Day of Reckoning in Search Engine Advertising

Overture’s announcement that it plans to separate contextual advertising from regular search results has garnered kudos from the search engine marketing community. Will Google follow suit?

Why would anyone care if two search engine advertising programs were separate or not? To answer that, we need to go back to the basics.

Contextual Ads Explained

First, what exactly are contextual ads? Contextual ads operate much like traditional pay-per-click search engine ads. You bid for placement and pay a fee each time someone clicks on your ad, but instead of your ads appearing in search engine results, they appear on web pages on other sites.

I like to compare contextual ads to ads you might find in a magazine. Pick up any special niche magazine and you’ll see ads for products or services related to the subject matter of the magazine as well as ads on subjects that might be of interest to readers in the magazine’s subscriber demographics.

For example, when I pick up Money magazine, I see a plethora of ads for investment firms and retirement plans. That’s an example of contextual marketing. The ads are related to the main subject of the magazine. Of course, you will also see ads outside the immediate focus of investing. I noticed several ads for high end cars and expensive jewelry. In this case, advertisers know that readers interested in investments often have the expendable income to splurge on a new diamond encrusted watch.

The contextual ads are placed in the magazine because they are related to the magazine subject matter or because they may be of related interest. Online contextual ads work the same way. Ads are placed on a web page because of an “association” between the web page content and the advertisement.

Want to see contextual ads in action? This search on mapquest.com for Dallas, Texas displays a list of ads on the right side of the page. Those are contextual ads from Google.

Second Rate Effectiveness?

Many marketers get their first exposure to contextual ads through Google’s and Overture’s programs. Often this first experience is negative and the marketers get frustrated after noticing lower click through rates (CTR) and ROI on the contextual ads when compared to the search ads. The problem is the marketers are blaming the ads when they should be blaming the system.

Let me explain. The current Google and Overture contextual ads programs are coupled with their search based ads. This means advertisers participating in the contextual programs pay the same price per click as for the search ads. The coupled programs don’t allow you to opt for a contextual only campaign. You can opt for a search only ad campaign, but if you use content ads in the coupled program you always have the content and the search ads together.

This creates a problem because the “coupled programs” treat the ads as if they were the same (and charge the same PPC rates) when in reality the ads are displayed to different kinds of viewers. This is the equivalent of paying the same price for a general banner ad as you would for a newsletter ad in a newsletter going out to your target market. You expect the newsletter ad to do better so you don’t mind paying more for it.

Since the ads are being shown to very different types of viewers, you shouldn’t expect them to perform identically. In most cases the search ads return higher CTR and ROI (higher conversion rates) than the contextual ads.

The marketing theory that explains the performance difference goes like this: Searchers using a search engine to buy products are focused and are farther into the buying process than the casual reader on a content site. They are actively looking for information on a certain product. The ads appearing on search results are highly relevant whereas on a content match site the ads may only be marginally related. The higher relevance of the search ads and viewer motivation for information means viewers are more likely to “act” on a search ad.

In any case, since the ads don’t perform identically, advertisers shouldn’t be expected to pay the same. The less relevant contextual ads should cost less than the search ads. This price issue has been at the heart of the contextual ad controversy. Advertisers want separate programs so they can pay separate prices.

Google’s Reluctance to Capitulate

So, if Overture is ready to acknowledge it’s time to separate the programs, why is Google holding out? The Google folks are smart and have a lot on their minds these days. Google knows that they will probably have to reduce the price per keyword on the contextual ads if they break out the ads into different systems. That would result in a decline in their revenue numbers. Hey, if you owned a company heading for an IPO, would you be anxious to make a change that could cause your revenue numbers to drop?

Another theory that contributes to their reluctance is the “Sleeper Account Syndrome.” Opting out of Google’s content matching program is easy. (In case you are wondering, you simply login into your Google account, click on the campaign, select “Edit Campaign Settings” and then unclick “content sites in Google’s network” under “where to show my ads.”) The problem isn’t that it’s hard to get out of the program, but that many companies doing Google PPC advertising aren’t even aware they are in the program. They are suffering from “Sleeper Account Syndrome.”

The “Sleeper Account Syndrome” theory contends that there are thousands of Google clients in the program who don’t know it. Since Google likes to grandfather existing clients into their new programs, many of them were added without their knowledge. Others probably joined out of ignorance. Breaking content ads into a separate program might wake up these sleeper accounts, causing them to opt out, and again, cost Google revenue.

Formal Recognition of Difference

Overture’s January 2nd announcement of a separate contextual ad program is a formal acknowledgment that contextual ads are different from search ads. It’s the big step eagerly anticipated by many marketers. Once Overture makes the change, sometime later this month, Google will more than likely soften its position and break out its program as well. They can’t afford to let Overture get too far ahead. We’re talking market share in a whole new marketing arena.

Overture has also taken aggressive steps to expand the scope of its Content Match program, officially adding its parent Yahoo as a distribution partner. This means that in addition to potential exposure on the MSN network, the MyFamily.com Network and the Away Network, Content Match ads are now also distributed throughout portions of the Yahoo network of sites.

Contextual Advertising Options

If you want to try contextual advertising in a program separate from search ads, here’s some good news. There are companies that already separate contextual advertising into their own programs.

Enhance InterActive (formerly ah-ha.com), Searchfeed, and Kanoodle are among several search engines that also offer contextual marketing. Even though these smaller engines don’t have the sheer numbers of partner sites of the big dogs, their numbers are respectable and growing.

Contextual Search Marketing Equals Exposure

Want a good reason to try contextual advertising? Think volume and exposure. Consider all the sites you visit each day on the Web. Most of these are candidates for contextual advertising. Google claims to have partnerships with over 100,000 sites in the system already. For a company wanting widespread exposure on the web, I can’t think of another medium that has the potential reach of contextual advertising.

So, if you’re looking for a way to reach new customers and enhance your brand, contextual advertising may be a good option for you, especially as a separate program. Try it, you may be pleasantly surprised.

Christine Churchill is President of KeyRelevance.com, a full service search engine marketing firm. She is also on the Board of Directors of the Search Engine Marketing Professional Organization (SEMPO) and serves as co-chair of the SEMPO Technical Committee.