SEM Predictions for 2004 (The Analyst's View)

It’s clear 2003 was the year search engine marketing (SEM) entered into the popular marketing lexicon. What began as a niche method of promoting sites has become the golden-child-advertising tactic, and the single most significant catalyst of the industry. But if 2003 goes down as the year of SEM’s debutante ball, 2004 will be the year our little darling leaves home and grows up. Search will have a roller-coaster year in 2004 as the practice of using search traffic to advertise becomes better understood by people with advertising experience and expectations.

The following is a catalog of trends I believe will shape SEM over the next 12 months or so:

• Agency purchase and consolidation
  I was working at a company that built Web sites and banners when, all of a sudden, traditional agencies realized we were doing advertising. The guys in the suits snooping about were the team beamed down to see if we were worth investing in (we were). I imagine the same scene is being played out in the halls of the SEOs and SEM agencies. In 2004, agencies will be invested in, purchased and merged. Remaining independents will find ways to band together to compete with the agencies riding high on their investments. In particular, agencies that focused on a particular SEM method, such as paid inclusion or organic search optimization, will begin to partner (and merge) up. This will be important as clients, especially those spending significant amounts of money, will care less and less about the particulars of how their program works. Only that it works. Which brings us to the next point:
• Search Method Agnosticism
  InfoSpace’s Arnaud Fischer foresees paid listings and paid inclusion merging into one practice he calls “bid for traffic.” I couldn’t agree more. We all recognize the next wave of SEM advertisers will be traditional, large advertisers: CPGs, lifestyle brands, offline retail. These advertisers won’t be concerned with the specific method of search used. They want to use search engines to get qualified traffic. Agencies that understand this will begin to give their clients simple reports that tell them the amount of traffic they got from the spend. Whether that spend went to SEO, paid listings, or paid inclusion will be irrelevant, as will whether the money was spent with Google, Overture or anyone else. Really good agencies will continually shift methods and services used to maintain the highest ROI levels. SEM campaign managers will look like daytraders in 2004. The companies that help people do this job, with real-time information, aggregated data, and alerts, will be in a great position.
• Time Parting (and tools to forecast)
  Speaking of tools… they’ll be really important in 2004. I pity da fool who’s using a homemade spreadsheet to track and manage SEM campaigns. Not only is there waaaaay too much data coming in, but any tool that reports must also provide an ability to act. The moves by Kanoodle and GoToast made toward adding dayparts is excellent, and paves the way. The next generation of these tools should not only provide the ability to turn ads on and off, but also help determine which of those times represent the best opportunities by using historical data to make forecasts. This must apply not only to dayparts, but yearparts. Terms like “income tax” are more valuable at certain times of the year than others. An SEM team for a national accounting firm would do well to get a sense of how much that value will cost.
• Position Guarantees (for a fee)
  This is perhaps my most far-fetched prediction. I give it a relatively low probability of coming true, but include it because it’s an option, particularly for the so-called “second tier” engines. It will be important for large brands with lots of cache to insist on always remaining in the top position for any search on a given list of terms. It’s important for such brands to never display anywhere but on top. Right now, the brand can achieve this by either keeping on top of bidding and reacting quickly, or simply by setting a ludicrously high maximum bid. The first case requires a high level of management. The second exposes the brand to bid-jammers. But what if a search engine simply charged the brand a premium and guaranteed top position? Of course, the fight to remain on top is a lot of what drives revenues for search engines. But again, a second tier might to advertisers with this kind of position promise.

I see a lot of these trends already afoot. One thing’s clear: SEM will going become more complex as the search engines compete to be best, and advertisers arrive with high expectations. Coupled with that must be the realization that complexity is perennially around online advertising’s neck. Look back at these trends: all, in some way, are about making it easier for brands to use SEM tactics to achieve their goals of generating qualified traffic. As long as those goals remain the focus, 2004 will continue the happy ramp up we experienced in ’03.

Happy New Year!

Editor’s note: Compare and contrast SEM predictions — read what SEM expert Frederick Marckini has to say about search trends next year.