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Paid Search Results
Are Here to Stay
Andrew's
METAGUIDE - Searching for a Better Way #6 - Pay-Per-Click Search
Engines
Pay-for-placement
or pay-per-click is a search engine category pioneered by GoTo.com.
GoTo burst onto the scene with a successful
1999 IPO, following on the heels of solid venture backing by,
among others, idealab's Bill Gross. Until recently, GoTo has met
with considerable scepticism from analysts - in particular those
who consider themselves consumer advocates or aficionados of web
search.
 Most
of us have felt that while paid placements might be desired by advertisers,
there is no reason for the consumer to use a pay-for-placement search
engine. Who would deliberately seek "tainted" search results? And
if no consumers used the search engine, the reasoning went, the
whole project would fizzle, just as Open Text's attempt to charge
for rankings did back in the summer of 1996.
Recall, too,
that Altavista launched
a pay-for-placement program in April, 1999, but then backtracked.
Long after
Open Text's pay-for-placement flop (it's now a successful intranet
company), it appears that the time may be ripe for pay-for-click
search engines. Advertisers are increasingly interested in what
they have to offer, and there is diminishing resistance on the part
of consumers. The timing of these changing attitudes is unsurprising:
e-commerce didn't come of age until the monster holiday season of
1999.
Given the strong
incentive for advertisers and leading search ranking auctioneer
GoTo.com to see this model succeed, the following proposition won't
surprise many: pay-per-click search engines are here to stay because
the folks with the money want them to stay. I'm going to go one
better than that, however, and propose that they're here to stay
because they offer real value to a segment of consumers and many
business owners. The idea that paid search results are "tainted"
may give way to a willingness to transact commerce more directly.
Moreover, many now realize that just because something isn't obviously
paid for on the Internet, doesn't mean that it isn't paid for. This
method is just more up-front about it.
How
it works
Here is how
GoTo.com works from an advertiser's perspective. Advertisers register
search keywords or keyword combinations, along with a title and
description, much as they would with any search engine. The key
difference is that placement in the search results is "purchased"
by the advertiser rather than determined, as they are with most
search engines, by complex formulae relating to relevance or popularity.
Contrary to
popular belief, relevance is the golden rule at GoTo.com. Spammers
who want to buy in categories unrelated to their site's content
have their submissions rejected. It's important to take care at
first to ensure that one's listings get past the editorial process.
From there, it gets easier, as the advertiser has the opportunity
to adjust bids up or down to control the flow of site traffic and
to spend their budget more or less quickly.
Admittedly,
everything has its price. Webhelp.com has built a company quickly
by buying traffic, in large part from GoTo.com. Webhelp's listings
appear under so many keywords it's absurd. But one supposes their
rationale is that their service offers help on "any search query."
And, of course, they're dropping a bundle on advertising with GoTo.com,
and overbidding in many categories.
GoTo.com is
apparently taking steps to tighten the relevancy requirements for
submissions. This is good for both searchers seeking relevant results
and advertisers seeking more receptive customers post-click for
a better return on their per-click investment.
A
good thing? How so?
Most of the
benefits of this, granted, do lie on the side of the site-promoting
webmaster or corporate advertiser who is actually doing the bidding.
But these are so substantial that they need to be taken into account.
First of all, unlike most search engines, there is no complex process
of spidering web sites, ranking pages for keyword, title, and content
relevancy, link popularity, or site popularity. It's a pure market
model. A pure market model has its shortcomings, but one major advantage
is a reduction in mystery. There are no hidden prices.
Let's face
it. To get ranked high in search engines nowadays takes a lot of
time and patience - so much so that companies must devote considerable
staff time to it, and small webmasters must devote inordinate amounts
of their personal time to it. It's this personal sacrifice that
creates, in part, a huge market for automated services which promise
to get high rankings for people. The regular search engines may
not be pay-per-click, exactly, but make no mistake, an economy surrounds
them. Indeed the how-to-get-ranked-high-in-search-engines industry
has attracted legions of snake oil salesmen and a few responsible
practitioners.
