Last week, I gathered in New York with 12 other search marketers for SEMPO's bi-annual planning retreat. To kick off, we did a bit of brainstorming about the current state of the search marketing industry. Observations included the current build or buy search marketing capabilities dilemma faced by the big agencies, the red hot demand for anyone with search marketing experience, the sudden development of search marketing in house groups in large organizations and the current push for industry wide certification of SEM practitioners. Also, more than a few at the table mentioned that we've noticed a significant change in the prospects we're talking to and the contact points within those companies. Today, our sales leads are more often Fortune 1000's than the latest online start-up. With increasing frequency, we're starting to get C-level interest at the table when talk turns to Search.
"My God!" I thought to myself as we jotted our observations down on a flip chart, "Search is crossing the chasm!"
Chasm Dead Ahead
Geoffrey Moore's book, Crossing the Chasm, belongs on that small and select shelf of "Must Reads" in technology marketing. It explores the fundamental break between early adopter and mainstream markets, and why so many companies founder in trying to make the transition. For the ones that do, the reward is a sudden firestorm of demand. Exactly 3 years ago now, I wrote a column examining if search marketing had indeed crossed the chasm yet. My conclusion, (reinforced by a note of endorsement from Mr. Moore) was that search marketing had yet to do this. Until recently, I still thought we were squarely in the early adopter camp. Either it was practiced by aggressive, early adopter companies or by individuals in larger organizations that fit the early adopter profile. Budgets allocated to search by most "mainstream" organizations made it clear that it was an interesting experiment of limited scope, nothing more.
Calling All Pragmatists
But it seems that the climate is changing. One thing to remember about mainstream markets is that when they move, they tend to do so en masse. Search marketing is starting to show the early signs of a marketing channel that's ready to make the leap from early adopters to mainstream markets.
What does this mean for search? First of all, search is too limiting a definition. There is a built-in inventory bottleneck with search that will keep it from meeting the demand that will be generated when large advertisers move large budgets into the arena. People only search so much. The relatively tame growth curve of search usage will soon be outstripped by the steep incline of advertiser demand.
So we look to two additional markets that will move across the chasm in lock step with search. I'll call them by more generic, all inclusive labels. First of all, there's "Consumer Initiated Marketing". Search is the literal embodiment of this, but the search publishers will be finding other ways to enable consumers to reach out and connect with advertisers on the consumer's timeline, not the advertisers. Secondly, there's "Targeted Accountable Marketing". These are the channels that allow advertising messages to be more precisely targeted through behaviors, geography, demographics or areas of contextual interest, provided unprecedented accountability to the advertiser. Every single search publisher is heavily invested in this area, and this will continue.
The Local Search Wildcard
Another huge flood gate of new advertising inventory that will begin to crack in 2007, and will turn into a flood in 2008, is local search. According to InfoUSA and the Kelsey Group, there are about 350,000 web based businesses in the US, and 4,000,000 businesses with a brochure-ware site. That leaves almost 10,000,000 businesses without a website at all. That's a total of almost 15,000,000 businesses. There are no hard numbers for Google's advertiser base, but an educated guess would put it somewhat north of 300,000. So, even with businesses with a website, that means Google only has 6.9% market penetration currently. If it seems like search marketing is old hat and everybody's doing it, it's probably because you're an early adopter and so are the people you hang out with. Add the businesses without websites, most of which are only interested in local markets, and that penetration drops to an infinitesimal 2.3%. That's a ton of upside potential and it all sits in the local market, which is currently throwing their money at other channels, such as the yellow pages, newspaper and radio.
And You Thought Google had too much Money Now?
Let's do a little more math. Based on Google's reported revenue of approximately $6 billion, that averages out to about $20,000 per advertiser. That may sound impressive until you remember that a substantial portion of Google's advertisers are large, multi million dollar companies. Let's assume that over the next 3 years search marketing does cross the chasm and that Google manages to capture 50% of businesses with a website. Also, let's assume that budgets loosen up substantially as search moves into the mainstream and more advertising options are open, increasing that average spend up to $50,000. Neither of these predictions is overly optimistic, given a Chasm Crossing scenario. And that doesn't even touch the 10,000,000 web-less businesses that are likely prospects of local search, or the global market. That puts Google's potential revenue at 208 billion dollars. Currently, that would put Google at number 3 on the Fortune 500, right behind Exxon and Wal-Mart, and ahead of GM and Ford. Even if I'm wildly optimistic, those are numbers to pay attention to.
A Chasm Retrospective
My original column was written 3 years ago. In rereading it in light of my New York revelation, I was surprised at how little had changed. In the past 3 years, search marketing has solidified its grip on the early adopter market, growing both in terms of number of advertisers and revenue by over 200%, but the total product solution that's required to attract a low trust pragmatist market is still being assembled (Yahoo's announcement of the much delayed Panama Platform hit my inbox as I was writing this). One thing that has changed, somewhat, is my guess as to who will be the dominant player in search marketing. This is the one who will gain the lion's share of the market as it hits overdrive. My prediction 3 years ago was that Microsoft would kick start search as it moved in and dominated. As we've seen, Microsoft's Big Hairy Audacious Goal of dominating search has not quite matched up with their execution, which has been tentative at best. Google still rules the roost, so they have the all important pole position going into the tornado. The trick will be to see if they can hold onto it. Remember, pragmatists love turnkey solutions. Is Google's assembling of auction based media buying opportunities the solution they're looking for?
I was quoted in a recent interview as being bullish on the future of search. What I realized in last week's SEMPO meeting did nothing to change my mind. In fact, I just bumped up my expectations.
Hang on..we ain't seen nothin' yet!
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Gord Hotchkiss is President and CEO of Enquiro, Canada's leading search engine marketing firm and one of the top firms in North America. His articles are regularly published in both on and off line newsletters, including Marketing Monitor, SEOToday, Marketing and many other trade journals. Enquiro's own information portal is www.searchengineposition.com.
With an extensive 20 year background in the marketing and advertising business, Gord has been working to increase client's search engine visibility since 1996 and has specialized in search engine marketing since 1999.
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