SEM Immaturity Threatens Industry Future

The search marketing industry is immature. I'm not just referring to the fact that nearly all the companies engaging in search marketing are less than 10 years old. The industry is also immature in the way "partnerships" are created and maintained.

Successful brands and successful marketers, be they manufacturers, retailers or catalog merchants, nearly always manage offline marketing by establishing long-term partnerships with their agencies, suppliers, and even media providers. These relationships don't always work out, of course, but there generally exists a mature understanding that in order for the company to thrive and grow, an investment in success requires both sides of the relationship to work hard to achieve agreed-upon goals and objectives, many of which will not be easy to deliver. Some initiatives take time to bear fruit; others rely on aggregation of experiential data, as well as learning by both organizations.

My hope is as search engine spending becomes more material and as senior management begins to fully understand the true value of attracting search visitors to their sites, an increased level of maturity will manifest itself on both the agency and marketer side of the equation. Unfortunately, strong relationships between SEMs and clients currently seem to be the exception, not the rule. Both marketers and agencies seem to display an alarming degree of immaturity in regard to what it takes to forge a successful partnership.

This malaise can be partially explained by the fact most PPC search spending continues to be managed in-house without the benefit of any kind of partnership at all, according to surveys conducted by both SEMPO and Marketing Sherpa. Of the 3,000 marketers served in Marketing Sherpa's PPC Survey (a larger sample than the SEMPO survey), "73 percent say they're using in-house staff for PPC paid search." The SEMPO study (conducted by Radar Research) broke results down by company size, using number of employees as the gauge. Sixty-three percent of companies with fewer than 500 employees manage paid placement search in-house; for companies with over 500 employees, this number drops to 39 percent.

There's hope in that there's a 24 percent difference in the in-house/agency ratio between small and large advertisers. It may be larger, more mature companies have developed a firmer understanding of what their competencies are, and can therefore better determine the correct share of search tasks that should be outsourced. But the story doesn't end there. While senior management may correctly understand the missed opportunities typically associated with in-house management of a non-core function, those at lower levels of the organization tasked with managing external relationships report they'd prefer to bring SEM (and SEO) in-house. This dichotomy in outlook between strategic thinkers and tactical implementers may explain why there's a high level of SEM provider churn, even among larger advertisers.

The SEMPO survey went on to delve into satisfaction with paid placement SEM services and found "just one-third of respondents said they were happy ("moderately" or "very") with their SEM agencies for paid placement campaigns. More than a quarter of respondents are unhappy ("moderately" or "very") Two out of five advertisers report "mixed results" when asked for their satisfaction level."

Why are so many advertisers unhappy? One could be tempted to blame SEM agencies for providing poor service. Perhaps these agencies are indeed providing service levels insufficient to help their clients compete in an increasingly-competitive marketplace. One cause of this may be that SEM agencies face the same labor shortage issues that plague the marketers attempting to staff qualified in-house search teams. The result is that many agencies simply cannot deliver the level of service required to hold onto an account.

But SEM agencies don't bear all the blame. Like serial daters or serial divorcees, marketers who report being disappointed after trying numerous SEM agencies must own up to their own mistakes, which include:

1. Poor Agency Choice Marketers rarely have a mature decision process capable of truly evaluating SEM agencies based on the underlying business needs of the organization.
2. Unreasonable Expectations Paid placement search is complex, and also hinged to the competitive set and how rational or aggressive the competitors are in the auction marketplace. Battles waged in this environment are both offensive and defensive. "Standing still" may require considerable effort and expertise to defend against competitors seeking to capture market share, ROI, profit, or other success metrics. Unless marketers approach this environment with a thorough understanding of its peculiar features, the result will be disappointment and SEM agency churn.
3. Unwillingness to Pay an Equitable Price Success in paid placement search may take more work that a standard discounted fee structure will support. Sure, marketers naturally seek to keep these fees low, and many agencies go out of their way to secure new businesses by meeting such demands. But low fee structures may preclude the partnership from evolving because they prevent the SEM agency from supporting the strategic needs of the client.
4. "Dating Mentality" and a Short-Term Horizon Depending on the state of an existing campaign, it may take time to lay the foundation of change to extract maximum value from it. Doing this requires a longer-term horizon than many in the industry currently use when evaluating campaign performance. In addition, changing SEMs or moving SEM responsibilities from in-house to an outsourced basis is a process that must be carefully managed.
5. Unwillingness to Communicate The time for marketers and agencies to communicate is when things aren't going well. When marketers give their agencies "the silent treatment" while waiting out the terms of their contracts, valuable opportunities are lost on both sides of the equation.

