The research firm Borrell Associates just released a study titled "Economics of Search Marketing: Addressing the Challenges of a Scalable Local Online Advertising Model." You can pick up the report free of charge at borrellassociates.com. I found the most impactful quote of the study came in the opening line where the authors write: "The Search Engine Marketing marketplace [for local advertisers] has become like a boisterous carnival, overcrowded with people trying to elbow in on the excitement, but inevitably a place where many end up feeling hoodwinked and fleeced." While I may change the boisterous carnival analogy, I agree that too many local businesses are not happy with their results in search.
Having spent time at Yahoo! focused on the Real Estate category, I spent hours at conferences interacting with individual agents and local brokers struggling to make search work. My conversations with small and medium sized business owners in the real estate category support Borrell's assertion that many feel "hoodwinked and fleeced." Often frustrations from local businesses stemmed from one key statement: "I get the bills but I can't even find my ad." I see the lack of predictable visibility in search as a key factor driving the high churn (50%+) Borrell identifies in SMB search marketing.
Why does predictable visibility matter in search marketing, a marketing channel where we can report on the clicks and transactions that occur directly associating ROI? First, consider the statistic that Borrell cites that just two-fifths of all small businesses don't have websites. Next, consider how few local businesses either enable online purchasing, capture leads via forms or email, or have unique call tracking for acquisition channels like search. So small businesses are left to look and see if their ad is running as tangible evidence that their investment has value. With its complex algorithms that determine rank, search often does not produce proof of an ad to the marketer searching for it. Local marketers used to seeing their ad in the yellow pages, newspapers, and local television cannot access a similar experience in search.
The challenge of quantifying the full value of search is not unique to local marketers. Large retailers struggle to assess the impact search has on their brick and mortar locations. CPG companies would like to quantify the impact a unique, creative listing may have on consumer's perception of a brand. But valuing search is a particular challenge for the local marketer lacking basic visual proof that their ad is working let alone even showing up in the results.
Perhaps the lesson here is that we don't always need to think of value in complex equations. It is true that data-driven optimization is the right approach for many clients. However, as an industry we should not forget that a compelling ad reaching the right consumer at the right time is by itself valuable. To use a tried and true idiom, we often can't see the forest for the trees.
by Justin Merickel
Yes, "visibility" is at the crux of the marketing crisis.
The local newspaper in my town is shrinking, and I think the reason for it is that advertisers are discovering that it's not cost-effective to advertise in the paper. The smallest ad costs about $30k a year; you could rent a decent shopfront or hire an employee for that -- ask the question, "does it make me $30k a year in profit?" and the answer is likely "no."
I think businesses have long overspent on advertising because of "visibility", or really, the narcissism of the owners/operators. There's something so satisfying about hearing the name of your business on the radio, seeing it on television, or in a magazine, that people don't rationally ask the question: "What value am I getting for my investment in advertising?"
In some online advertising markets, people are getting a taste of a world where we can say I spend $X on an advertising campaign and that made $Y in profits. That world is rapidly expanding and improving.
John Wanamaker said that "Half the money I spend on advertising is wasted; the trouble is I don't know which half." As advertisers discover the "wasted half", advertising spends are going to drop, at least in the short term.
Posted by: Paul A. Houle | June 22, 2009 at 09:00 AM