February 12, 2003 12:00 PM PST
All the search that's fit to print?
Last week, sports site ESPN.com signed a deal that has pay-for-performance ad company Overture Services offering up links to CD players and sports memorabilia as well as news articles when readers conduct searches on the site. The deal followed a similar announcement from CNN.com, which
As a result, readers seeking the latest news about Iraq could find themselves targeted with ads for T-shirts and eBay collectibles, items that appeared recently in a search conducted on CNN.com.
It's no wonder. Pay-for-performance search marketing is a rare bright spot in the online-ad industry, tempting struggling Web sites with the promise of easy money through seemingly risk-free partnerships. But as news and information sites such as CNN.com line up for their cut of the pie, some wonder whether the practice is getting out of hand.
"I can't imagine that the search volume on publishers' sites would be attractive to the majority of advertisers," said Jessie Stricchiola, president of Alchemist Media, which helps advertisers improve traffic to their Web sites. "Most Web surfers are not going to be looking for consumer products on CNN.com."
Pay-for-performance search marketing has exploded in the past year. Financial analysts estimate that sales from paid search comprised between 20 percent and 24 percent of the nearly $7 billion generated by the online-advertising market in 2002. That compares with between 10 percent and 12 percent in 2001.
The clear winners of the ad boom are Overture and Google, which both host networks that let advertisers bid for placement in search results that then appear on partner Web sites. The companies get paid when people click the links, and they share the revenue with distribution partners.
The deal has worked out nicely for major Web portals including MSN, AOL and Yahoo, the last of which posted profits in the third quarter that were greatly helped by the company's Overture deal. In the coming year, financial analysts expect the major portals to play up paid search like never before.
Quantity, not quality?
News and information Web sites such as NYTimes.com, Boston.com and the Washingtonpost.com are aiming to reap similar rewards from search engine marketing, if not to merely augment ad sales. But as commercial search providers seek to expand their partnerships into new areas, the red-hot arena could start to cool off, industry experts say. Marketers may see more click-throughs, perhaps, but they won't necessarily see more sales of advertised products.
"For advertisers, it means more traffic, but the downside is, it could be bad traffic," said Danny Sullivan, editor of industry newsletter and Web site Searchenginewatch.com. "The advertisers really have to monitor what's going on with their results as they go beyond traditional search sites."
Many advertisers are already attempting to track the number of people who buy products and services as a result of clicking paid search links. Those clicks that help ring sales are thought of as qualified traffic.
For Overture's advertisers especially, wider distribution on sites like CNN could mean more unqualified traffic. Overture hosts an ad network that is widely distributed on major Web portals as well as smaller ISPs and search sites. But as that traffic branches out even more, advertisers may get tired of paying for exposure on a site that doesn't draw customers like MSN, for example, would.
One ramification could be that advertisers will start to demand more control over where their listings appear in the Overture network, asking to pay lower rates for clicks that originate from smaller-tier sites or destinations that do not produce sales.
"Once you get into broad distribution, in places where the user isn't even aware it's an ad, in that respect it's become more expensive and less profitable for advertisers," said Greg Boser, president of Web marketing consultancy WebGuerrilla, which helps companies improve their visibility in search engine listings.
"The broader they get, the less targeted their listings will be, and that's unfortunate," said Boser, adding that the most targeted traffic comes from product-related search sites.
Others are less forgiving, speculating that some publisher deals are merely trophies for Overture in the investor community rather than profitable to advertisers or valuable to Web surfers.
Bill Demas, senior vice president of the affiliate business group at Overture, said there has been much more interest from news and information sites in recent months and he expects it to be a growing industry for distribution.
The company reported higher-than-expected revenue on Thursday, but its net income was down on one-time charges. One cause for concern, however, is the rising cost of acquiring new partners: Overture's traffic acquisition costs grew by more than 140 percent to $124.8 million for the year, compared with $51.9 million in 2001. As a percentage of revenue, traffic acquisition costs were 62 percent in the fourth quarter of 2002, ended Dec. 31, compared with 51 percent a year ago.
"Increasing the number of Internet users across a wider network of advertisers, they might initially think that the quality might be different, but when advertisers come into the network, conversion rates are high," Demas said. "Our success is dependent on our partners' success, and we have a relentless focus on quality, like the news and information space." He added that the early responses for paid ad links on CNN have been positive.
Google declined to comment for this article. Those companies that have signed on to Google's AdWords sponsored matches program include CBSMarketwatch.com, NYTimes.com, Boston.com and Washingtonpost.com.
Breaking the news
Journalism ethics experts caution that commercial search on news and information sites can blur the lines between editorial and advertising. While most of the publishers that are currently running paid searches mark their listings with terms like "sponsored" in accordance with urging from the Federal Trade Commission, some ethics experts say that doesn't go far enough.
"There needs to be (demarcation) that's obvious--you can't do it in fine print," said Kelly McBride, a member of the ethics faculty at the Poynter Institute. Fine print "may be holding up the letter of journalistic values but not the spirit of those values--because on a news site you're expecting to find news links."
Sites typically give visitors the ability to search news archives, the day's headlines or the Web from a box at the top of the page. For example, when visitors to CNN.com search for news on the pope they are given five Web results by default, which start with roughly six sponsored listings from Overture and end with query results from Google. However, if visitors check a box to search only on CNN, they find links to the top headlines from the news service with no paid links.
CNN said that its search results are "clearly labeled and distinquishable."
"The sponsored links are separated with a 'sponsored results' headline in a bold separating block," said Edna Johnson, CNN.com spokeswoman. She declined to comment about the relevancy and effectiveness of sponsored search results on the news site.
Search experts say that it's increasingly important for Web publishers of all stripes to strike a balance between paid and general Web links because people are often not expecting to find only a slew of commercial links when they see a Web search box.
"If as a publisher you're going to give Web search, then it needs to be Web search and not simply a lot of ads," said Danny Sullivan.
For its part, CBSMarketWatch.com said its ads will be geared toward its search engine for financial ticker symbols, which will be a benefit to Web visitors and advertisers.
"We're looking for new opportunities for our advertisers on our site, and this is something that advertisers want," said Dan Filmore, director of marketing for CBSMarketwatch.com.
"I agree, if someone is out searching to buy a particular retail good item, they would search Google directly. This is ticker-based, where a company could buy links related to their own ticker, and it's very targeted."