I hope and expect that as the SEM industry matures, agencies and advertisers will take a deep breath and approach their relationships as partnerships. It may take some healing time to bring this situation about. Many marketers I speak with tell me they consider themselves "burned" by their prior SEM agencies. Relationships between marketers and agencies are like personal relationships: bad experiences and bad memories can poison them and limit one's chances of finding a successful new relationship. But with maturity, one can see good relationships can provide fulfillment, adding up to a sum greater than the constituent parts.

It's taken decades for this level of maturity to evolve in other industries, and paid placement is only now finishing its first 10 years. Much healthier, more productive relationships lie ahead.

Google vs. Microsoft: Beyond PPC

Today, we'll look at the broader interactive marketing ecosystem, the competition between Google and Microsoft, and how this competition may affect the future of targeted PPC (define) (and CPM (define) or CPA (define)) advertising. Someday soon, the SERP (define) will be the smallest part of your digitally targeted media buy. That's why the broader battle between Microsoft and Google matters.

Microsoft still leads in productivity software for consumers and information workers, as well as in desktop operating systems. Recently, there's been lots of buzz in the press about Google and its foray into Google Apps, which provides free Web-based apps (they eventually may be ad supported) that compete with the Microsoft Office suite.

While Google's applications are usable, they won't be a significant threat to Microsoft unless Google also starts delivering the functionality in downloadable client-side software, due to the limitations of SAAS (define).

However, Google could decide to emulate the alternative desktop office suite providers, such as Corel, with its Office Suite, or private-label a free version of the open-source OpenOffice. Then it would indeed be going head-to-head with Microsoft's software-plus-services strategy, which envisions a world of software where you can be equally productive running applications and accessing data on desktop software or via Web services and the "cloud" (meaning the Internet).

The software-plus-services program is application and file interoperability and a set of applications that are agnostic as to whether you're working on your desktop or via a Web browser. The name, though, is an unfortunate selection because many sophisticated techies don't assume it describes Web services but professional services. This holds true even within the Microsoft partner community, which I had a chance to interact with at a recent Microsoft Worldwide Partner Conference (WPC). Even some Microsoft employees don't seem to know what the Web services are and are therefore confused as well.

To minimize this confusion, Microsoft should consider coining -- and therefore owning -- a completely new phrase for applications delivered seamlessly, locally, and across networks while being device-agnostic (i.e., working seamlessly with PC, mobile, game console, and set-top box platforms). Trademark and rights issues aside (money solves these), I suggest the following terms (listed in order of personal preference) to communicate Microsoft's flexible vision of the future, along with their current trademark/domain owners:

* Anyware (owned by Secuware in Madrid)

* Flexware (unused domain; the company may be dead)

* Flexiware (owned by a domain speculator)

Microsoft won't likely choose a clearer descriptor to illustrate this evolution in software to a multidevice, multilocation paradigm but will instead spend billions in media to educate the masses and its partners about software plus services.

I found WPC to be quite instructive. It reminded me that while I might be considered geeky in the media world, there's a whole other world of technologists that keep the computers humming, the software stable, and the data flowing behind the scenes in every kind of business you can imagine. Those Microsoft partners help determine what business data is available within their client organizations and how it's stored.

My key takeaway from the conference was there's a massive shift in the way consumers interact with software, content, entertainment, and information, as well as how they communicate with each other. In this new ecosystem, data are the key that enables marketers to target consumers as they use their many devices. With data comes complexity, and success in the marketing arena will be earned by those who best manage complexity and are able to focus on proper execution over the next several years.

Thomas Edison once said, "Vision without execution is hallucination." Microsoft COO Kevin Turner modified this slightly: "Strategy without execution is hallucination" (and not for the first time). This reminder of what might seem obvious is very relevant to search engine marketers, as well as to the portals. There are lots of great ideas, tactics, and strategies out there, but prioritizing the ones that make a difference then executing them is critical for success.

Share of Voice in Search

Advertisers familiar with offline advertising metrics will now find a recognizable metric available in their Google AdWords interface: a share of voice (SOV) proxy called impression share (IS).

According to Google, SOV is "a relative portion of inventory available to a single advertiser within a defined market sector over a specified time period." The search giant defines "inventory" as the impression inventory available against your campaign based on your keyword and campaign settings. In addition to IS, Google has also released two related metrics: Lost IS (Rank) and Lost IS (Budget).

