Search engines are driving more business

March 25, 2005
By Bob Mook, Denver Business Journal

For small businesses trying to climb to the top of the "search results" list online, the challenges are
formidable.

"If you're in a heavily competitive area, it's a case where you think you can play with the L.A. Lakers, but youcan't," said Chris Sherman, associate editor of Search Engine Watch, an industry trade publication in Boulder.

Niche players can stand out in search engines with a simple understanding of optimizationtechniques, but small businesses going up against larger competitors might have a more difficult time, Sherman said.

The struggle has created a growing industry in search-engine marketing consultants. According to the Wakefield, Mass.-based Search Engine Marketing Professional Organization, the search-engine marketing industry grew 214 percent in the last two years.

Sherman said attendance at a recent search-engine conference in New York grew from about 3,500 in 2004 to 6,000 this year.

Search-engine marketing agencies help clients get better visibility on Google, Yahoo, MSN and numerous lesser-known Internet search engines.

The agencies help clients draw more attention through "organic" searches (when users seek information on specific topics) and "sponsored links" (when clients pay search engines to highlight their Web sites).

As evidenced by the success of Google's initial public offering and the proliferation of smaller, niche-oriented search engines, the concept has evolved into a money-making proposition in recent years.

Earlier this week, IAC/InterActiveCorp, a New York-based Internet company led by media mogul Barry Diller, announced it would purchase Ask Jeeves Inc. -- the nation's fourth-largest search engine -- for nearly $2 billion. Analysts say the acquisition would help Diller's company compete in the rapidly growing segment.

JupiterResearch found that paid search advertising increased by 34 percent in 2004. The New York-based market research firm projects the sector will grow from $2.6 billion in 2004 to $5.5 billion in 2009. Online ad spending increased from $3.5 billion in 1999 to $8.4 billion in 2004, and is expected to grow to $16.1 billion in 2009.

Yet online advertising remains a relatively small part of the overall marketing picture, said Patricia Hursh, president and founder of Boulder-based SmartSearch Marketing.

Hursh, who advises clients on improving their Web-search placements, cited a statistic that shows online advertising accounts for a mere 9 percent of all the advertising dollars spent.

According to the Kelsey Group, a Princeton, N.J.-based market research firm, less than 40 percent of small businesses have Web sites and only 24 percent of small businesses advertise online.

Jim Grinney, partner at 90octane, said he's noticed a "huge shift" away from the Yellow Pages to the Internet in the five years his Denver-based search-engine marketing firm has been in business. As more consumers rely on the Internet to find local products and services, businesses that don't consider search engines as part of their market
strategy risk losing business in the long run, Hursh said.

"Consumer behaviors have changed and the advertisement dollars haven't followed," she said. Hursh said search engines present a huge opportunity for small businesses because they capture customers at the exact moment when they're looking for businesses, unlike traditional advertising avenues, such as TV, radio and newspapers.

"When someone online is in search mode, it's the perfect time to catch them," she said. Hursh advises clients to look at both their organic search techniques and their sponsored links. "Studies indicate that having both a natural listing and a paid ad can be very effective -- it's not an either/or proposition," she said.

There are a number of factors to consider when plotting a search-engine strategy. For example, Hursh said search-engine marketing can benefit local businesses because most Internet service providers request a users' location information during registration. That information is usually encoded in the user's IP address, which influences the results of a search. Grinney said his firm watches search-engine "algorithms" -- the prescribed set of mathematical rules that are used to send and receive data -- to better place their clients.

World events also can offset search-engine results because timeliness is a factor in the search engines' algorithms.

Grinney said identifying the right key words -- and displaying them prominently in a Web site -- could improve search results, driving more visitor traffic to the site.

But Grinney cautioned that the practice of "keyword stuffing" could backfire. "Search engines interpret overoptimization as 'search-engine spam' and will deny access to the search engine," he said.

Andrew Davison, president of Texture Media, a Boulder-based Web-design company, urges smallbusiness customers to keep search engines in mind when designing and updating their Web sites. "You need to think of the Internet as a big card catalogue," he said. "Make sure you're keeping the site as broadly relevant as possible and use the right key words when registering with search engines."

Getting sponsored links could be cost-prohibitive to many small businesses. Google charges sponsors according to a "per-click rate." The highest bidders generally get the best placement in the sponsored link searches. Hursh said sponsored links can run as high as $10 per click. Prices are expected to climb even higher as Google solidifies its reputation as "the 900-pound gorilla" of the search-engine industry.

But Hursh and Grinney say there's hope for small businesses that want to maintain a searchengine presence without breaking the bank.

A number of small, niche-oriented search engines -- such as DayPop, Ananova, Topix, Bpubs and Newsknife -- offer significantly cheaper pay-per-click rates than Google and Yahoo. "It's easier to find the right needle in a smaller stack," Hursh said.

Sophisticated Internet users are discovering that different search engines have different strengths. For example, he said many users find Google is best for finding research and MSN best for finding sponsored links.

"Deep pockets don't necessarily win this game," Grinney said. "The strategy is focus."

Posted on March 28, 2005 09:36 PM

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