Category Archives: Online Trends

Search and the Winds of Change in Chicago

First published December 7, 2006 in Mediapost’s Search Insider

Things are changing in the SEM world. At the Search Engine Strategies Conference Chicago, it’s more than the ice-cold winds off Lake Michigan that are blowing. These are the winds of change. There is a palpable sense that we’re moving into a new era in search.

Dateline: Chicago

The word on the streets of Chicago (not that I’ve ventured on the streets that much) is that a huge consolidation juggernaut is about to steamroll the industry. We’ve seen the precursor to that in a few announcements timed with the show. But at the same time, we’re seeing the world of search fragment in another way, as search marketers now have to move their focus to include new worlds such as CRM platforms, ad networks, local, video, social tagging, analytics, usability and a host of other emerging developments. If we follow Google’s model, soon we’ll be dabbling in the world of print and radio. And I thought I had left those worlds behind in a previous life.

There’s a collective holding of our breath to see what’s next. One of the wonderful things about search, the fact that it’s the intersection of so much activity on the Internet, is also its biggest challenge. To truly leverage search, you have to have one foot in a lot of different worlds. And that’s tough to do as a small independent shop.

The Honeymoon’s Over

But the other topic of conversation I’m hearing is how the integration of traditional marketing and search is not going as swimmingly as some of the early marriages might have us believe. There’s a lot of drinking of one’s own Kool-Aid here. Search agencies position themselves as the keepers of the vaunted black box, the holders of arcane knowledge and assets essential to the truly enlightened marketer. That black box could be advanced algorithmic optimization knowledge and technology or sponsored search management technology and advanced campaign optimization tools. Whatever it is, the SEMs protect and promote it religiously, using it to drive up the price tag of their company.

The potential buyers seem content to cede this small area of expertise to the SEMs, because they lay claim to pretty much everything else. The entire brand relationship that lies outside the search silo is where they play, and the only reason they’re looking at search at all is because they’re being forced to by their clients. Reluctantly, they have to look at building or buying, and the lack of available talent is forcing their hand towards the second option. It’s a shotgun marriage, and in many cases, the results will be predictable. Search marketers are mavericks, and they won’t place nice in the corrals that are currently being set up for them.

We Don’t Know What We Don’t Know

The problem is that in both cases, the egos on both sides of the table don’t allow us to know what we don’t know. The trick here is not to be territorial about your area of expertise, but to acknowledge that the rules of the game are changing incredibly quickly, are being changed not by the agencies, not by the search engines, certainly not by the SEMs–but by the consumers, and we’d better all work together to figure out what’s happening.

I believe in integrated, or convergent, service offerings. I think it’s essential. But the simple fact is that there is no search silo. It sits at the center of a tremendous amount of consumer activity. But the firms that are positioning themselves to provide these convergent (or integrated, or 360 degree–you pick the buzzword)  better reacquaint themselves with the meaning of the words integrated and convergent, because unless they truly get it, admit they don’t know everything and are willing to work with new partners to effectively understand this new consumer control, they won’t be able to keep up. Passion is the price of entry, but please, everyone, check your egos at the door.

Living in a Quality Score World

Another point of interest that emerged in Chicago is the new reality of quality scoring being introduced by the engines. Suddenly, search marketers have to tweak a lot more campaign factors to determine position on the page. We have to look at not only the quality of the ad but also the quality of the landing page and the subsequent on site experience. To make matters murkier, the engines aren’t really sharing the criteria or methodology they’ll be using in these new quality algorithms. So once again, search marketers will be working in the dark, trying to reverse engineer the inner algo workings that will hopefully vault their page up into the top of the Golden Triangle, but this time on the sponsored side. I think search marketers will be well suited to the task, but the challenge is that this requires them to step into a lot of new areas, and in some cases, they’ll be stepping on toes in doing so, both on the client side and the agency side. Without exception, the biggest challenge we’ve had in delivering effective results has been in getting the buy-in of the various groups required to take a holistic approach to search. The introduction of a quality score means this will be happening with greater frequency.

New Madison Avenue Mavens?

