posman is a strategic planner with BAM Strategy, a leading digital agency with offices in Montreal and Toronto. BAM's core services include strategic planning, media buying, creative production, online contests, email marketing, and customized marketing technologies.

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