SAN JOSE, CA — With search inventory in short supply on the top paid listings providers, search marketers have taken a second look at smaller, alternative sources of leads.
Google and Yahoo's Overture Services dominate the paid listings market, providing paid results on their own sites and top search destinations like AOL, MSN and Ask Jeeves. Yet advertisers have seen prices spike in the past year, as search inventory on top sites has failed to keep up with demand. Some marketers have found inventory at cheaper prices on the estimated 525 second-tier paid search providers.
“[Prices] are going to continue to rise, and it's going to be incumbent on the advertiser to find more efficiencies in their buy,” said Chris Churchill, CEO of search marketing firm Fathom Online, San Francisco.
Google and Overture do not release their average click prices, but marketers report steep increases in the past year as more have begun using search engines. Jupiter Research recently forecast that click prices will continue rising as search engines struggle to keep up with surging advertiser demand.
In the past year, Churchill has found click prices rising 40 percent. The higher prices led him to devote more spending to smaller paid search providers that now deliver 18 percent of the clicks to his clients. He expects this trend to continue as the search market sees new entrants focused on specialized areas.
The amount of search inventory on second-tier sites is debatable. Some put it at just 2 percent of all searches, while others say the figure is much higher when taking into account search toolbars and parked domains that display search listings on Web pages users arrive to by misspelling Internet addresses.
The two publicly traded paid search providers, FindWhat.com and LookSmart, report delivering millions of leads to advertisers. FindWhat said it delivered 219 million paid clicks in the second quarter while LookSmart generated 105 million, excluding paid inclusion listings on MSN.
“It may not convert as well as the tier one [search engines], but the difference in the CPC makes it worthwhile,” said Peter Hershberg, managing partner of search marketing firm Reprise Media, New York.
Dakota Sullivan, vice president of marketing at LookSmart, San Francisco, estimates that in most categories click prices for LookSmart come in 25 percent lower than Google and Overture. Dan Ballister, vice president of sales at FindWhat, Fort Myers, FL, said it too offers marketers a cheaper alternative with far fewer search advertisers than the more than 100,000 at Google and Overture.
“It's a less competitive bidding environment, so it's a lower cost per click,” Ballister said.
Churchill said Fathom has found traffic from smaller search providers, such as Business.com and Quigo, has converted at a higher rate than clicks from Google and Overture.
Doubts still lurk about the overall quality of traffic from small search providers. One major problem at some second-tier providers is click fraud, often done by affiliates looking to drive up their commissions by using automated clicking programs.
“We're not there yet,” Sullivan said of LookSmart's traffic quality. “We're getting there.”
LookSmart does not release a full list of its search partners. They include regional Internet service providers and meta-search engines. Sullivan said LookSmart rejects more sites than it accepts. It has a fraud detection team that works to spot abnormal click levels and respond to advertiser reports of questionable activity. LookSmart also hopes its new search initiatives like its private-label search deal with the University of California will let it control more of its own search traffic to guarantee its quality.
“We know what clean traffic looks like,” he said.
Frank Watson, head of search marketing at Forex Capital Markets, said marketers need to balance the risks of using small search providers with the payoffs.
“If you don't take that traffic, somebody else will, and it will be your competitor,” he said.
