Key-word search, which accounts for an average of less than 1% of total marketing budgets, is slowly being embraced by b-to-b marketers as a low-cost, effective way of reaching a target audience, particularly in a down economy.
According the Interactive Advertising Bureau, search grew from 1% of total online advertising in 2000 to 4% in 2002, or about $288 million out of $7.2 billion in online ad revenue. Banner ads continued to account for the largest share of online ad revenue, at about 36%. A study last year by CyberAtlas Research found that marketers on average devote less than half a percent of their total marketing budgets to search.
"B-to-b marketers are spending the most money on the tactics that are least effective," said Fredrick Marckini, CEO of iProspect, a search engine optimization company. His research showed that search engines are the most widely used technique for finding Web sites.
A July report from iProspect found that 77.5% of Internet surfers use search to find Web sites "somewhat frequently" or "very frequently," compared with only 3.1% of Internet surfers who use banner ads somewhat frequently or very frequently to find Web sites.
Effectiveness aids acceptance
Despite making up such a small percentage of marketing budgets, search is being accepted more readily by b-to-b marketers that are looking for effective ways of spending limited marketing dollars.
Dow Chemical Co., for example, is broadening its use of search as a way to drive traffic to its Web site. Last year, Dow ran one search campaign, and this year it has run four so far, said Eric Grates, business services manager for Dow.com.
"Search engines are a big way of generating traffic," Grates said. In fact, search is the only online advertising Dow will do this year, he added, although the company also uses e-mail newsletters to communicate with its customers and prospects. Its overall marketing budget is flat compared with last year.
Dow uses search campaigns to attract business customers looking for specific products, such as polyurethane plastics. Its search campaigns generate click rates between 2% and 7%, which is significantly higher than the average banner click rate of less than 1%, according to industry estimates.
Dow primarily uses Google for its search campaigns, Grates said. "Their technology seems to be extremely good," he said.
Google offers options
Google is a pure-text search engine that provides several levels of pricing models, from cost per thousand impressions to cost per click. It also provides sponsored links that give marketers top placement on results pages.
The average CPM for b-to-b search terms is about $50, said David Hirsch, director of the b-to-b vertical market group at Google Inc. However, pricing varies based on the industry and target market, he said.
Googleâs b-to-b group has sales teams that specialize in vertical segments, including manufacturing, health care, technology and retail. Each team provides expertise to marketers in an industry, particularly when it comes to defining key words and results desired.
"ROI has gone from a spreadsheet to a reality, especially in this business climate," Hirsch said. "You canât hide behind the numbers. A campaign worked, or it didnât."
Einstein Medical, a division of Einstein Industries Inc., San Diego, is another b-to-b marketer that has been expanding its use of search. Einstein Medical in an online medical research directory aimed at physicians providing fee-for-service medical care. It uses search to recruit doctors who are interested in advertising on the directory.
This year, Einstein will devote 90% of its online marketing budget to search campaigns. "We run placements on all the search engines, but Google definitely ranks at the top," said Ben Gravelle, advertising director at Einstein Medical. He said campaigns on Google generate twice the click rates of campaigns run on other search engines, including MSN, Yahoo! and Alta Vista.
Gravelle said sponsored links and premium placements on Google have proven to be effective, and he likes the text-only search results.
"A text link works much better than a banner or skyscraper," Gravelle said. "People are looking for information instead of looking at an ad."
Search is a star
In a climate in which online ad agencies are struggling to find profitable business models, search is proving to be a star. In fact, some search-only companies are reporting profitability in an otherwise dismal year.
Pay-per-performance search company Overture Services Inc., Pasadena, Calif., reported its fourth consecutive quarter of profitability at the end of the second quarter of this year. Overture had net income of $17.5 million, or 29 cents per diluted share, for the second quarter, compared with a net loss of $2.9 million, or 6 cents a share, for the second quarter of 2001. Overtureâs second-quarter revenue was $152.5 million, a 144% increase from $62.5 million a year earlier.
The search company uses a pay-per-click model in which advertisers bid on the prices they will pay for search results. Marketers pay only for search results that generate clicks.
The average cost-per-click was 30 cents for the second quarter, said Lisa Morita, senior VP-general manager of online business at Overture.
"Itâs up to the advertiser to establish a price they want to pay for a qualified lead," Morita said. "For a lot of b-to-b type products, itâs an extremely low price per lead."