Effectiveness Study Confirms SEM Power

Before I launch into search research published this week by the Interactive Advertising Bureau (IAB) and comScore, Yahoo’s acquisition of Overture is worthy of comment. Yahoo has been a major source of search inventory for Overture. This vertical integration makes sense for both parties for a variety of reasons. Though I don’t anticipate any immediate effects for marketers and agencies as a result of the pending merger, some changes are sure to evolve, particularly in the area of XML paid inclusion.

Post-merger, Yahoo will have the ability to leverage Inktomi, AltaVista, and FAST technology within the XML paid inclusion mode of search advertising (in which marketers pay to have their content included in the algorithmic index). Yahoo’s algorithmic results might look very different in the future, because it’ll be able to tap the best technologies in-house. It will be interesting to see if Yahoo continues to use Google’s algorithmic results and, if so, how. The landscape will continue to evolve. Content-based inventory’s increasing importance is an additional impetus, driving synergies between major portals and search advertising networks. I anticipate text link sponsor matches in more Yahoo areas, particularly when graphic inventory hasn’t sold.

Now, let’s move on to that study.

Ever wonder how searchers behave when viewing and clicking on major marketers’ listings? So does the rest of the industry. That is why the IAB Search Engine Committee spearheaded research into search marketing effectiveness. Research firm comScore conducted the study using its qSearch platform. Results are being released under the title, “Measuring the Effectiveness of Sponsored Search Marketing.”

The research was designed to demonstrate and measure the impact of sponsored listings. As one might imagine, sponsors were the larger players in search: Google, Overture, Yahoo, Sprinks, MSN, and AOL. The study, conducted over three months, tracked and analyzed searcher behavior across major portals and search engines as related to 16 leading travel and finance brands. Behavior was tracked from initial search to conversion.

Key findings include:

• A significant portion of sponsored search conversion value occurs weeks after the initial referral. This holds true in diverse sectors, from travel to finance. Lagged conversion was higher if the search listing was seen a second time by the searcher, even if the searcher didn’t click on the second viewing. (As with any advertising, this indicates campaign optimization must take into account lagged conversions, buying cycle, even branding.)
• Sponsored search impressions achieved 18.3 percent CTR. Surprisingly, for brands in the study, CTR on organic listings was 4.3 percent. (Not all keywords, listings, brands, and creative can pull killer CTR. However, this underscores searchers find listings relevant and choose to click paid listings, particularly when they’re brands. Google rewards ads that are clicked and considers clicks on AdWords ads votes for relevancy.) There are several possibilities for low CTR on organic listings. One likely scenario is when the brand wasn’t represented in the sponsored area, listings may have dropped below the fold.
• Click rates vary significantly by industry. Not unexpected, but a reminder that general industry averages cannot be used by individual industries as benchmarks. Benchmarking must occur against peers.
• Sponsored search drove an estimated $208 million in travel sales and approximately 2.2 million new finance customer applications in the three-month period ending May 2003. With the power to deliver that level of acquisition and revenue, it’s no wonder travel and financial services marketers find search engine marketing (SEM) an indispensable marketing plan component. CPCs within these industries reflect search’s power to deliver immediate and lifetime revenue.
• Sponsored search listings resulted in a higher conversion rate (to objective) than unpaid (organic/natural) listings for the sites and brands studied: 1.4 percent versus 0.6 percent, respectively. This proves the quality of paid search traffic is at least as valuable as organic/unpaid traffic.

In addition to the research, case studies were prepared by the sponsors.

The study didn’t measure searcher behavior or value for either directory paid inclusion (LookSmart) or XML paid inclusion. It’s only the beginning of a wealth of information regarding search behavior that can be harvested. The behavior marketers care most about are those searchers who arrive at your site. Are they high quality? Will they convert profitably to sale or registration? Did they have a positive branding experience?

Read the full study when it’s eventually published on the IAB Web site to learn new ways to use search in your marketing mix.

In the meantime, a road show has been sharing the data with agencies and marketers. The final session is on Monday, July 21, in New York. E-mail me if you’re interested in attending, and I’ll see if I can swing an invitation for you.

Meet Kevin at the Jupiter ClickZ Advertising Forum in New York City on July 30 and 31.