You won't find the new metrics in AdWords' campaign management section at either the ad-group or campaign level, but under the Reporting tab. To see IS data:

1. Select a "Campaign Performance" report.

2. Within the "Advanced Settings" area, select "Add or Remove Columns."

3. Select "Impression Share (IS)," "Lost IS (Rank)," or "Lost IS (Budget)."

SOV's History

SOV has long been used in offline advertising. It was typically calculated as a percentage reflecting your total ad spend against your competitors' total ad spend. A more accurate measure of SOV in offline advertising would be to base the share calculation on the share of ad impressions against the target audience. Alas, this number was far more difficult to calculate, so percentage of total spending within your competitive set became the standard.

No one in the mainstream agency world ever had a satisfactory answer as to why one wouldn't adjust for efficiency. After all, if you were twice as efficient in buying media, your true SOV would be twice that of your competitive set when calculated using media spending. This is an important point to remember when using IS and the other new metrics provided by Google.

Using Google's New Metrics

In Google's case, the IS and lost IS metrics are useful in ways similar to the offline SOV. However, there are limitations in how you might use this data, not the least of which is the dramatic difference in the value of PPC (define) ad impressions within a SERP (define) based on position.

Common sense, CTR (define) data, and the eye-tracking study we did with Enquiro a couple years back all prove top center positions are far more likely to be noticed by searchers, making this impression dramatically more valuable. This goes back to that question to my supervisors years ago: why don't we adjust for efficiency in SOV?

Yet the data can be very useful in identifying poor campaign settings that may be causing low-value impressions while missing more valuable impressions (and clicks). If you have plenty of budget to spare, don't really care about efficiency, and have a high IS, congratulations. You're in the minority. Most advertisers are stretching their limited budgets as far as possible.

If your impression share is low, consider weeding out less valuable or (even better) less relevant impressions from your campaign. These search impressions could be tuned out by dayparting, ad scheduling (days of the week), geotargeting, adjusting match types, or keyword tuning. By eliminating impressions from the bottom (based on click profitability or relevance), you raise your IS without actually spending any more.

A side benefit may be impressions lost due to a low AdRank (based on Quality Score times bid) improve due to enhanced relevance. Google specifically identifies which impressions were lost due to low rank and which were lost due to campaign budget caps. If the lost impressions were due to a poor AdRank, raising the bid would help, but it's always cheaper to look for Quality Score improvements. Of course, you must take into account the value of the time spent tuning the campaign for improved Quality Score, but the benefits of an improved Quality Score are cumulative for as long as any campaign is active. This can be quite significant on high-volume campaigns.

More data is always better, so long as the data are actionable. When looking at Google's new SOV metrics, start on the most material sections of your campaign first and experiment with tuning there, where it matters most. The ad groups in your campaign's tail may be less significant in the overall picture and can probably wait. Those tail ad groups may also be less competitive, meaning your SOV is already higher.

My team and I have been using and will continue to use SOV and share of clicks data we have in a proprietary system that uses both client and comScore data. It's nice to see the engines are finding ways to make this data available as well.

Presidential Primary Underdogs Send E-mail, Too

The best-known presidential candidates -- Hillary Clinton, Rudy Giuliani, Barack Obama and John McCain among them -- get most of the attention. But the fact is those who haven't made it to the top of the polls, as well as the popular yet unofficial candidates, are still campaigning. And, of course, they're sending out e-mail to supporters and campaign watchers.

With help from e-mail tracking firm Email Data Source, ClickZ News took a look at some of the Republican and Democratic primary candidate underdogs and the e-mails they've sent since the beginning of the primary campaign cycle this spring. Themes common with the more popular campaigns were evident among the lesser-knowns. They, too, had links to donate, featured or linked to video of recent appearances or events, and petitioned supporters to get their friends involved with their campaigns.

One interesting thing to note: Campaigns for Republican candidates or would-be right-leaning candidates sent out far fewer messages than their Democratic counterparts. For instance, former Tennessee Senator Fred Thompson and Texas Congressman Ron Paul's campaigns sent just two e-mails this year, while ex-U.S. House Speaker Newt Gingrich put out six e-mails to registrants of his Newt.org site. Neither Thompson nor Gingrich have declared themselves officially as primary candidates; however, much speculation abounds about each, particularly Thompson, a star of NBC's "Law & Order."

The underdog Dems on the other hand have been prolific in the e-mail arena. Connecticut Senator Chris Dodd sent 19 messages since April, New Mexico Governor Bill Richardson's campaign distributed 22 e-mails in that time, and Delaware Senator Joe Biden's campaign sent 32 e-mails to campaign observers since May of this year.

