Will Search Grow Again or Contract?

No one’s really sure if search engine advertising will continue to grow in 2009 or if it will contract. If by some miracle it grows, growth rates will clearly be lower than previously experienced. A 10 percent year-over-year growth rate is still possible, but only if marketers are willing to accept lower measured ROI (define) as they go after consumers more aggressively or if consumers return to commercial queries with the same volume and zeal displayed in the past.

Issues relating to search industry revenue growth (most of which is paid search advertising) were discussed among several SEMPO research committee members and Radar Research folks, a firm hired by the organization to prepare projections for 2009 search revenue growth. A challenge in providing longitudinal growth estimates for this ever-evolving industry is the fact that not everyone’s definition of search is the same. Wall Street analysts, some agencies, and some search engine marketers might consider any kind of keyword-targeted text link advertising to be search marketing. Consequently, most, if not, all estimates of search advertising revenue growth include contextual ad links in overall industry spending totals. If advertisers and marketers consider keyword-targeted contextual links to be paid search and allocate budgets supporting search marketing using this definition, one really can’t argue the point.

That creates just one fundamental difference between what a pure search marketer considers to be search advertising and what ends up as a public growth number. The bigger question is where the boundaries of search engine marketing are now and where they will be in the future. Case in point: an increasingly popular form of behavioral targeting called retargeting — in the case of search, “search retargeting.” Perhaps the best way to describe this form of marketing is as time-shifted search targeting. Consumers search and, at some later time, are served advertising relating to that search behavior. This is distinct from Google’s brand of personalization, where the SERP (define) contains text links relating to a prior search query (a narrow form of this concept). Search retargeting instead uses ad networks and cookies to anonymously serve highly relevant ads based on prior search behavior. Generally those ads will be display ads, but they need not be.

Search engines haven’t gone whole hog into this form of search retargeting, but Yahoo and Microsoft are much further along in exploring how to leverage this kind of targeting information within their ad servers. The premium display ad market’s collapse may speed the willingness of search publishers to create additional time-shifted search inventory because many advertisers’ budgets are constrained less by budgets than by the paucity of searchers who can be targeted at a particular CPC (define)-ROI combination. By targeting searchers again (since few of them converted), the publisher recycles one of the best targeting indicators for ad relevance.

Many analysts would characterize the display ad dollars used for search retargeting as display advertising. Agencies might also be tempted to do so, since they’d likely be using the same display ad servers to serve the retargeted ads as they do for premium or ad network traffic. In some cases, the advertiser or agency may find that a third-party specialist on retargeting may also have some creative targeting latitude based on the real-time data interchange between the ad server and the behavioral profile cookies.

I’d place all search retargeting media and technology dollars firmly in the SEM (define) bucket. It’s one reason that even in this economy I’m bullish on the broadest definition of search. Even when searchers may be swapping out some of their commercial searches for news and entertainment, those who’ve raised their hands to indicate they’re in-market or close to in-market for a product or service deserve to get relevant ads wherever they are, on a SERP or elsewhere.

Retargeting will likely be deemed successful based on the last-click attribution model. While we can all preach that marketing attribution must allow for influence beyond the final influence to buy, we may be stuck with ROI-centric spending models for the time being.

Search growth in 2009 may get a boost if marketers with large offline and premium display budgets start to measure search more holistically (just as they do with other media where tracking includes fuzzier metrics to close the loop). If this happens, early-buying-cycle keyword prices may rise as other completely untrackable media sources are cut from budgets.

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