Magnetic announced integration of its search data marketplace with leading ad networks on Monday. This partnership will enable display ad buyers on the Collective, interCLICK and Undertone ad networks to retarget users of second-tier search engines who have performed a search in the last 30 days.
The thinking goes that since search is one of the highest converting ad formats in the world, then why not mash that data into ad networks to improve the conversion rate of display ads?
Demand Matching Double Bind
Advertisers demand your attention, and consequently love display ads as they offer more creative branding opportunities than a typical paid search ads. Usually they are powered by Flash, which can accommodate animation and video, and they are often interruptive and designed to be attention grabbing.
Despite the fact that paid search ads are plainer, resembling classified ads, conversion is much higher. This is because they are targeted to a what a user is actively looking for - namely the search query used to trigger the ad. In effect, every search performed functions as a strong indicator of what the user intends to achieve. Display ads do not enjoy such luxuries and rely on targeted placement to generate resonance with their target audience.
Two factors combined create a problem worth solving. Downward pressure on CPM rates as the display ad format conversion rate is continually eroding. Hunger from advertisers to generate reach from display ads with budgets to match. This means that publishers are stuck in the middle not being able to meet the demand, but with little incentive to actually meet demand.
Magnetic has solved this problem in an interesting way. Taking a user's search history via its network of second-tier search partners, it has integrated the data with large ad networks so that advertisers can buy ads retargeted to search queries. Effectively they allow advertisers to use search data to qualify an audience and reach them outside of search.
Google already does something similar, but severely limits the ability for advertisers to retarget search users. Magnetic offers the ability for advertisers to retarget queries between 30 and 90 days.
How Does it Work?
Basically the second-tier search engine installs some code which passes the query back to Magnetic.
Does This Violate a User's Privacy?
Participating search engines have updated their privacy policies to include a search retargeting opt-out clause.
Magnetic does not collect any unique user IDs or cookies; targeting is based off keyword data alone. There is no user profile or search history collected - a user can only be targeted off his last search. Advertisers essentially buy aggregated impression data of retargeted search users in the ad network sourced via the search network.
Also, it's worth noting that the big three search engines (Google, Bing & Yahoo) do not participate in this network. Typically this model benefits e-commerce sites with large internal search engines.
A $1B Advantage?
In my conversation with Josh Shatkin-Margolis, CEO at Magnetic, he made the point that the main advantage that $1B companies have over smaller competitors is that "one has intent data, and one does not." Magnetic can leverage that advantage because "intent data can de taken outside".
Good sources of Internet data come from generic search engines but the strongest come from e-commerce sites. Suddenly the most core feature of those sites, product search, can be monetized for its inherent value, signalling intent. Users of large shopping portals who were ready to buy, but didn't, could be retargeted in accordance to the customer lifecycle of the data.
In theory, Magnetic can monetize a very small search engine that only serves 1M searches a day and sell 20M impressions against that data. Magnetic claims that against one search performed, it can serve 100 ads.
Search Data Enables Off Site Revenue Streams
Selling retargeted internal search data could be secondary revenue for social networks like MySpace and other free content archives. E-commerce and comparison shopping sites stand to bolster conversion rates as well as upsell current advertisers. News sites also stand a pretty good chance of generating a secondary revenue stream from this source. I speculate, but if search data is this valuable to advertisers, why would you not try to build a search engine, no matter how rudimentary?
But... If Search Is So Effective, Why Do Advertisers Need Display and Re-Marketing?
Keyword based relevance is good, but it's not always effective. 98% of the time people are not using a search engine; most of the decision-making processes are occurring off portal.
Counter to conventional search marketing wisdom, a standard search purchase funnel, over one month, does not necessarily start with a generic phrase. The search journey actually starts with a long tail phrase, and what we observe is a gradual movement from long-tail phrases to targeted unique phrases such as make & model number.
E.g. A typical search journey may go something like this:
HDTV ---> Panasonic ---> Panasonic Viera ---> VIERA® VT25 Series Plasma Full HD
We assume that research, presumably on search engines, helped to narrow the funnel but it's sensible to consider other influencing factors. What were those other influencing factors? Presumably off portal events. But what were they?
Video game marketers are acutely aware of search marketing's limitations. They have discovered that the purchase funnel for their products actually starts with the purchase of a high-end graphics card. Makes sense right? The graphical capabilities of the computer define what games that user can play, and also what they are interested in playing.
Yet a generic search for "computer games" is so broad, and of such high volume, that buying search ads too high up the buying chain risks burning out the marketing budget. All marketing dollars would be spent before anyone established whether the prospect is interested in shoot-em-ups or adventure games. Wouldn't you agree that those audiences are substantially different despite using the same game engine?
Furthermore, games manufacturers, like movies, need to hit gold at launch in order to sustain interest and success over time. How do they market games to search users who do not know that their games exist yet?
They retarget similar search terms for similar games and genres using search retargeting technologies like Magnetic.
Pretty awesome huh?