Each campaign, like the more prominent candidate efforts, had its own individual approach. Some jammed e-mails with a variety of issue-based ideas and commentary, and others took a more bare bones tack. Perhaps the two polar opposites in the style category were Congressman Ron Paul and Newt Gingrich, both fringe Republicans. Paul's spare messages mimicked press releases; they were nearly all text, and stuck mainly with messages of momentum building. Gingrich's, on the other hand, featured lots of images, and read like dense diatribes on multiple political issues while keeping with the overriding theme of government bureaucracy.

Thompson, yet to officially throw his hat in the ring, wrote of testing the campaign waters. The would-be candidate kept with his typical casual approach, even making mention of baseball and football. Senator Dodd promoted the Democratic CNN/YouTube debate and his participation in the annual liberal blogger grassroots YearlyKos convention. Governor Richardson stuck to issues like troop redeployment in Iraq and global warming. Meanwhile, though issues were a regular focus for Senator Biden, the most recent messages from the perennial Sunday morning political talk show guest featured media alerts touting upcoming TV appearances.

Fashion Industry Gets a Whiff of Web 2.0 Marketing

The apparel industry has long been a holdout to online advertising as other categories commit ever more dollars to the medium. Now that may be about to change, as several agencies and digital properties have begun courting fashion marketers with digital ad offerings.

A new division of Ketchum, a unit of Omnicom Group, is ramping up a service called Fashion Interactive 2.0. The new initiative will deploy brand evangelism, social networking, word-of-mouth, blogging, podcasts, and mobile communications to reach consumers, and -- the company promises -- deliver measured ROI to marketers. Other current efforts by "paper doll" avatar site Stardoll and, yes, a Second Life agency, aim to snare the attention of fashion brands.

Jeff Danzer, VP and group manager at Ketchum, explained that Fashion Interactive 2.0 will focus on "how to keep a brand fresh in the eyes of consumers, going out where they live and where they play." Without sharing many details, he said the agency's formula includes outreach to brand evangelists, content creators and consumers who frequent social shopping sites like This Next and Kaboodle, which was just acquired by Hearst. The agency is currently in talks with apparel companies, but has not identified any clients yet.

Ketchum is better known for its PR work on behalf of a roster of tech clients than it is for building programs around clothing brands. Fashion Interactive 2.0 practice head Danzer's professional background includes the development of the brand and marketing strategy behind the men's underwear brand 2(x)ist, and the designof iBoxer, a line of men's underwear with a pocket for an iPod. When those projects earned him the nickname "underwear guru," Danzer sought to apply his expertise more broadly to the apparel category, and to interactive campaign development.

Though it's early, that may prove a wise choice. Earlier this week the founder and CEO of Kaboodle, Manish Chandra, told ClickZ News that the fashion category is now the growth leader on e-commerce and comparison shopping sites.

Virtual communities in particular appear ripe for fashion marketing. Clothing manufacturers like American Apparel have created storefronts in Second Life, and H&M is providing its clothing collections to EA's "The Sims 2" though the expansion pack "The Sims 2 H&M Fashion Stuff."

And this week, Stardoll, a virtual community for teen and tween girls, opened StarPlaza, an interactive galleria where girls can spend "Stardollars" to outfit their avatars, called MeDolls, with real-world fashion brands. Stardoll already has celebrity boutiques with promotional merchandise from Hilary Duff, Avril Lavigne, and Swedish pop singer Darin.

Additionally, Second Life-centric marketing firm Dynamedia is seeking brands to help develop what he calls VirtuReal, a shopping mall in Second Life where Founder and President Antonio Collier says visitors will be able to shop for real-world products.

Top 10 Search Terms in 10 Categories, July 2007

A look at what terms get the top searches on the Web in 10 categories. The data are provided by Hitwise.

