$2.6B on paid search: Keyword wars heating up as holiday nears

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With marketers expected to spend $2.6 billion on paid search in 2004, competition for keywords this holiday season has heated up. And the price of those words and phrases-which deliver Net users to marketers' sites-has risen from 10% to 80% depending on the term, said Rob Wilk, director-search engine marketing, Avenue A/ Razorfish Search. That's why companies fatten their search marketing budgets up to 30% for the gift-giving season.

Among the best-performing keywords this year are "free shipping" and "guaranteed delivery," said John Burke, head of technology commerce at Google. And good performers like these are competitive and expensive: "Free shipping," for example, cost 83¢ in early December. Minimum prices for key words start at 10¢ at Google and Overture, and a marketer pays that rate whenever a consumer clicks on the ad results for that keyword when doing a search.

sense of urgency

"Shipping terms provide a sense of urgency and are a huge factor as we begin to get more aggressive moving into the holiday season," said Jason McKay, manager of online acquisition at Sony Electronics e-Solutions Co.

Because it's the biggest sale time, the holiday season is when marketers roll out numerous keywords related to their best sellers and their name brands. Plus, they peg terms to all merchandise available. Popular keywords fetching premium prices this year include "digital camera," "mobile phone," "MP3 player" and "iPod."

But advertisers don't know whether a phrase sings until they experiment-and marketers and their agencies check the return on investment of bids constantly. The real-time nature of search lets marketers modify their terms at any time-and they should if they want to beat rivals.

Among seemingly similar terms, certain configurations can command a higher price. For instance, "Holiday business card" was fetching $18.90; while "Business Christmas card" was priced at $10.50; "Corporate Christmas card," $10.50; "Holiday corporate card," $10.50; and "Company Christmas card," $7.51.

"It's not about a flight and analysis of results," Mr. Burke said. "It's about ongoing optimization and adjusting campaigns on the fly."

fast optimization

"You have hours, not days, to optimize search terms," warned Diane Rinaldo, director-strategic alliance at Overture, a Yahoo company.

For example "free shipping" doesn't always connect as a keyword because it can attract a crowd that can't afford to spend the minimum to get free shipping, pointed out Andrew Wetzler, president of search agency MoreVisibility.com.

But "free" works great in ad results. "Free shipping until Dec. 20" or "Free shipping for spending over $50" are examples of strong promotional language in ads. "Set yourself apart from competition with any value or incentive you can provide," Mr. Wetzler said.

Specific holiday terms are worth testing. Indeed, "corporate gift" and "gift certificates" are among the most popular words this year. General phrases like "gift ideas" and "stocking stuffers" and "Chanukah gift" are effective when shoppers are looking for ideas. So these words are better at branding than selling. To drive sales, when you "use a broad phrase like `holiday shopping,' you need to have a broad enough menu of products to impress those coming to your site," Mr. Wetzler added.

In general, the more you modify terms, the better qualified your results. The word Treo, for instance, is a popular term. But superior leads are derived from "Buy Treo 600" and "Treo 600 for sale." "Those permutations help appeal to more people," said Tom Dugan, president of search agency NewGate Internet.

Now that 80% of consumers have broadband at work, much shopping takes place during the business day. So, marketers have learned to bid highest then. An exception is an item like the $270 Roomba robot vacuum cleaner, sold by gadget purveyor Hammacher Schlemmer. "When customers are buying items that are more costly, they spend more time [considering them] and that occurs on the weekends," said Mr. Dugan, Hammacher Schlemmer's agency.

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