One dinner conversation I had circled around the potential future of SEM agencies. Apparently, a representative from a major engine told a room full of SEMs that we’re the new Madison Avenue. We embrace accountable marketing in a way that much of the rest of the advertising world is struggling with. We’re not afraid of consumer-empowering technology, because we’ve cut our teeth on such technology. And we’ve learned to adapt and survive in a fluid marketplace, where things change daily. To me, these three things are the true value that SEMs bring to the table, and as traditional agencies look for potential partners, I’d be looking very hard at those three criteria. To be honest, most of the rest of our “black magic” boils down to simple common sense and a willingness to do the dirty work that’s required to optimize search campaigns, whether they’re on the organic or sponsored side.

It’s been a cold week in Chicago, but one would never guess–based on the heat being generated in the Chicago Hilton Convention Center. Hang on, it’s going to be a bumpy ride.

SEMPO’s Snapshot of Search

First published November 30, 2006 in Mediapost’s Search Insider

If you haven’t heard, or received your invite, the annual SEMPO State of the Market survey is currently looking for search marketers to give us this year’s snapshot of the industry. You can find a link to the survey at the SEMPO site. Now in its third year, this survey has become the definitive year-over-year look at search marketing.

Knowing that we’re in Chicago next week for Search Engine Strategies, we paused long enough to take some on the fly data points which we’ll be sharing at a special SEMPO meeting on Monday night. I can share one of them with you in this column.

Why the Survey?

First, why do we do this? Simple. In something as dynamic as search, it’s tough to keep your bearings. Obviously, year-over-year sizing of the markets is one yardstick, but there are a lot of other factors that we like to keep an eye on. We track advertiser’s acceptance of different strategies, including paid placement (or sponsored search), paid inclusion and organic optimization. Late- breaking info on this in a moment. This year, we’ll also be asking more questions about local search and what other marketing channels advertisers use.

We also check in with advertisers on issues like click fraud and how prevalent they feel it is, as well as use of search marketing technology and contextually targeted ads. Of course, we’re very interested in where those search engine budgets are being placed and where those budgets are coming from. Is search poaching from other budgets, or has it established itself as its own line item?

We try to determine the maturity of search by asking how much executive participation there is in search marketing decisions. We can also look at the different groups that answer the survey (advertisers, agencies and affiliate marketers) to see if there are variations in attitudes toward search amongst them.

Wake-Up Call for SEM Agencies

Last year, a key finding was the attitude of advertisers toward search marketing agencies. It was clear that there was a trust disconnect, with a full 65% looking to bring both paid and organic search capabilities in-house. For SEM agencies, it was a clear signal to up the ante in terms of measurable results.

We spend a fair amount of time in the survey digging into how companies conduct their search campaigns, the percentage that’s done in-house versus outsourced, whether this is a growth strategy for them, and trying to determine some of the hidden costs, such as the expense of internal staff to conduct the campaigns.

And of Course, There are Those Click Costs

One of the hottest data points from the survey tends to be around acceptance of current bid prices. Again, we get quite granular in determining the extent of price elasticity on paid placement. Last year, we saw a flattening out, with 21% of advertisers saying they were maxed out on bid prices, and another 37% saying they could go as high as 10 to 20% more.

If you want to find out more about the 2005 findings, make sure you visit the Learning Center at http://www.SEMPO.org.

Hot Off the Spreadsheet

So, how is the data shaping up this year? Well, I just pinged our number crunchers–and based on the results in so far, it looks like organic optimization is holding the lead as the most popular strategy when it comes to search. Last year, it barely edged out paid placement, with 80% of respondents saying they were using it, compared to 76% of respondents using paid placement. This year, adoption of both strategies increased, with 83% of respondents using organic optimization, and 80% using paid placement. Remember, this is very preliminary data, and will likely change a bit as we get more survey completions. We have a few other preliminary data points that we’ll be sharing in Chicago next week at Search Engine Strategies. Look for the SEMPO event, Monday, Dec. 4t at 6 p.m.

Call to Action

If you’re working in search, we need your participation. The more respondents, the better the data. Everyone will have access to a summary of the report, and SEMPO members can download the full report. Once again, you can take the survey at http://www.sempo.org/learning_center/research/sempo_research/sempo_2006_state.

The Coming Storm: Search and Consumer Privacy

First published November 9, 2006 in Mediapost’s Search Insider

Earlier this week, in OnlineSpin, Seana Mulcahy wrote about two new complaints filed by consumer groups with the Federal Trade Commission. The shadowy subjects of tracking online behavior, analytics and targeting are outlined in the complaints.

