The cost-effective days of paid search may be coming to a close, as demand outpaces supply.
Running out of advertising inventory may be a too-much-of-a-good-thing problem search engines are facing, according to a report released by Nielsen//NetRatings today. But it's a problem nonetheless.
The major search engines' robust growth is outpacing the advertising supply. Nielsen//NetRatings' director of strategic analysis, Ken Cassar, predicts paid search will undergo continued price increases until the medium is no longer cost-effective for advertisers. The measurement firm recommends search engines develop new advertising opportunities while maximizing existing revenue streams.
Illustrating high search activity are measurements from Nielsen//NetRatings finding that 1.2 billion search sessions were generated by Americans during May 2004 – a 30 percent increase from the previous year.
Also, traffic analysis from Hitwise indicates that Google, Yahoo and MSN combined accounted for 5.5 percent of all U.S. Internet visits for the week ending May 15, 2004. comScore qSearch revealed over 40 million consumers in the UK, France and Germany used search engines in April, 2004.
The Nielsen//NetRatings report offered suggestions for both the search engines and the search advertisers.
"The big win for the search engines, and advertisers alike, is when the search engines are able to get people to use the Internet to find and buy products that they aren't already using the Web to find," said Cassar. "Technologically driven improvements in relevancy will contribute to this, but is not the only answer. It may also include the laborious work of cataloging and selling to local merchants and developing content that is valued by consumers," he concluded.
Potential growth areas for paid search inventory include: improvement of search relevancy; increased personalization for better targeting; localization to support local purchases; and specialization to narrow the scope of search results.
The measurement firm recommends that search advertisers track the effectiveness of their search dollars, and also integrate paid search with non-search advertising.
Nielsen//NetRatings also urges advertisers not to pay exorbitant premiums above justifiable prices strictly as a pre-emptive move against competitors gaining key locations on portals.
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