Search Players Agree on Industry Challenges

SAN FRANCISCO – Five of the largest players in the hot search engine marketing space faced off in a panel discussion at the Ad:Tech conference Tuesday, clashing on issues such as privacy and paid inclusion, while generally looking forward to a future in which search improves its relevance, creative and geo-targeting capabilities.

On a panel that included executives from Google, MSN, Yahoo! , Overture and LookSmart , Google was alone in criticizing the ethics of paid inclusion, a practice which allows advertisers to pay for their Web pages to be crawled during a search.

“We believe the user should understand when a link is paid and when it’s not,” said the search giant’s SVP of sales and field operations Omid Kordestani.

He was contradicted by representatives of LookSmart, Yahoo! and Overture, all of whom said that paid inclusion actually increases the relevancy of results in cases where consumers are shopping for goods and services.

“As long as you’re not changing the ranking, then we believe paid inclusion results are still relevant and ethical,” said LookSmart CEO Jason Kellerman. “It’s important to realize consumers are looking for commercial stuff.”

Despite the disagreement on inclusion and on gathering user data — advocated by Yahoo! and shunned by Google — members of the panel largely agreed on the state of the industry and the main challenges facing it.

When asked to rate themselves in terms of relevancy of search results, the search engines collectively agreed they deserved a two on a scale of one to 10, owing to the ongoing inadequacies of search technology.

“Nobody’s above 30 to 35 percent in terms of ideal search results,” said Overture ‘s Bill Demas, SVP and general manager of the partner business and community group. “We’re the 8-track tape in a DVD world.”

The reason for the ongoing failure of search technology to reach anything close to 100 percent relevance, the panelists said, is partly due to the exponential increase in the amount of content on the Internet, and partly due to the inherent difficulty of knowing what any given searcher is looking for.

“It’s a long road before the machine can really start to interpret what humans are looking for,” said LookSmart’s Kellerman.

Local targeting of sponsored links is a possibility for the near to mid-term, however, a development that would open up the search field to allow small, regional businesses to target Web users in their own areas, said Demas and others on the panel.

“The first wave of regionally targeted sponsored links will likely be chains that want to draw attention to their regional outlets,” Demas said, adding that only then will sole proprietorships begin to try it in force.

Finally, panelists discussed creative issues such as how brand identity can be more strongly expressed through keywords. This is a special concern of high-end luxury brands that avoid search engine marketing for fear it will dilute brand identity.

“There’s a lot of opportunity to let advertisers more creatively promote their links within search results, for example through merchandising, graphics, fonts and product images,” said Kirk Koenigsbauer, general manager of search and business strategy for MSN.

A few numbers were offered up as well. In discussing the size and health of the search engine marketing sector, LookSmart and Overture held forth on the average price per click they’re charging advertisers for keywords. LookSmart said its average PPC is currently .17, while Overture said it charged an average .40 per click in April, up from .37 in the first quarter of 2003 and .08 two years ago.

Paid search, the current star of the interactive marketing sector, is poised to become an even hotter commodity in the years ahead. Analysts at U.S. Bancorp Piper Jaffray forecast the worldwide search industry will generate $2.1 billion this year, growing to $7 billion in 2007.

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