Earlier this year, in an interview, I predicted a showdown between search engines and consumers around privacy issues. I suspect these two complaints could be the harbinger of the coming storm.

The Natural Convergence of Search and Behavioral Targeting

It makes all kinds of sense for the worlds of search and behavioral targeting to overlap, and the conjunction of those two worlds is a very powerful place indeed for the marketer. Behavioral targeting allows you to track and target potential customers based on their click stream. You can identify promising click streams based on sites visited and behavior on those sites. The odds of picking the right person at the right time to receive your message go up substantially.

Now let’s look at search. At some point in the buying cycle, which is mirrored by the click stream, almost all consumers will turn to a search engine to look for more information. This is a rather momentous point. At the earliest occurrence, it often indicates when the consumer switches from awareness to consideration. It’s when they become actively engaged in the act of purchasing, which puts them in a whole new mindset. From that point forward, they could turn back to the search engine at different times to assist them in the purchase. The key is that consumers who are using a search engine are very receptive to information about the product or service, because they’ve requested that information. Push turns to pull.

 

The Challenge with Search

The problem with search right now is knowing where the consumer is–at which touch pointIs it early in the cycle, near the beginning of the consideration phase, when consumers are compiling candidates for their consideration set? Is it somewhere in the middle, when they’ve assembled their set and are comparing features or looking for reviews? Is it when they’re ready to purchase? It’s almost impossible to tell from the query, because as past comScore studies have shown, there is often not a search funnel. The same query could be used at each point in the cycle.

Given this inability to disambiguate intent from the query, most marketers aim for the sure bet. They go for the purchase, because it’s much easier to track conversions and ROI. Do a search right now on any engine for “digital cameras” and look at the sponsored ads that appear. I guarantee they’ll be aimed at someone ready to purchase. Is this the query you would use if you had done your research and were ready to purchase one specific model? Would you even buy online? Probably not. But it is the query you would use if you were starting to consider your options.

You’re not alone. The marketers on the results page are missing over 80% of potential buyers by focusing on the less than 5% who are ready to buy now. It’s just not a good match-up for the advertiser or the consumer.

Enter BT

Now, if you were able to combine behavioral targeting with that all- important search touch point, you could serve a research-based ad if you knew at what stage in the buying cycle the consumer was, based on his online visits. You could take the guesswork of matching the message to the person. And finally, we could start to pull away from the pure direct response tactics that restrict the effectiveness of search. It’s tremendously powerful.

This is not something in the far-distant future. The mechanisms are already in place for search engines to track your online behavior. Tool bars, mini apps, personal search history. All of these can and do track where you’ve been. Everybody is being tracked to some degree.

But as Seana pointed out in her column, most of us are blissfully unaware of it. That’s because it’s been relatively benign to this point. In return for a handy tool bar that offers increased convenience, the ability to index your desktop and other added functionality, we just click the accept button without really reading what we’re accepting. Up to now, there hasn’t seemed to be any consequences. But in the background, the engines are quietly collecting terabytes of click-stream data. And the time is coming when that data will be put to use.

Privacy Storm Front

At first, it will be subtle and a little unsettling. The search ads we’ll be seeing will be targeted much more precisely. They will seem to speak just to us. It will be like the advertiser is reading our mind. We’ll be thrilled at first, but eventually, we’ll read an article somewhere that will explain the uncanny ability of the advertiser to give us just the right message. It’s because they’ve been watching us, tracking what we do online. And it won’t just be on search, it will be throughout the search engine’s advertising networks.

“Hmmm” you’ll say to yourself, “I’m not sure I’m okay with that.”

More and more consumer groups will launch protests. Politicians will sense opportunity and jump on their soapboxes. There will be a very vocal minority that will rail against this “Big Brotherism.” There will also be a group of advertisers that will continue to step way beyond the acceptable, using targeting to subvert the user experience, rather than enhance it, hijacking the user and taking them to places they never intended. This will add fuel to the fire. And because they’re the most visible target, the search engines will bear the brunt of the attack.

