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JupiterResearch: Concentrated Search Market Suggests Room for Vertical Engines

Paid search spending in the United States is concentrated in the four categories of retail, financial services, media/entertainment and travel, according to a report released yesterday by JupiterResearch, a division of Jupitermedia Corp., New York.

The four categories accounted for 79 percent of the $2.6 billion spent on paid search in 2004.

The report, “Vertical Search: Early Marketers Will Reap Rewards of Low Pricing,” said this finding means the search industry will develop much the same way historical media markets before it have, with the broad-based search engines spawning a raft of vertical engines dedicated to specific categories.

“Broad-based search engines are extremely good at navigating vast amounts of information, but extremely poor at helping a consumer make a purchase decision,” said Niki Scevak, a JupiterResearch analyst. “This creates a large opportunity to enhance the consumer experience with vertical search.”

In the search market overall, rapidly rising keyword prices on broad-based engines soon will stabilize, and industry growth will depend substantially on the incremental value provided by vertical search engines, the report found.

“The trend will cause a sea change in how advertising spending is allocated online and force existing media firms in vertical categories to embrace performance-based advertising pricing models,” Scevak said. “If vertically focused media firms do not seize this opportunity, search engines like Yahoo and Google, as well as a number of established and startup vertical search engines like Shopping.com and Sidestep, will enter to satisfy the market demand.”

Melissa Campanelli covers postal news, CRM and database marketing for DM News and DMNews.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters

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