Listen to any
site owner who has garnered top listings in most places through
conscientious methods of self-promotion and hand submission to engines:
the majority of such services are unnecessary. They are preying
on the mystery which surrounds the field. Rather than being masters
of the science of search keyword relevance, many search engines
and directories are more like a game or maze, and those with money
can, it is believed, pay to find their way through the maze. Leading
directories Yahoo! and Looksmart are quite up front about this,
charging a hefty fee for express processing and consideration of
a potential listing. Looksmart's fee is $199.
Unfortunately,
many efforts to master the search engine game can be counterproductive.
Learning about search engines
is vitally important, but the best way to stay out of the engines'
doghouse while taking advantage of some automated tools may be to
use a responsible service like Robert Woodhead's free Selfpromotion.com. Woodhead acts like
a search engine submission "coach" and offers extra tools if you
"donate" $10 or more.
A market model
in the age of e-commerce can actually be quite beneficial to smaller
businesses. Because they can bid so precisely on particular keywords,
advertisers can count on some highly targeted clickthroughs. Targeting
to reach your customers, and not just some random audience, is what
the new economy is increasingly about. Feedback is swift. Advertisers
receive quick responses to the questions that matter to them: "are
people clicking on my link, and how much did the link cost?" That
can quickly be compared to the assessment of how much the
business stands to make from the average visitor.
Depending on
one's business model, the average new prospect could be worth considerably
more than a paltry few cents. In that case, advertisers have choices.
GoTo might be one of the best ones, and the comparison of alternatives
is highly quantifiable. Have a look at Squirrelnet's interesting analysis
of why GoTo advertising may be much more cost-effective than banner
advertising on Yahoo. Based on today's clickthrough rates, it'll
cost an advertiser at least $1.00 to get a clickthrough on a high
profile site like Yahoo. On GoTo, the average click costs 14 cents
(but for many advertisers it might easily be half that).
Less
friction, better customers
In short, GoTo.com
seems to be offering a service to advertisers well in line with
the most successful business models in the e-commerce world. The
benefits of e-commerce are generally seen to lie in the reduction
of friction between buyers and sellers. A bid-for-clicks auction
model accomplishes this in two ways.
First, the
bidding mechanism is live and updates one's search ranking immediately.
An advertiser can buy what he wants (targeted traffic) instantly,
and can generally buy more or less of it as he or she chooses depending
on goals and budget. Here's a thought: the advertiser could double
their bids on a Tuesday, or a Sunday, if they prefer to get more
hits on slow days! There are many other possibilities here - the
point is to emphasize the flexibility offered by the system.
Second, friction
between customers and e-commerce or e-content sellers is reduced.
If you sell chocolate bunnies, and expect a couple dozen folks a
week might search under the term "chocolate bunnies," you can pretty
much have those customers eating out of your hand for a couple of
pennies a click. Advertisers only pay for clicks, ensuring that
the customer at least makes it onto their web site to see what other
delights await. A far cry from ad banners, which consumers increasingly
ignore.
For
consumers: mixed benefits, but not all bad
Ok, fair enough,
so all of this benefits the folks doing the bidding, and the search
engine company which runs the keyword auction, but is there any
benefit to consumers or web searchers?
It depends.
If you're looking
for a museum or nonprofit organization, you probably aren't going
to have much luck finding it at GoTo.com. Its primary uses are commercial.
At the same time, more of the world is commercial than we realize.
Public sector organizations and private sector organizations, for
example, now compete for the same "customers." Some forms of entertainment
compete with others. Would it be so foolish for a museum, nonprofit
group, or public radio station to advertise on a pay-per-click engine?
Not if their bean counters found out that they could get $50 in
donations for every dollar they spent on clickthroughs. At a nickel
a click, a little goes a long way.
A lot of the
traffic that comes through GoTo, we're told, is by way of metasearch
engines. This does seem like the pay-for-click engines' ace in the
hole, ensuring that their advertisers's listings make it into search
results from a variety of sources. Currently, GoTo is included in
the metasearch results of Metacrawler, Ixquick,
and others. This also gives GoTo.com advertisers something to think
about. While a #3 ranking on a GoTo keyword ranking may be "good
enough," bidding a few extra cents for the #1 spot may pay off in
more than just GoTo hits. It may also create a greater likelihood
of a top five ranking on the metasearch engines. A recently-announced
agreement
with metasearch engine Mamma should contribute to that trend. Incidentally,
advertisers pay for clicks generated through metasearch engines,
just as they would if traffic flowed directly through GoTo results.