In the end, we’ll realize there’s much more pro than con here. Effective targeting will generally add to our experience, not take away from it. We’ll toy with trying to use a third-party privacy filter, but in the end, most of us won’t be willing to give up the additional functionality in return for maintaining an illusion of anonymity online. Much of the usefulness of Web 2.0 (I know, I hate the term too, but at least it’s commonly understood) will be dependent on capturing personal and click-stream data. We’ll give in, and the storm will gradually fade away on the horizon.

At least, that’s my prediction.

Thou Shalt Not Google (unless it’s on Google)

First published November 2, 2006 in Mediapost’s Search Insider

goo-gle: Function: transitive verb: to use the Google search engine to obtain information about (as a person) on the World Wide Web
–Merriam-Webster Online Dictionary.
Of all the things that Google’s lawyers have in their basket, apparently stamping out inappropriate use of “Google” as a verb is right on top of the stack. It apparently irks them no end.Now, I can really sympathize here. It’s a little known fact that my last name has actually suffered the same fate as Google. In Japan, of all places, Hotchkiss has become the generic name for the office stapler. Each time a worker lost in the maze of cubicles at Mitsui and Co. says, “Pass me the Hotchkiss” I die a little inside. I kid you not! Check out Wikipedia.Mind your Ps and GooglesNow, according to a post on Google’s official blog, it’s not the fact that we Google on Google that causes the Google legal department to have hissy fits. It’s if we try Googling on Yahoo and MSN. It can’t be done. Not all tissue papers are Kleenex, not all copy machines are Xeroxes. To quote the post:

You can only “Google” on the Google search engine. If you absolutely must use one of our competitors, please feel free to “search” on Yahoo or any other search engine.

Hmmm..people are using the word “Google” to refer to Google’s competitors, and it’s Google that’s upset? Unless I’m missing something here, shouldn’t it be Yahoo and MSN that should be miffed?

I Google, therefore I am…

The inclusion of Google in the English lexicon is “faintly unsettling,” according to the folks at Google. They fear that Google will lose its identity as a trademark once it slips into common usage. They explain:

A trademark is a word, name, symbol or device that identifies a particular company’s products or services. Google is a trademark identifying Google Inc. and our search technology and services. While we’re pleased that so many people think of us when they think of searching the web, let’s face it, we do have a brand to protect, so we’d like to make clear that you should please only use “Google” when you’re actually referring to Google Inc. and our services.

Now, I know that Google has way too much money, and they have a team of very bright 12-year-old lawyers (or at least, they look 12) trying to reinvent the law. But in this case, I would suggest slipping down to the Google cafeteria for a double decaf low fat cappuccino and relaxing. There are better windmills to tilt at than this one.

Once again, who’s in control?

The irony here is that the very entity that has probably done more than any other to put control in the hands of the consumer is now fretting because consumers are exercising that control. We associate search with Google. We endorse the brand by using it as a verb. It’s just this critical mass that makes Google such a formidable competitor in the highly promising search market. Frankly, it’s not the fact that their brands became generic terms that hurt many of the companies that Google uses as examples. It’s because the companies became complacent and let the competition catch up, losing the distinction that their brand once afforded them. The consumers didn’t take the brand away from the company, the company surrendered the brand to the competition.

In the corporate culture that says “don’t be evil,” apparently improper use of “Googling” is now defined as evil. Just to make it clear, Merriam-Webster defines evil as “morally reprehensible.”.  Perhaps someday “google” will also mean “to spend one’s time unproductively fighting frivolous legal battles.” At this point, it’s a toss-up with “disney.”

A final word to Google’s legal team: As you’re putting together those multi-page lawsuits, go ahead and feel free to use the Hotchkiss. I don’t mind.

Thoughts on the Search Tornado: The Chasm Revisited

First published October 26, 2006 in Mediapost’s Search Insider

While pondering topics for this week’s column, I was in a quandary. I could join the 1.65 billion people who are penning about the GoogTube deal. I could do something timely about Danny Sullivan’s decision to stick it out with Incisive and Search Engine Strategies for a little longer (yes, if you haven’t heard, it appears they’ve kissed and made up, kind of, and Danny will be around for the New York, San Jose and Chicago conferences, although he’ll be transitioning to a new chair) or I could chat about meeting Marissa Mayer last week (albeit briefly), the person in charge of user experience at Google.

I pick… none of the above!

I’ll loop back to Marissa in a later column, but I’m angling for an interview to talk about some of the things I’ve learned in my rather obsessive detailing of user behavior on Google, so put that on the back shelf for now.

