Google’s IPO and SEM: Predictions

The media’s in a frenzy. The SEM community is buzzing with anticipation. Google’s IPO is approaching, and it’s likely Google’s transition from a privately held company to a publicly held one will shake up the search industry and search marketers.

The shake up will equally be the result of the actions of Google competitors, all positioning themselves against a new, post-IPO Google. This isn’t about the share price, valuation, float percentage, or IPO date. What concerns us is how the pending IPO will touch upon we search marketers:

  • Increased contextual inventory. Google’s AdSense product is already quite successful. With recent improved targeting and “smart pricing,” every indication is Google will continue to expand the AdSense network. With an ever-increasing amount of inventory available within the contextual side of the Google network, you’ll have to understand if and how AdSense inventory works for your specific campaign.
  • Increased search inventory. Media hype over Google’s IPO has increasingly more people trying Google, and even the Internet in general. The entire search engine marketing (SEM) space will see increases in search inventory as new searchers come online. Even existing Internet users will learn more about what search has to offer and will search more often. Google will likely enjoy a disproportionate lift in this hype-related systemic growth. Both before and after the IPO, Google’s competitors, particularly Yahoo and MSN, will likely launch mass media campaigns to maintain or increase their share of the market.
  • Smarter searchers. Media focus on Google will result in the public learning how to search more intelligently. This may accelerate the current trend of longer search queries (searchers using more keywords in a phrase). This shift in behavior will force marketers to embrace campaign management strategies that align well with searcher behavior. Broad campaigns and broad match listings will become the norm. XML paid inclusion, the automation of ad creation from data feeds, site crawls, or programming scripts/spreadsheets,, will increase.
  • More advertisers, consequent higher costs (CPCs). Marketers who are either sitting on the SEM sidelines or just dabbling in it will begin to understand SEM’s true power. This trend is already underway as engines, agencies, search optimizers, and nonprofit organizations such as SEMPO, AIM, and the IAB educate the marketplace on search’s value.

    Ironically, because SEM is a zero-sum game, the return on investment (ROI) on both paid and organic search for all participants will drop as the marketplace learns more about and adapts SEM. The auction marketplaces for search clicks will become more efficient, and competition for organic search engine optimization (SEO) positions will require more work from internal IT and marketing staff, SEO agencies, and consultants.

  • Product enhancements. Google is very aggressive in launching product enhancements. Unlike most publicly traded companies, Google has made it clear it has a vision and a long-term mission to serve information to users who need it. It’s willing to take risks, add functionality on an experimental basis, and aggressively release updates.
  • Government scrutiny on the industry. The Federal Trade Commission (FTC) and other government agencies are busy fighting email spam, with limited success. Although the FTC has released disclosure guidelines relating to the labeling of paid search listings, thus far the level of scrutiny has been relatively low. Google’s IPO and the related media visibility, in combination with a major election year, could result in additional guidelines and event regulation. Links explaining what sponsored links are may become larger and more prominent. The resulting FAQ pages may be more standardized. If the scrutiny is high enough, regulation could even extend to organic SEO practices (though I doubt it).

    Similarly, the media and any number of organizations and government bodies have interesting ideas on what regulations regarding user privacy and disclosure should be. Many of those folks are misinformed, a very dangerous situation for a budding industry. Several organizations are attempting to educate the media, the public, and the government. Unlike other industries, our industry doesn’t yet have a large trade body that engages in lobbying efforts, such as marketing’s DMA. Perhaps that will evolve soon, either at the SEM level or on a broader interactive marketing industry level.

Meanwhile, at Google, there are risks that accompany the IPO. The SEM/SEO industry is great fun to work in. Almost everyone I know in this industry really loves the work. An enormous workload is part and parcel of a rapidly growing industry where the demand for smart, knowledgeable people far outstrips supply. Will some of Google’s critical top staff in engineering, strategy, sales, and account services leave after the IPO increases their net worth? Or will continued challenges, fun, and a well-crafted stock-option compensation plan keep Google from experiencing the devastating effects of a brain drain?

Each year in SEM is more exciting than the last. Predicting the future is difficult, if not impossible. But it’s important to consider what might influence the direction of our industry. An IPO following a significant technology drought can be cataclysmic. Stay tuned.

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