An eMarketer report from February projects that in 2006 Google will account for 57.2% of the total U.S. paid search ad spending (after traffic acquisition costs), up from 32.9% in 2004. Meanwhile, Yahoo will increase its share of total U.S. paid search only 4% over 2004, to 27% of the market.
Google's volume dominance
The two things are important to search marketers: a high volume of searches and a high number of profitable conversions. Google has volume dominance. According to Nielsen/Net ratings for November, 2.3 billion searches were performed on Google. That accounted for 46.3% of all searches for the month. In comparison, 23.4% of the searches were on Yahoo, 11.4% on MSN and 6.9% on AOL. Microsoft also last week announced its own adCenter platform was up and running and serving ads for its own search site (Yahoo Search Marketing had served advertising on MSN's search platform).
Yahoo hopes its management tools will enable advertisers to make up in profitable conversions what its engine might lack in sheer search volume. "Yahoo's new technologies and features will make it easier for marketers to understand the performance of their search advertising campaigns and experiment with the medium in an effective, insights-driven way," said Steve Mitgang, Yahoo's senior VP-advertising platforms and products.
The platform offers several performance enhancements over the existing system. It has improved its geographic targeting, so the technology can better understand and match user search intent. Yahoo's WhereonEarth technology can identify, for example, that a search for a "restaurant near Fenway park" is in central Boston. In addition, advertisers can begin and end campaigns on the dates they choose. Unlike Google, Yahoo allows advertisers to pause the campaign without losing performance data. The system is built to make it easier for Yahoo to extend its ad system to mobile devices and other media as well as ad click-to-call capabilities.
Yahoo has also streamlined its content-review process to launch ads more quickly. In the past, marketers have been critical of the delay caused by Yahoo's human-based editorial process, because it made it harder to get immediate feedback about an ad's performance.
Bryan Wiener, president of 360i, an agency with a specialty in search, explained that rapid placement of ads is important for direct marketing. "In direct mail you have great tracking on how things are working, but there's a substantial time delay. What marketers want from search is to be able to test creative, keywords and bidding strategies and get instantaneous response so they can continue to optimize," Mr. Weiner said.
Mr. Wiener thinks the bells and whistles of the new interface will not materially influence marketers' search-ad-buying allegiances. "Google's dominance in paid search emanates more from its dominance in consumer searching behavior than it does in them having a superior platform," Mr. Wiener said. "The key to MSN and Yahoo making gains on Google is really gaining market share in searches."
Targeting small businesses
However, Yahoo's many enhancements are designed not only for marketers that are already actively involved in online advertising, but also at businesses that have not yet started to use search as an advertising tool.
"We wanted to make an advertiser experience which was not just about folks who are currently in our system today but for all the small businesses in the U.S. or abroad that just don't do any online marketing at all," Mr. Mitgang said. "We looked at how we could provide the easiest way for them to get quickly online, to quickly see results and also quickly see ways that they can improve things."
The new platform also provides data with which to evaluate a campaign. Marketers will see an ad's quality score, assigned by Yahoo based on bid and other relevance variables, that will help them better estimate where on a page their ad will go once the new system is in place. Marketers will also be able to identify their highest-performing ads with an automated ad-testing feature that rotates multiple versions of ads to determine which are the most effective.
Perhaps the most innovative offering of the new platform is monitoring of deferred conversions. The platform shows advertisers not only the last click that led to a conversion but also the contribution of earlier results. For example, a search for "cameras" might bring up an ad for Nikon, but the user might not click on that ad but refine the search to look for "Nikon cameras." If the consumer then clicks through a second ad, Yahoo notes the contribution of the first ad. Yahoo calls this metric an assist. Some large brand advertisers, however, may be reluctant to use the "assist" tool, instead preferring their own agencies' proprietary metrics.
Yahoo also offers a tool that forecasts the bid needed to achieve a specific share of expected clicks. It also offers goal-based auto-optimization. An advertiser can tell the Yahoo interface its business goals and the tool finds the lowest cost-per-acquisition strategy to meet those goals.
Yahoo's new campaign management application will become available to marketers in the third quarter.