Top 10 Search Terms by Category, Four Weeks Ending June 30, 2007 (%)
IT and Internet Automotive Manufacturers
Search Term Search Volume Search Term Search Volume
paypal 5.17 toyota 2.24
paypal.com 1.20 nissan 2.02
people search 0.69 honda 1.99
www.paypal.com 0.59 ford 1.57
experian 0.56 harley davidson 1.00
mapquest.com 0.51 dodge 0.95
pay pal 0.47 suzuki 0.93
ebay 0.44 chevrolet 0.90
mapquest 0.38 mazda 0.77
intelius 0.34 hyundai 0.77
Movies Internet Advertising
Search Term Search Volume Search Term Search Volume
imdb 1.29 money maker group 0.52
netflix 1.09 unclaimed money 0.40
harry potter 1.09 work at home 0.38
transformers 0.80 smcorp.com 0.37
movies 0.74 free banner advertising 0.37
blockbuster 0.73 adwords 0.36
fandango 0.65 famous quotes 0.32
cinemark 0.33 www.smcorp.com 0.27
regal cinemas 0.32 nudist 0.25
movie times 0.31 reining horses 0.23
Food and Beverage Brands and Manufacturers Pharmaceutical and Medical Products
Search Term Search Volume Search Term Search Volume
pizza hut 2.62 alli 1.55
starbucks 1.09 chantix 0.54
mcdonalds 1.00 lexapro 0.46
transformyoursummer.com 0.96 myalli.com 0.46
candystand 0.78 viagra 0.42
subway 0.74 phentermine 0.36
dominos pizza 0.64 cymbalta 0.33
burger king 0.52 lyrica 0.30
candystand.com 0.51 herpes 0.28
dairy queen 0.50 pfizer 0.27
Blogs and Personal Web Sites Broadcast Media
Search Term Search Volume Search Term Search Volume
myspace 0.85 cnn 2.11
perez hilton 0.71 fox news 1.15
xanga 0.42 msnbc 1.09
yahoo 360 0.41 cnn.com 0.88
360 0.31 ksl.com 0.48
livejournal 0.25 foxnews 0.47
rosie 0.25 bbc news 0.45
myspace.com 0.23 www.cnn.com 0.44
area codes 0.19 news 0.40
yahoo360 0.18 abc news 0.40
Shopping Rewards and
Directories Travel Destinations and Accommodations
Search Term Search Volume Search Term Search Volume
mycokerewards.com 0.32 hotels.com 0.58
consumer reports 0.30 holiday inn 0.27
coupons 0.16 hotels 0.26
free stuff 0.12 six flags 0.22
free samples 0.12 disneyland 0.21
pch.com 0.12 motel 6 0.20
my coke rewards 0.11 cedar point 0.18
mycokerewards 0.11 disney world 0.16
www.pch.com 0.11 days inn 0.15
www.mycokerewards.com 0.09 holiday inn express 0.15
Hitwise logo
View: Top 10 Search Terms by Category, Four Weeks Ending May 26, 2007

Hitwise monitors how more than 25 million Internet users interact with over 500,000 Web sites across 160 industry categories. It collects Internet usage information through a combination of ISP data partnerships and opt-in panels. Data are collected in accordance with local and international privacy legislation and are audited by PricewaterhouseCoopers

Delta Faucet Directs E-Mail Flow

Getting close to the customer is most marketers' goal.

But for many business-to-business (B2B) marketers, there's often a go-between involved: a distributor, reseller, or advisor who has the closer relationship with the client. This can create an e-marketing challenge since the e-mail's sender line is so important to getting e-mail open.

Should the e-mail come from the larger company with a well-recognized global brand or the intermediary who's actually in touch with the client?

Delta Faucet solved this conundrum by creating what e-mail marketing manager, Kim Biggerstaff, calls "on your behalf" e-mail.

Delta doesn't have a direct sales force. Instead, it has a group of sales managers who work with independent sales agencies who act as manufacturer's reps. These sales agents call on wholesale plumbers, builders, architects, designers, and other wholesalers in their geographic region.

Since the sales agent actually call on clients, Biggerstaff decided the e-mail messages should be sent by them, not Delta.

To preserve the Delta branding and ensure the messages are on strategy, Biggerstaff creates the e-mail messages herself with the help of her agency, Ohio-based Hanson Inc. and her e-mail service provider, ExactTarget.

She works on creating a "really beautiful e-mail that is very much on brand, on strategy" and locks in all the main components, except for an area of personalization for the sales agent. Here's a typical "on your behalf" e-mail.

The sales agencies choose the e-mail messages they want to send out, import their own list of contacts from their local market, then add a custom paragraph or signature. The e-mail messages are sent out under their own names, such as marketing@salesagency.com. The product branding is accomplished in the subject line.

Any responses go directly back to the sales agency itself for follow up. However, Biggerstaff is able to track open and click-through rates, which are both above industry averages, and beyond the results Delta usually achieves. The open rates are one and a half times the industry average, and the CTRs (define) are three times the industry average.

To find out whether the e-mail messages generated revenue, Biggerstaff had to rely on anecdotal feedback from the sales agencies, which was more difficult to pin down.

But the feedback she did receive suggests a very successful campaign. One sales agency reported an e-mail opened the door to a new client and generated a six-figure sale. Two other sales agencies wrote orders from new clients who had never bought Delta products before. In addition, Biggerstaff received many calls from sales agencies that told her they loved the e-mail campaign.

The "on your behalf" e-mail messages were originally sent as a test and proved beyond a doubt to Biggerstaff that her hunch was correct. Customers would rather hear from a sales agent they know on a local level rather than a global manufacturer.

In essence, the message seems to be: "Think globally, sell locally."