Last updated on April 19, 2014 at 5:20 EDT

Paid Search Faces Up to Social Media

July 18, 2008

By Jones, Gareth

Web 2.0 sites such as Facebook are looking to challenge the big search engines. But Google and its ilk are ready for a fight, reports Gareth Jones Paid search has long been the backbone of UK internet advertising, accounting for well over half of the Pounds 1.3 billion spent online in the first half of last year, according to the Internet Advertising Bureau (IAB). However, brands are looking for new ways to target consumers in the web 2.0 world, bringing an end to the golden age of search.

Web giants Google, Yahoo! and MSN look set to start losing advertising revenue to sites such as MySpace, Facebook and Bebo during 2008, as brands shift their marketing budgets to cash in on the social networking phenomenon.

A new report, The Impact of Social Networking in the UK, from Experian and Hitwise, claims that web 2.0 sites will focus on improving their search functionality this year in an effort to secure fresh investment from advertisers. The fact that consumers are required to sign up to join social networks means that sites such as Facebook know far more about their users than search engines and traditional portals. They could, for example, choose to show ads only to men aged between 16 and 24 who live in London and enjoy football.

It follows that social networking sites could command much higher cost-per-click (CPC) rates for these highly targeted ads than the sponsored links that are shown on Google, Yahoo! and MSN. The search functionality on social networks is pretty basic, but MySpace, Facebook and Bebo are working to make information on companies easier to find so they can improve their targeted advertising offerings. “The growth of social networking sites could threaten the dominance of Google and other leading search engines,” argues Robin Goad, director of research at Hitwise and co-author of the report.

A further cause of concern for search engines highlighted by the Experian/Hitwise report is the fact that social networks are becoming an increasingly important source of traffic for other web- sites, particularly music, film and TV destinations. The research shows that more than one in ten visitors to entertainment and music websites came from social networks in October last year, with Bebo being the second highest source of traffic after Google.

The growing popularity of MySpace, Facebook and Bebo is prompting advertisers to question the value of their paid-search activity, according to Vincent Potier, marketing director of Vonage. The internet telephony company is planning to put social media at the heart of its marketing strategy for 2008 in an effort to reach a wider audience than is currently possible through paid search. “We will see an end to the dominance of sponsored listings on Google over the coming year as social networking and other emerging forms of digital marketing increase in importance,” insists Potier.

Personalised medium

With social networks and other community-based portals transforming the internet into a more niche, personalised medium, paid search appears to be reaching a natural plateau. After years of exponential growth, the fragmenting digital media landscape is making it harder for brands to target vast numbers of consumers with sponsored search engine listings. Three or four years ago, when CPC prices were low, marketers could achieve return on investment of up to 20 to one on campaigns comprising several thousand unbranded keywords. However, Jupiter Research estimates that the number of marketers bidding on 10,000 or more listings has doubled since 2005, leading to widespread CPC inflation and diminishing ROI levels. “After the gold rush, large numbers of advertisers have been left with fool’s gold and are spending much more than they need to on paid-search activity,” says Amy Lenox, partner at Trinity Communications.

Rising costs

Frustrated by the rising cost of paid-search campaigns, some advertisers have reduced the amount of business they do with Google, claiming that keyword search prices on selected terms have risen by between 40 per cent and 60 per cent during the past two years. “If brands continue running paid-search campaigns in the same way they have done for the past two or three years, then the sector will falter and eventually die,” claims Paul Doleman, head of paid search at Spannerworks.

According to Harris Interactive, 80 per cent of all online activity begins at a search engine, meaning Google, Yahoo! and MSN have everything to play for. However, competition from social networking sites and a potential backlash over CPC inflation, is forcing the big search engines to adapt their offerings. In an effort to pre-empt the highly targeted advertising system being developed by Facebook, Google has already tweaked its AdWords service in the UK and US. The search giant is attempting to take sponsored listings to the next level by allowing selected brands to run demographically targeted campaigns only displaying ads to women aged between 25 and 34. The move, which reflects the demographic targeting functionality available via Microsoft’s AdCenter, could signal a new era for paid search in the UK.

“Web 2.0 does not spell the end of en masse paid search but there are fundamental changes occurring that affect every advertiser and online business,” says David White, chief executive of Weboptimiser.

