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The Search Tax: Are Search Engines Leeches?

  |  January 26, 2007   |  Comments

Do the engines unfairly appropriate and leverage marketers' advertising, PR, and buzz?

I hear an undercurrent of discontent from more and more marketers. Increasingly, they're are concerned search engines and pay-for-performance marketing channels (such as affiliate marketing) have turned into tolls. These advertising and sales channels are becoming less about customer acquisition and more about paying -- repeatedly -- to maintain share of wallet with existing customers.

The online marketing ecosystem has evolved in an interesting way, creating pinch-points or conduits through which customers generally pass by choice (even if they don't have to). Search engine SERPs (define) and organic landing pages generated by affiliates well-versed in SEO (define) represent a huge segment of inbound traffic to marketers. They have the cancelled checks to prove it.

At first glance, it seems search engines and affiliates are often in a position to get a free ride, making money as a result of the interest stimulated through a merchant's or brand holder's advertising, marketing, PR, and even sales efforts. Many might call the search engines and affiliate marketers leeches. After all, a big segment of customers originating through these channels are existing customers, returning with a price tag attached.

Affiliates often use both paid and organic search results to generate revenues leveraging the content and brand names obtained from the merchants. Are the search engines any different when they sell clicks from the query demand generated through a marketer's advertising, PR, and buzz? Do the engines unfairly appropriate and leverage the copyrighted material on billions of Web sites, then charge for clicks from humans who already know what they want: a merchant site? Do affiliates who use PPC (define) arbitrage or create organic pages that rank highly for brands, trademarks, and model numbers unfairly profit, joining the search engines by sucking the profit out of the marketers' and merchants' pockets without adding value?

The answers are perhaps no, yes, and yes. Or perhaps yes, no, and no, depending on your perspective. But the alternative to paying the continued fees to both affiliate and search engines may be even more painful than the ongoing toll marketers pay to gain (and regain) customers through search and affiliate channels. Consumers are changing their behavior. To continue capturing these customers, marketers are necessarily tied to the new ecosystem. To gain some perspective on this issue, let's take a step back, looking at the world of advertising, marketing, and sales outside of the Internet.

Advertising and marketing aren't just about getting new customers; they're also about holding onto the customers you already have and maximizing share of wallet for customers you may share with your competition. Coke and Pepsi have, at this point, had nearly every cola drinker as a customer at least once. Yet the two organizations continue to spend hundreds of millions of dollars on advertising, sponsorships (think "American Idol"), and in-store promotions (including slotting fees). Airlines' frequent flier costs are designed to stimulate loyalty as well.

Truth is a healthy chunk of revenues for the vast majority of companies are funneled toward marketing to maintain share of wallet and customer loyalty. The Internet shouldn't be judged by a different set of standards. It's easy to point at Google, Yahoo, MSN, and the affiliate networks because they're so visible in the value chain, yet their value seems invisible. Consumers have simply changed their behavior from watching TV and reading newspapers to surfing and searching. TV networks and newspapers that don't have strong online migration plans will suffer as the consumers' eyeballs migrate online.

What's difficult for marketers to swallow, however, is the clear evidence the search engines (and affiliate marketers with good organic rank on brand terms) have the power to insert themselves between the consumer and the brand, even when consumers clearly have an interest in the brand (as indicated by their search query containing the brand or trademark).

Marketers' temptation may be to refuse to pay for brand keywords, sticking instead to the generic keywords that are also clearly aimed at any given target audience. In every case we've tested (and I have tested many and will likely test many more), that would be a mistake, even when the marketer has high organic rank on his brand. The results of every test we've executed indicate the incremental gain received when paying for traffic on a brand term has a very high net ROI (define) because:

  • Significant additional screen real estate on the SERP is gained.

  • The total control over title and description allows for greater offer control.

  • Top positions on one's brand usually aren't very expensive due to the engines' relevance algorithms.

  • The ability to control and tune the landing page results in a conversion rate percentage in many cases is higher for the combined pages than for one alone.

I urge you not to think of Google and its brethren as leeches any more than other media are. Think of search as the net you cast to capture the demand created by all your sales, marketing, PR, and advertising efforts. Fail to cast that net, and your customers will get away.

Join us for Search Engine Strategies in London, February 13-15, at ExCel London.

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Kevin Lee

Kevin Lee, Didit cofounder and executive chairman, has been an acknowledged search engine marketing expert since 1995. His years of SEM expertise provide the foundation for Didit's proprietary Maestro search campaign technology. The company's unparalleled results, custom strategies, and client growth have earned it recognition not only among marketers but also as part of the 2007 Inc 500 (No. 137) as well as three-time Deloitte's Fast 500 placement. Kevin's latest book, "Search Engine Advertising" has been widely praised.

Industry leadership includes being a founding board member of SEMPO and its first elected chairman. "The Wall St. Journal," "BusinessWeek," "The New York Times," Bloomberg, CNET, "USA Today," "San Jose Mercury News," and other press quote Kevin regularly. Kevin lectures at leading industry conferences, plus New York, Columbia, Fordham, and Pace universities. Kevin earned his MBA from the Yale School of Management in 1992 and lives in Manhattan with his wife, a New York psychologist and children.

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