Instead, I’m continuing to pick up the thread from last week’s column. The idea of search marketing crossing the chasm perked up a few ears, notably amongst financial analysts, so I thought I’d spend a little more time exploring the concept and what it means for search. Ironically, the day after the column ran, Google was heading for a new stock high and I was scrambling from building to building and meeting to meeting at the Google complex in Mountain View. I must say, everyone seemed to be smiling. I think the surge in stock prices had everything to do with my column running and nothing to do with their quarterly earning report, but some may argue differently.

If search marketing is indeed crossing the chasm, there are some rather interesting aspects to look at.

Who’s Crossing First?

The ideal strategy for crossing chasms is to gain critical mass in a particular vertical, and then market to adjacent markets that share similar pains, gradually reaching the tipping point where everybody jumps on board. Geoffrey Moore refers to this as the Bowling Alley strategy, hitting the head pin and knocking down the adjacent ones.

Search is well down this road (or alley). Over the last few years, search has gained this critical mass in the verticals that tend to be proficient in direct response marketing. Categories like travel are heavy users of search, and we’re starting to see this extend into areas such as consumer electronics, software and other B2C consumer categories.  Hard on the heels of these head pin categories are financial services and automotive. These verticals will be the first to jump.

It will take longer for search to gain critical mass in the B2B sectors, but the early adopters in these verticals are already laying the foundations.

The last to cross will be the local Mom and Pop shops. There are still some challenges to be addressed in gaining local traction, the most notable being a lack of a quality Web presence. But every month that goes by, the functionality of online local search increases to the point where it will be the users driving adoption, since local businesses can no longer ignore the fact that this is where people are searching prior to purchasing. And this is where search can open up vast tracts of unexplored potential.

Reducing the Pain With a Total Solution

Another trend that is becoming more apparent is the assembling of a total solution. The chasm can only be crossed when a significant portion of pain and risk is eliminated from the equation. Early adopters can stomach this, but pragmatists will avoid it like the plague.

The early markets are comfortable with cobbling together pieces of solution from disparate sources, providing the glue that holds them together and investing significant resources in coming up with an advantage over their competitors. This is exactly where search is right now. You need a pretty savvy inside person who can make search click for most organizations. It’s still far from a turnkey solution.

But look at what’s currently happening with the engines: The belated release of Yahoo’s Panama platform. New targeting capabilities from MSN. Google’s offering of free analytics and landing page optimization tools. All these speak to one goal: eliminate the pain for a mainstream market by assembling a total solution. The engines are putting together the package they need to appeal to a mainstream buyer.

Who’s the Gorilla?

The biggest question: Who will the winner be? There can only be one 800-pound gorilla, despite all the talk from the three engines that there’s more than enough market to go around. Google’s current marginalization of Yahoo’s business model speaks to this. The fact is, the marketers will crown the winner, based primarily on market share, which is dictated on the best user experience. Google wins this battle hands down. While it seems as if the engines have up to now been willing to cede the pole position to Google, if they don’t want to end up in the chorus, they have to get serious about this race. It goes quickly–and right now, Google has a huge head start. I’m beginning to think it may be uncatchable. Perhaps that share price isn’t as ridiculous as it seems.

I drop one last King Kong-sized hint for the engines. You can’t pay enough attention to the user experience. And right now, Google’s eating your lunch, and your afternoon snack. Ad management platforms only matter if you have a market to target the ads to.

What This Means for SEMs

So, if we’re crossing the chasm, do SEMs get shut out? No, in fact, the opportunity has never been greater. We can ride along with the main players in this chasm crossing, the engines. But we have to be nimble and fleet of foot. There are plenty of opportunities to add value along the chain as the engines assemble the total solution. But remember, the aim of the total solution is to reduce the pain points, not increase them. Therefore, the engines will be working hard to identify where mainstream buyers experience pain and try to introduce new solutions to eliminate it. That means if a SEM finds a spot where they can add value, i.e. bid management, they have to be prepared for the engines to introduce a solution and wipe out their business model overnight. Another strategy is for SEMs to gain deep vertical expertise in one particular industry, because the engines will be caught in a vortex of demand and will be stretched far too thin to be all things to all people.

