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Search Share Slipping, But Still Strong

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Avenue A | Razorfish released its third annual Digital Outlook Report yesterday, a hefty 143-page book examining the state of digital media in 2006. As Zach Rodgers notes in his story at ClickZ, the big three portals are still garnering a quarter of AARF's digital advertising dollars, handily beating out ad networks, community and entertainment sites, and anything other than search.

Search Spend Shift & Lift?

Search spending by AARF grew 17 percent overall, but search spending as a percentage of total billings dipped slightly from 31 percent in 2005 to 28 percent in 2006. This shift was even more pronounced at Yahoo, where the agency's search spending dipped from 65 percent of total spend in 2005 to 40 percent of spend in 2006.

The agency, which spent more than $542 million across 863 Web sites last year, said that Yahoo, AOL and MSN saw their share of that agency's media spending collectively jump from 13 percent in 2005 to 24 percent last year, driven by a lift in brand advertising budgets and AOL's shift to an ad-supported model.

"AOL has lately been regarded as either a has-been or full of potential. They really came back in a big way last year, particularly for key accounts like Avenue A | Razorfish," Jeff Lanctot, senior VP and general manager at Avenue A | Razorfish and editor of the report, told SEW. AARF's year-to-year spending on AOL rose by 454 percent, and it didn't gain by stealing share from other portals, but by growing the category, he said. Spending on both MSN and Yahoo was up over 80 percent year over year.

Giving Credit Where It's Due

Lanctot said that one of the biggest shifts for search advertisers last year has been the way search and other media have been credited with conversion. "When you use a model where the 'last click wins,' that's going to favor search. When you change the notion of how to value ad exposures that happen before the last conversion, you can attribute value to those exposures as well," he said.

Through a process it calls Custom ROI Attribution, AARF has developed increasingly sophisticated methods of attributing conversions. When all ad placements and exposures are analyzed through this lens, it becomes apparent that several types of media combine to lead to a conversion, a fact which has been borne out in studies from other agencies and research firms as well.

For example, the concept of "assists" has been discussed recently by SearchIgnite, Starcom IP, Avenue A | Razorfish and even Yahoo and comScore. In fact, the concept of assists has been built into Yahoo's Panama platform.

That means search will sometimes get less credit for a direct sale, despite being the last click before the sale. But it will also get more credit for non-transactional value for leading buyers through the conversion funnel at higher points, Lanctot said.

For search marketing, that process can be reflected in "keyword attribution analysis," a method that goes beyond portfolio keyword strategies to weigh and value each keyword according to the impact it has on the final transaction. Some of the goals tracked here, which are often lumped together as "branding" by some marketers, include building awareness across keywords, building positive brand association, and protecting brand trademarks from competition.

Emerging Channels in Search

The report highlights several areas within search that the agency and its clients began paying more attention to last year, and which it expects to pay even more attention to in 2007, including local search, shopping search, and social search.

The biggest vertical is local, which AARF and others say shows the most near-term potential. Clients in the retail and service industries are the most active here, since they have physical locations they hope to drive online leads toward. Following them is hospitality, which leans on mapping products like Google Maps to reach the increasing number of travelers using those services, Lanctot said.

Local search is growing both because of increasing consumer usage and improvements by the providers, Lanctot said. While Google, Yahoo, MSN and AOL all have strong local search presence, it is Ask.com that is the innovator among the larger providers, he said.

"Perhaps the most innovative development in the local search space is the newly launched AskCity," Lanctot writes in the report. "Representing the first true strategic integration point between Ask.com and parent company IAC, AskCity leverages content and features from other IAC properties ... to provide an integrated local search experience. Whether AskCity's innovation will resonate with consumers remains to be seen."

Lanctot expects growth in local to be somewhat hindered by a flood of ad formats, pricing structures, and implementations. Navigating the complexities will be worthwhile to larger advertisers with the money to do so, but the small and mid-sized businesses that are expected to drive local search may not have the resources.

That leaves plenty of room for specialist agencies to cater to the needs of local search advertisers, he said.

Shopping search is another growing vertical among AARF clients, with Shopzilla, NexTag and Shopping.com leading the category. Lanctot points to Like.com as a promising newcomer, with its "visual shopping" technology.

The report discusses social marketing, noting that more advertisers are turning to blogs for linkbuilding as well as sites like Digg and Technorati. Nothing new here for SEW readers, other than the standard warning to "proceed with caution."

Community sites, including social networks like Facebook and MySpace, saw growth in share of ad spending, as they began establishing a revenue model. While they still have hurdles to overcome, such as filtering content that ads appear next to, or providing advertisers with opportunities to engage their community, they are poised for growth this year.

Lanctot said that he has a "healthy skepticism" that a meaningful ad model for mobile will develop this year, despite it continuing to be a buzz-worthy issue among clients. "The market for mobile is not yet there, outside of SMS. We're not seeing people surf the Web from their mobile device, or download mobile video," Lanctot said. "Advertising will follow once that kind of consumer behavior is established."

New Order of New Media

Lanctot likens the current state of interactive media with the upheaval of the advertising industry when TV burst on the scene. While sound and motion overtook static print ads 50 years ago, so today will interactivity and control change media, and advertising, in today's world. The good news for marketers is that this will allow those that understand the new technologies to compete at a new level, he said.

"The new reality offers us the broadest marketing palette in history. We can now embrace the relevance, interactivity, and portability of print with the sound and motion of video. To those attributes, we can add efficient personalization, rapid optimization, and rich customer data," Lanctot writes in the report.

Search will play an integral role in moving beyond TV advertising, as a case study included in the report shows. In a test including seven markets where an AARF client was spending offline, the agency compared the influence that offline spending had on online conversion.

With TV ads in the mix, the test found a 164.0-percent lift in total conversions when online ads and search were included, which was greater than the 157.7-percent lift in view-based conversions, when users were exposed to display ads. Without TV ads involved, but with other offline media, view-based conversions improved by 134.2 percent when online was added, and total conversions, which include search, jumped 193.0 percent.

At AARF, at least, search has been getting an early seat at the table alongside other digital media, Lanctot said. With most clients, the agency handles both search and display ads, with specialists handling each separately, but working closely with a central account team coordinating their efforts.

"In the last 18 months, especially, we've integrated all our services. We've built our business on the notion that silos have a shelf life, so we've tried to remove them wherever possible," he said.

All told, Lanctot said that search needs to be considered alongside other online and offline media, and that methods such as AARF's Custom ROI Attribution need to be undertaken to determine the right mix for each customer.

"If you're not thinking about display and search together, you don't have a single view of the customer. It's crucial to figure that out," he said. "If you're managing things in a silo, you can't get at those insights, and that will materially affect your decisions."

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