GoTo's
competition
There are five
or six competitors to GoTo.com, but it towers over most of them.
An emerging second-place competitor in the category is Findwhat, a pay-for-click search engine that
has picked up serious momentum recently. They already have significant
revenues from click-based advertising in several industry sectors.
As with many such search engines, their biggest challenge was in
getting enough consumers to use the search engine so that advertisers
would actually get clickthroughs. A major breakthrough for FindWhat
was its recent deal with Go2Net to have Findwhat results included
in metasearch results for Metacrawler and Dogpile, the #1 and #2
metasearch services in the world. That will deliver the hits to
Findwhat that it may need to mount a credible challenge to GoTo.com.
Unsurprisingly, Findwhat's CEO seemed upbeat about the company's
future when I talked with him recently.
Some other
search engine companies vying to get noticed in the pay-for-placement
category include Searchound and Kanoodle.
General
adoption of pay-per-click
Nothing says
that a portal or search engine which relies on advertising dollars
has to be a pure play focusing on pay-per-click results. Increasingly,
all the majors are going to adopt various aspects of this approach.
Some companies already offer keyword-based advertising, which is
not the same as pay-for-placement, but offers advertisers similar
targeting while maintaining the integrity of search results (integrity
in the sense of being faithful to the search algorithm). This
method places keyword-targeted advertising "near" the
search results. Metacrawler and Direct Hit are examples of search
engines which offer keyword advertising. Keywords are a rich potential
source of income for search engines, and a reasonable opportunity
for targeted campaigns for the advertiser. From the advertiser's
perspective, however, participating in a search results auction
is likely to provide more reliable clickthroughs than buying banner
space near the results. Surfers might be more inclined to click
on the search results rather than nearby banners.
So are we going
to see Altavista or Yahoo search results contaminated by paid rankings?
Not likely. They have too much invested in relevance-based or category-based
search. But the general trend is clear. More portals and search
engines will begin gravitating towards a pay-for-placement approach.
About.com is planning to announce a program in this category in
April. They're calling it a "sponsored links advertising initiative."
The power of
frictionless commerce is motivating the shift. Advertisers like
About.com and Yahoo are taking steps to manage their unsold
advertising inventory through an auction process. Significant
additional revenue can be brought in without discounting too heavily
and without needing to resort to high-priced and cumbersome advertising
sales.
Relevance
revisited
While many
may lament the increasing commercialization of search engines and
the difficulty in finding relevant research materials as opposed
to advertisers' products and services, it is increasingly the case
that advertisers' products and services ARE relevant to what a great
many people are looking for. If it weren't, the trillion-dollar
e-commerce industry would not exist today. The consumer demand is
there. There is therefore no cause for finger-pointing at GoTo or
other pure market-oriented bid-per-click advertising models. Content
and commerce are indeed blended on the web, and the blending carries
over to practically any commercial web venture, even when the front
end or content side of the package may indeed be "about something."
Many may find
the high-octane bazaar of GoTo.com, where advertisers wear their
budgets on their sleeves, distasteful. But given today's culture
- millions happily tune into a game show named Greed, and have diminishing
patience for what Edmund Burke called the "decent drapery" of life
- there is likely to be widespread receptiveness to GoTo.com's direct
approach.
Sites
featured in this article
GoTo.com
- http://www.goto.com
AltaVista - http://www.altavista.com
Looksmart - http://www.looksmart.com
Self
Promotion - http://www.selfpromotion.com
Yahoo - http://www.yahoo.com
Ixquick - http://www.ixquick.com
Findwhat
- http://www.findwhat.com
Searchound - http://www.searchound.com
Kanoodle - http://www.kanoodle.com
Related
Resources
PayPerClickAnalyst.com
Page Zero Media
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THE REST OF THE SERIES:
Searching for a Better Way
1. Popularity
Engines
2. Meta Search Engines
3. Meaning-Based Search Engines
4. Natural-Language Search Engines
5. Expert Guide Sites
6. Pay-Per-Click Search Engines
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