Search engines once served the sole purpose of answering questions. But that has changed with the maturity of the search industry as engines have moved into the advertising business, leading to the beginning of a two-tiered search system.
One example of this trend is Google Inc.’s recent move to buy online display advertising giant DoubleClick Inc. from private-equity groups Hellman & Friedman and JMI Equity and Management for $3.1 billion.
“The more search engines focus on advertising, the more they are working to drive paid search ads, at least on searches that demonstrate a monetizeable intent,” said Kevin Lee, executive chairman of Did-it Search Marketing, New York. “For more purely research-focused searches, the engines will maintain the prominence of organic listings.”
Mr. Lee thinks that because of this there will be a split between the way search engines treat consumers and researchers. He said consumers will be driven increasingly towards paid ads, while researchers will gravitate toward organic listings.
In the early days of search, Google’s search results page had no advertising. A little while later, advertising appeared on the right side of the page. This became AdWords, the most formidable paid search advertising money can buy.
“Now there are two and even three ads on the top rail for the most competitive search terms,” Mr. Lee said. “As time went on, advertising has taken more prominence – at the expense of the organic listings’ real estate.”
Top rail or third rail?
Although Mr. Lee thinks this is why search engines are investing in the display and infrastructure market, others are not as sure.
“I will say that search, both paid and natural, will remain in the position that they are in, that they fulfill a consumer’s need to research a product, service or solution prior to purchase,” said Dustin Engel, director of strategy at search shop Range Online Media, Fort Worth, TX. “Search is also another conversion channel in that some consumers start their ‘purchase decision’ at the site while others start the process through search.”
Mr. Engel believes that search engines are buying into the online display advertising and infrastructure market because they are simply going for a bigger share of pocket of advertiser budgets.
Google specifically intends to open up display to mid-market and smaller advertisers.
“The engines are going to create a more level playing field between big brands and smaller advertisers,” Mr. Engel said. “Smaller advertisers will be able to compete through cost-efficiencies, remnant inventory buying or yield management strategies such as RightMedia, or through advanced targeting.”
Mr. Engel said that the opportunity to test display ads on search results will be interesting.
“Even more fascinating is that this is how paid search marketing started,” Mr. Engel said. “All of us, as marketers, were relegated to buying the display unit on our top performing search terms in the mid- to late ’90s. Obviously this will favor larger brands with larger budgets, but this could create a nice long-tail display advertising opportunity for smaller advertisers.”
Did-it’s Mr. Lee noticed that Google recently changed the background of its top-rail ads, making them more visible in an effort to drive consumers’ attention and clicks to paid ads.
He said that further evidence of a two-tiered search system is in the shift from more conventional auctions to quality score-based search advertising.
“Through quality scores the engines are working toward more relevant advertising systems,” Mr. Lee said. “These systems will ultimately rival the relevance of organic listings, driving more traffic to the ads at the expense of organic results. And following the release of Panama, quality score has only become a more important concept within the search arena.”
Phil Stelter, Range’s director of business development, believes the industry has had a two-tiered search system for years now. He expects to see greater integration of the monetized placements in the future.
“I don’t know that a ‘two-tiered system’ is the way to think about it,” Mr. Stelter said. “If anything, that’s where Google gave us a good sign of this with the announcement of Universal Search.
“More interesting to me is the use of structured data from Google Base and other sources,” he said. “Organic content, content they have retrieved themselves and attempted to classify with the algorithm, is difficult to control for quality whereas structured data from Google Base for example is much easier to control and display – and is likely more relevant, more often.
“The end result is a page that resembles less a list of results with ads filed around it but a page that attempts to answer the query in more ways with more options, including paid advertisements,” Mr. Stelter said. “Advertisers with content relevant to the query-response will need to leverage all of these options including paid, organic and structured feeds of data into Google and Yahoo.
“They understand, and have for some time, that while it’s critical to pursue a business goal of greater monetization of SERPs [search engine results pages], and shareholders are grateful, they know that they will ultimately lose the game if they are not relevant,” he said.
Mr. Stelter said it would make sense to sacrifice some increased monetization of the results for the sake of avoiding user defection.
However, he is convinced that research is part of a consumer’s purchase process and that organic listings actually aid consumers to eventually make a purchase.
Yahoo Search Marketing would agree with Mr. Stelter, as the company’s purchase funnel illustrates. A consumer first builds awareness of a product through research before actually buying the product, according to Yahoo. Therefore, organic listings are an important medium for research, shaping their purchase decisions.
Range’s Mr. Engel concurred with that line of thinking.
“I don’t think natural search will become less relevant and less a part of the purchase path,” Mr. Engel said. “I think it will increase as more advertisers are able to jump into the display advertising fray and messaging fragmentation increases. Consumers will need an agnostic resource to sort through it all and that resource will walk them through the conversion.”
Mr. Lee said that the efforts to drive searchers away from organic results and toward paid results exist only within the realm of monetizeable, commercially-focused searches.
“For the searches that are truly research-oriented, which do not lend themselves as readily to product- or service-specific advertising, the engines will maintain the prominence of organic results,” he said.
Mr. Stelter also talked about the future of this advertising model.
“The curious piece to me is that as engines provide a greater diversity of responses to a single query, including elements from their own properties, Google will inevitably stray from its prior intention of getting a user off Google.com as quickly as possible and instead draw greater interaction with its pages,” Mr Stelter said.
“I see this ultimately resulting in more impressions and more clicks for advertisers across the range of placements, paid or unpaid, [that] they could occupy with their content or ads,” he said.