So there will be a lot of opportunity, but be prepared for it to be transitory. While this holds true for service-based SEMs, it applies to a much greater degree to technology developers. Sure, this might make it tough to navigate, but if the tornado develops, you really have no choice. Either you hang on for the ride, or you sink.

Thoughts on 18 Months with SEMPO

I’m noticing my blogging will power is directly related to my current slate of activities. October has been a busy month for me, with travel and some different initiatives here at Enquiro. As much as I try to schedule some time to post some thoughts, I keep finding things getting pushed back. I’ve got a file crammed with stuff to review to see if it’s comment worthy.

A quick update is certainly in order though. Two weeks ago I was at SEMPO’s planning retreat in New York. I have to give a shout out to Dana Todd and the BOD both last year and this year. The organization is making substantial progress on many fronts and has come a long way. Now, this is to take nothing away from the original board. You know, I was one of the ones that criticized some of those early decisions. As I’ve said in numerous interviews, I don’t think the story of SEMPO is that of revolution but rather evolution. Barbara Coll and the original board got the job done. They got SEMPO off the ground, they build some incredibly valuable relationships and they laid the foundation for the organization as it currently sits. You don’t get an industry organization off the ground in a climate as charged as the search marketing industry without rubbing some people the wrong way. And sure, there were strong personalities on both sides..that’s what makes this business fun. But you know what? There are many who would have thrown in the towel and said this ain’t worth it. Barbara stuck in and handed over a fully functional organization to last year’s board. It was an organization that was still defining itself, but it was well off the ground. I for one don’t think Barb ever got the recognition she deserved for that.

The other part of the SEMPO story is that we all had different expectations for what the organization would become. Some wanted it to police SEO’s, some wanted it to be a lead generator, and some just wanted parties and free booze. As the organization has evolved, those disconnects in expectations have largely corrected themselves. Where the disconnect was too great, members have gone their own way. But the majority of members have learned, as has SEMPO, and we’ve found middle ground. Do we have it perfect yet? Not by a long shot, but we’re trying to do more things right than wrong.

SEMPO is finding its voice and building its franchise. Our State of the Market Survey is in its third year as we’re working towards launch. We had full participation of the major publishers this year, as they recognize that this has become the definitive year over year snapshot of the industry. We’re launched a scaled back version for the European Market. We’re working with Fair Isaac on the Click Fraud issue, again with the participation of the major engines, to try to get a fair estimation of the scope of the problem through an objective third party. And, perhaps most importantly, we’re forging strong relationships between the engines and search marketers, and to attempt to democratize those relationships, opening up the communication lines with smaller shops who may not be handling the budgets to give them a guaranteed ear with the Googles, MSN’s and Yahoo’s of the world.

There will always be the inevitable comments about SEMPO board members doing this for their own benefit. Having been on both sides of this comment, I have my own perspective, which I’m happy to share. There is certainly no monetary reward, and I put in about 20 to 30 hours a month on various SEMPO tasks as the Chair and as the Research Chair. Do I get some increased exposure? Probably, but to be honest, I get a lot more exposure through Enquiro’s research initiatives (something I have to start devoting more time too). The biggest benefit I receive from being on the board is the networking opportunities. Participation with SEMPO has allowed me to meet some interesting people, both at the engines and at other agencies.

A year and a half ago, I was one of the ones bitching in the hallways of SES. I made a choice: either keep bitching from the outside, or jump in and get involved. In the past 18 months, I was able to accomplish some of the things I wanted to do, but I also got the chance to have my perspective changed a bit. These are good, smart people, doing good, smart things. They’re making a difference in this industry.

Okay..off my soap box. I’m going to turn comments on for a little bit. Feel free to let me know your perspective on SEMPO..good or bad. You have the Chair’s ear.

All Hands on Deck! Search Marketing is Crossing the Chasm

First published October 19, 2006 in Mediapost’s Search Insider

Last week, I gathered in New York with 12 other search marketers for SEMPO’s twice-yearly 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 they’ve noticed a significant change in the prospects they’re talking to–and the contact points within those companies. Today, our sales leads are more often Fortune 1000s 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 between the two. For the ones that do, the reward is a sudden firestorm of demand.

