Search Engines Look for New Revenue Streams

The demand for profitability brought about by the stock market meltdown is causing many dot-coms to re-examine their business models, monetizing at every opportunity. Big players like DoubleClick and 24/7 are thinking email and search engine revenue streams as banners appear to play a less-dominant role in the marketing mix.

Search engines have been hailed by third-party analysts Jupiter Communications, Forrester, and Active Media as a source of high-quality targeted traffic. Actions of search engine traffic at client sites are being documented as some of the best ROI recorded.

Getting listed and staying positioned in the top engines is a monthly maintenance issue. While you are striving to achieve this ranking, the engines are struggling to bring in new revenue to support their infrastructures.

A few weeks ago, we talked about search engines considering pay-for-position models, and about directories contemplating pay-for-consideration options. Yet another tactic that could boost search engine revenue streams is a new model for the way advertisers buy keywords and the way ads are displayed when triggered by keywords.

At present, when an advertiser buys a keyword banner ad, its ad shows up at the top of the search-result page, as you’ve probably seen with Amazon ads that appear at the top of the Yahoo home page. Users can then either click on the banner ad that takes them to Amazon or not.

An alternate scenario would be for the search engine to sell ads on a pop-up frame to advertisers who would pay to display their ads when users arrive at the destination site. For instance, let’s say a user does a search for “running shoes.” Once the user lands at a destination site, up pops a frame with an ad for Nike running shoes. The user can then click on the pop-up frame and arrive at the Nike online athletic shoe store. The pros and cons of this scenario are not yet apparent, but the engines will likely be experimenting with this and other revenue concepts in the future.

Internet keyword solutions provider RealNames is experimenting with a potential pay-to-display ad model to increase its revenues. Here’s how it works: Users can perform a search for “Barnes & Noble” from their Internet Explorer PC browser at a site that uses RealNames links (MSN, AltaVista, Inktomi, Google, Go2Net and the GO Network). Clicking on the link brings up the Barnes & Noble site within a frame. The same thing will happen when users perform a search for “BN.” This is when an ad could appear. Right now, RealNames is testing the waters by displaying its own ads in the top part of the frame, but the space could be sold to potential advertisers.

If this works, RealNames would be able to monetize the search it now provides to sites and searchers for free. It could also sell the right not to have an ad in the frame to those who want to protect their brand. Thus, any client who buys this RealNames option wouldn’t be framed (if they pay for the privilege). Of course, many competitive brands would be interested. Coke, for instance, wouldn’t want ads for Pepsi appearing in a frame window above its own site.

This pay-to-display ad model could be very suitable for the search engine industry. Instead of loading sites in their respective windows, search engines could put up their own frames, showing ads targeted to search terms. Ask Jeeves has been doing this since its inception. Sites that object to being framed could negotiate contracts to own the entire display space, paying for visitors delivered. Even if you can’t afford a contract, you would still get free traffic, but in the process, the search engine has a chance to make money for delivering that traffic.

The pay-to-display ad model offers some advantages. The editorial-integrity problem that plagues the pay-for-placement model would not be there, and the sites that can’t pay to display an ad would still be represented. In the long run, it could result in better search capabilities as the engines could improve search infrastructure with the money they now spend on marketing to keep users on the site. Search engines would no longer have to maintain portal-type stickiness because the pay-to-display model would provide an ongoing means to earn money.

However, this model also has some drawbacks as users might find frames annoying. In this case, the engines should provide users with the option to turn off frames from within the frames themselves. This might result in some loss of revenue, but it’s better to target a willing audience, which, in the end, is a win-win.

Search engines are beginning to look at web marketers as potential clients and customers that can help monetize their business rather than as passive recipients of traffic from search engines. There are new opportunities to exploit and new revenue models to be created. Such a change could ultimately be better for everyone involved.