The lamentations of a media executive of a major ad agency.
I know, I know. Paid search represents approximately 40 percent of interactive spending today and is anticipated to surpass display advertising by 2010, according to a recent JupiterResearch report.
I know it represents a $4 billion industry and will nearly double in the next five years. I know as content continues to proliferate across all platforms, the most critical piece of the business will be the ability to find the information one seeks quickly and accurately. I also know dozens of specialized search agencies have sprung up to handle the endless supply of interested search advertisers.
I still hate search.
Let's start with a conspiracy theory. Despite marked improvements in search technology over the past year or two, searchers still get results with millions of irrelevant listings, no matter what they're searching for. Online search is still a gross hunting tool rather than a precision instrument.
One reason paid placements are so effective is organic search is a hit-or-miss proposition for the average consumer (read: my parents). If the major search players were to improve organic search so it delivered exactly the results consumers are looking for, the need for paid listings would be reduced. Cutting off the hand that feeds them isn't in search engines' best interest, so search players artificially limit organic results' precision.
A crazy thought? Have I lost my mind? Maybe.
Let's look at some facts in the search space. According to JupiterResearch, users increasingly turning to search engines to find information. There were 133 billion searches conducted in 2004, and that's anticipated to grow to 162 billion in 2010. When asked about keywords used to find the information they were looking for, 65 percent of searchers said they used the proper names of companies, brands, or products. Another 59 percent said they used products' or services' general categories (the driving force behind so much paid search spending, no doubt). The average CPC (define) in 2004 was $0.39. That's anticipated to steadily increase over the coming years to $0.58 in 2010. Seems like an awfully healthy business -- so why do I hate it so much?
"Hate" is a strong word. Today's search market scares me and doesn't speak to my strength as a part of a large, multinational, integrated communications agency. Market-driven pricing is a real challenge, for starters. It's the great equalizer, putting small shops, even mom-and-pop retailers, on equal footing price-wise. There's really no benefit to the volume of business in paid search. If someone wants to outbid you on a word or phrase, consider yourself preempted. In relationship-driven businesses such as TV, print, and even online display advertising, preemption usually leads to a phone call with the sales organization. The relationship (and clout) one has with the property typically leads to a mutually agreeable solution (make goods, bonus impressions, etc.).
Not in search.
This price challenge is also evident as the major search players dabble in display advertising, selling ads on a CPM (define) basis driven by open market pricing. To add insult to injury, we watched in horror as Google got in the print advertising business, offering print pages to select advertisers. As the media business continues to become commoditized and can potentially be bought and sold through a Web-based interface, where does this leave the agency community? I don't know about you, but I always liked the "part art, part science" section of the business. I don't even want to think about being replaced by an open auction.
Add to this discomfort the labor-intensive nature of running a search practice (and the resulting low margins) relative to other communication forms, and we have a recipe for extreme distaste.
Unfortunately, I'm going to have to get over it. Despite my protests, our clients demand increasingly more of our digital media budgets go toward search-related spending. As a company, we're rapidly scaling our search practice to accommodate increased need. As search becomes more important in the million-channel universe, this will be as necessary a competency as traditional Internet planning and buying. As search moves to the desktop and the TV screen, we fully anticipate our needs will grow in these areas, too.
Let's just hope all this search momentum and open auction pricing doesn't turn the interactive agency business into organizations of automation instead of organizations of creativity. That would be a real shame.
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Paid Search in the Mobile Era
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June 10, 2015
12:00pm ET/9:00am PT