Exactly three years ago now, I wrote a column asking if search marketing had crossed the chasm yet. My conclusion, (reinforced by a note of endorsement from Moore) was that search marketing had yet to do this. Until recently, I still thought we were squarely in the early adopter camp. Either search 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 lockstep 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 consumers’ 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, providing unprecedented accountability to the advertiser. Every single search publisher is heavily invested in this area, and this will continue.

The Local Search Wildcard

Another category 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 million businesses with a brochure-ware site. That leaves almost 10 million businesses without a Web site at all. That’s a total of almost 15 million 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 Web site, 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 which all sits in the local market, currently throwing its 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 three years search marketing does cross the chasm, and Google manages to capture 50% of businesses with a Web site. Also, let’s assume that budgets loosen up substantially as search moves into the mainstream and more advertising options are open, increasing 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 million Web-less businesses that are likely prospects of local search, or the global market. That puts Google’s potential revenue at $208 billion. 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.

What is Web 2.0?

It’s probably the emptiest catch phrase since the Information Highway. Everybody refers to the Web 2.0 but nobody really knows what that means anymore. The folks at PEW Internet tried to sort that out in the Future of the Internet II report I blogged about earlier. More and more, it seems that the Web 2.0 is used to refer to everything that is wrong with the Web 1.0: it’s not interactive enough, it’s not useful enough, it’s not democratic enough, it’s not engaging enough.

I think the problem is that by it’s very nature, the Web defies definition. It’s the largest organic being on the planet. It’s all encompassing and is enmeshed into society, business, government and every other aspect of our every day lives. So to try to define a new generation of the web through some technical criteria becomes impossible. There is no versioning on the web, because versioning implies some centralization of control. The beautify of the web is that it is organic and grows from the ground up. There is no one controlling body that defines what’s in scope and what’s out of scope. We all define our own scope.

Web 2.0 could refer to the explosion of consumer generated content (and if consumers are doing the generating, doesn’t that preclude them from being consumers?). It could refer to the new social hubs of the net like MySpace and YouTube. It could refer to the proliferation of web delivered applications. In fact, it refers to all this, but the beast has outgrown the name tag that we’re trying to pin on it. Web 2.0 doesn’t really mean anything, because something as vast and amorphous as the Web defies pigeon holing.

Microsoft Too Long in the Tooth to Play Online?

Bambi Francisco indicates that Microsoft might just be too old, too slow, too stodgy and, dare we say it, too bulky to play with the youngsters in the online sandbox any more. She points to the new YouTube clone, Soapbox, that Microsoft is rolling out.

You know, I’m starting to agree with Bambi. I’ve always said don’t count Microsoft out, because I still remember what they did to Netscape, but they seem to be lagging further and further behind the cutting edge. Increasingly, the game is being taken out of the courts they tend to dominate in. It’s okay to be late to the party if you’re bringing the beer, but increasingly, Microsoft is showing up with a case of empties (okay..maybe I’m stretching the analogy beyond the breaking point).

Is Microsoft finally becoming the dinosaur that everyone’s always accused them of being? Perhaps the world is changing too quickly for them to keep up. When’s the last innovation that rolled out of Redmond that wasn’t a pale and inferior imitation of something that already existed? One can’t help thinking that perhaps Bill Gates could see the writing on the wall and bailed when he could.

Yahoo’s Stock Slump is not Indicative of the Industry

Yahoo is currently taking some lumps for a slow down in a couple of sectors, but don’t try to extrapolate this to the industry at large. In a Business Week column Catherine Holahan indicates why the slump is due more to internal issues at Yahoo rather than some industry wide malaise.

What is pointed out in the column that is probably more interesting is the growing fragility of Yahoo’s largely banner dominated network, which has been a steady revenue anchor for the company for some time. Increasingly, online is improving the ability to put the right message in front of the right person in the right place at the right time with increased targeting options, either through behavioral targeting, online property targeting or demographic targeting.  Banner distribution on a tired stable of portals isn’t fitting the bill in any of these regards. The behavioral targeting dollars are currently going away from the top 3 into smaller players like Tacoda and Revenue Science. Google has the edge in targeting ideal online properties through roll out of display in their AdSense network and MSN is definitely building a robust demo targeting platform in adCenter. Yahoo’s push back of Panama, which would at least even the playing field for awhile is definitely an Achille’s heel and the race is picking up here.

In the rush for ad spending accountability, Yahoo is starting to lag behind and that could prove fatal if they don’t catch up fast.