On a fundamental level, Google, Yahoo! and MSN are engineering the evolution of search from simple text to the indexing of multimedia content, including images, video and maps. This process is seeing paid search move away from providing a One set of results fits all’ query response towards customised results based on a user’s preferences or subject of interest.

“The search experience needs to become richer and more rewarding to remain relevant to internet users,” argues Amanda Davie, head of search at i-level. “The integration of multimedia content and intuitive listings is crucial to the future of the medium as far as consumers and advertisers are concerned.”

Google has been leading the charge with the launch of its Universal Search service, with MSN nipping at its heels with Live 2.0. Both are intended to bring social networks, news stories, video clips and other types of content onto the results page. By altering the way consumers read search engine results pages (SERPs), these next-generation services will have significant repercussions for advertisers, prompting them to invest in rich-media listings, as well as sponsored text links. A recent experiment by Google to include rich-media ads on its results pages points to where paid search is heading. The search giant introduced ad units that any member of its AdSense program could embed into their web pages, allowing for the contextual targeting of rich-media ads. While this represents a huge leap forward, industry experts agree that a new wave of optimisation methods will need to be developed once simple text search moves into the realm of multimedia. “As the online landscape changes, paid search will become richer, more useful, more relevant, more timely and more targeted,” believes Doleman.

With search engine marketers finding it harder to achieve economies of scale, personalised search looks set to start gaining traction during 2008. With MySpace, Facebook and Bebo capturing an increasing share of the time consumers are spending online, the search giants are developing new ways of keeping users on their sites for longer. Google has been pushing the concept with its customisable iGoogle homepages and its new Knol service, while Yahoo! has quietly rolled outAlpha in Australia. However, the latest developments centre on new technology aimed at improving the relevancy of search results. In its simplest form, Google’s personalised search service ensures that consumers get results relating to their geographic location. For example, those searching for ‘football’ in New York will get different results from those in London.


In an effort to remain relevant to as many consumers as possible, the major search engines have also been racing to extend their services to mobile. Advertisers are catching on to the potential of the location-based services on offer from Google, Yahoo! and MSN that allow consumers to locate their nearest pub, club or restaurant while on the move. “Search engines are starting to take advantage of the mobile interface to provide compelling services for both consumers and advertisers,” explains Erica Schmidt, global search director at Isobar.

The increasing personalisation of the internet is leading to a host of new developments that could further fragment the paid- search sector. As well as the launch of next-generation services from Google, Yahoo! and MSN, several new players are also entering the sector. SpaceTime 1.0 launched a three-dimensional web browser in January, allowing users to shuffle through different search results without having to switch between web pages. The tool enables consumers to zoom, pan and flip through different results in the same way that they can scan through album covers on an iPod Touch. Meanwhile, Mahalo claims to be breaking new ground by providing humanedited search results aimed at trumping those produced by an algorithm, while Spock.com is a ‘people search engine’ that pulls together data from dozens of different websites to automatically form personal profiles of individuals. All of these nextgeneration search services are still in their infancy, but could provide advertisers with new paid-search opportunities. “Search will have to adapt to suit the evolving online landscape,” insists Damien Anderson, head of search at Blowfish Digital. “Like a chameleon, search engine marketing will have to change its colours to meet the monetisation needs of future content originators and users.”

Although the heady days of double-digit growth may be coming to end, paid search remains the backbone of the UK online advertising industry, with Group M estimating that sponsored listings will account for 65 per cent of all digital spend this year. As more content is added online, the task of navigating the web will become increasingly complex, forcing consumers to rely more heavily on search engines. At the same time, web 2.0 sites and social networks are causing the internet to evolve into a truly interactive environment in which text, images and video interplay. As a result, search and display advertising are coming closer together, providing search engine marketers with new opportunities beyond standard sponsored links.

If brands continue running paid-search campaigns in the same way they have done for the past two or three years, then the sector will falter and eventually die

Paul Doleman, Spannerworks

The integration of multimedia content and intuitive listings is crucial to the future of the medium as far as consumers and advertisers are concerned

Amenda Davle,


Copyright Haymarket Business Publications Ltd. Mar 2008

(c) 2008 Revolution. Provided by ProQuest Information and Learning. All rights Reserved.