For a $37 billion market, search advertising has been rather sleepy for years.
That’s because Alphabet’s Google has long dominated both internet searches and related ad spending. In fact, most search advertisers spend the vast majority of their budgets with Google, perhaps sprinkle in a bit of Microsoft’s Bing, and call it day.
But that could be changing, thanks to Amazon and perhaps Pinterest. That’s welcome news for search advertisers, who hope for more options for clients, as well as better products and pricing that could be spurred by more competition.
To date, “there hasn’t been a tremendous amount of innovation in search,” said Scott Shamberg, U.S. president of Performics, a direct response-focused division of Publicis Media.
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For years, there hasn’t been much fluidity in terms of user behavior. Google commanded roughly 64% of desktop searches in December, according to comScore, followed by 23% for Microsoft’s Bing—rankings that have hardly budged in years. Google recorded over 12 billion desktop searches in January, versus less than one billion on Amazon.
The domination in behavior also translates to advertising. Google is expected to pull in 76% of the search ad spending in the U.S. this year, versus about 8.3% for Microsoft and less than 1% for Amazon, says eMarketer.
And on mobile, the digital ad buying firm Merkle estimated that Google was responsible for a staggering 96% of all search-ad clicks on mobile devices during the fourth quarter.
Thus, the entry of Amazon and others into the sector, “very much has the potential to change things,” Mr. Shamberg said.
But change won’t happen overnight.
In January, Forrester Research analyst Collin Colburn published a report on the search ad market. He said expects a “potentially pretty big shift over the next five years” in terms of consumer and advertiser behavior.
Seven or eight years ago, “any question, any need you had, turned to a search engine,” he said.
Now, particularly on mobile, people might turn to Amazon to look for apparel, Pinterest to look for home furnishing ideas, or a site like Trivago for travel plans. Each of these searches is “taking one more search away, and starting to erode Google’s dominance,” Mr. Colburn said. We’ve seen Google’s volume decline over last few years.”
Google didn’t respond to requests for comment.
Certainly, Google’s recent $22.4 billion ad revenue quarter, driven largely by search advertising, would seem to affirm that the company’s dominance is hardly collapsing. But as Amazon enters any market, competitors take notice. The company’s footprint in digital advertising overall has been expanding, and many in the industry see it as a sleeping giant.
Amazon isn’t about to roll out a full-fledged consumer search destination. But is has spent the past few years quietly rolling out three different search ad products designed to help people find more things to buy on Amazon.com.
Amazon’s “Product Display Ads” feature product images and text that relate to people’s searches. For example, a person searching for “sleeping bags” might see ads for camping products like tents.
These search ads direct people to product pages on Amazon; unlike classic search ads, they don’t send people to other sites on the web.
“In the past 12 to 18 months we’ve really been focusing on search,” said Seth Dallaire, Amazon’s vice president of global advertising sales at Amazon. “It’s still really early days for us.”
Mr. Dallaire noted that search is a mature ad market, and many advertisers and specialty search agencies have built “super sophisticated” buying operations using thousands of keywords and product databases to power ads.
Thus, getting these advertisers to shift spending often means having to get plugged into their ad-buying software and, in turn, receiving a vital real estate presence on whatever digital dashboard they use to make decisions on where to spend.
“We’re still building a lot of the capabilities and tools some of these big buyers expect of us,” Mr. Dallaire.
Scott Linzer, vice president of owned media at the Hearst-owned digital agency iCrossing, said that “for certain clients, made material impacts on their spending.” One reason they like Amazon’s emergence is that Google’s search ads can get pricey, depending upon competition at a given moment.
That’s part of Pinterest’s sell, as well. The company just rolled out search ads last month. These ads appear when people conduct searches such as ”living room ideas” and are more image centric than classic text links on a search engine.
“We don’t have as dense of demand as Google right now,” said Jon Kaplan, Pinterets’s global head of partnerships. “You might see a pretty steep discount.”
Prices for search ads will vary by product category and time of year, but theoretically the fewer advertisers bidding for these ads on Pinterest early on, the fewer instances that ad prices will be driven higher.
Mr. Kaplan said that Pinterest is already gaining traction in the market. He recently announced that Pinterest would plug its search ad technology into the buying platform for Kenshoo, a firm that helps retailers like Macy’s and Home Depot spend millions on search ads. “We were at their partner conference, and got a rousing round of applause,” he said. “I don’t know if they’d had a new partner on their dashboard in a decade.”
Both Pinterest and Amazon believe they can help search advertisers reach people before they have made up their minds on products. It remains to be seen if targeting those undecided shoppers with ads will perform as well as Google’s have for so long—considering that so many people who conduct Google searches know exactly what they want.
As for Amazon’s emergence over the past two years, “the true mystery is, really can there be a third player here?” asked Todd Bowman, director of search engine marketing at Merkle. “We are prepping our clients for that reality.”
Date: March 03, 2017