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Demand For Search Engine Ads Outgrowing The Supply
A report conducted by Nielsen//NetRatings determined that while the demand for search engine advertising is continuing to grow quickly, the supply of appropriate search inventory is not. In laymen's terms, the study indicates that there isn't enough search engine space to accommodate all would-be advertisers.
What can be done to increase search engine real estate supply? Discuss at WebProWorld.
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The primary reason the dwindling supply deals with the growing costs of PPC advertising. Ken Cassar, director of Strategic Analysis at Nielsen//NetRatings, says:
"Conversations with several advertisers reveal that, even with recent increases in price, search engine advertising is still cost effective. However, if prices continue to rise, this will not indefinitely be the case. The low hanging search opportunities are nearly picked over."
The report gave suggestions concerning what areas PPC-driven search engines (Yahoo, MSN, Google, Ask, for starters) could improve in order to increase the supply of necessary inventory to accommodate more advertisers.
According to Nielsen//NetRatings, areas that search engines should continue to improve are: search result relevancy; personalization, which would allow for superior ad targeting; local search advertising services and increased search specialization, which would help to narrow the scope of search results.
"The future of search is dependent on advertisers' continued refinement and understanding of their own valuation metrics and of search providers' continued innovation - which will be principally driven by localization, personalization and specialization," said Cassar.
Because of the lowering supply of search engine real estate, the cost for a successful PPC ad campaign that includes competitive keywords can be very expensive. The report offered a few suggestions to assist them with rising prices:
Search advertisers must continue their efforts to track the effectiveness their money spent on search engine advertising. Another recommendation called for the integration of search advertising with non-search engine advertising, such as keyword purchases coordinated with a television campaign. The last suggestion involved resistance to "paying huge premiums on top of economically justifiable prices in order to prevent competitors from gaining key real estate on the portal sites."
The tracking issue was also addressed at the SearchEngineWatch forums by posters "seobook" and "James Colborn". "seobook" stated that many people still do not track their advertising spending, and that the system has room for improvement. James agreed with seobook by stating:
"Click costs aren't necessarily being bid up by lack of inventory (but) more by people not tracking and not knowing how to bid properly.
For example, if you place a (maximum) bid well over the next bidder down you might only pay a cent more and guarantee your place... That is until someone else comes in with a similar tactic and out bids you. If three or more people do this then the actual 'market space' cost for terms is inflated and it can take weeks or more to get it back down to equilibrium."
However, concerning the dwindling search engine real estate, Google and other search engines are offering searchers many more search features from which to choose from. In light of the report, it stands to reason that some of these features are being offered to increase supply. Features like shopping search engines (see Froogle) and local search services, for which both Google and Overture have developed targeted advertising services.
Google has also attempted to generate more search engine web estate for advertisers with the introduction of Gmail. Google's email service allows for the placement of contextually relevant ads. Gmail determines context by scanning incoming and outgoing emails. The ads that appear in Gmail's mailings are generated from Google's AdWords service, the same service that powers the search engine ads.
Another point of view concerning rising PPC prices was brought up at the WebmasterWorld forum. Because PPC costs are rising, those who display these ads stand to benefit financially. "jcoronella", a moderator at WMW, said that both AdSense clients and affiliates stand to profit from this current trend. However, jcoronella also warned:
"In general, when an industry is not mature you get extreme (inefficiencies) in the supply chain opening up opportunities for middle men like AdSense junkies and affiliates. As it matures, you get a tightening down of margins due to increased competition. The same will happen here, and the suppliers (SE's) will vertically integrate and edge out web masters to get a bigger piece of the pie."
Ken Cassar believes that not only does the search engine real estate need to grow, but the amount of searches conducted by a person needs to increase, too:
"Because the vast majority of the online population already uses search and because the size of the online population will inevitably begin to slow, future growth must come from growth in the frequency of searches per person."
Read the Neilsen//NetRatings PDF here.
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About the Author:
Chris Richardson is a search engine writer and editor for WebProNews. Visit WebProNews for the latest search news.
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Chris Richardson
