Demand for online skills pushes old marketing rules to the limit

Online marketing is no longer a niche market, and it takes more than a few core skills and a small budget to entice customers to pick your brand when they search online. By Andrew Walmsley

The Internet Advertising Bureau’s (IAB) announcement that 2005 online ad spend was up 66% compared to 2004 (MW last week) surprised many, even though it was the lowest rate of expansion for three years.

By the second half of 2005, 8.4% of UK advertising outlay was spent online, and most observers believe there is plenty of growth left in the market. As the uptake of broadband continues and people spend more time online, audiences increase rapidly, creating in turn more demand from advertisers. The medium will need to grow by only 39% in 2006 to overtake national press – a threshold it is likely to pass by October.

So online is no longer niche. But a gulf separates those who are exploiting the full potential of the medium and those who are lagging behind. The gap is widening as early investors reap the knowledge dividend. Nowhere is this more true than in search marketing, where spend grew a staggering 79%, according to the IAB.

Search is the last 12 inches in the marketing mile. There is a huge amount of work to do before you get there, but as any runner will tell you, it takes a huge effort to win in the closing stretch. Under-exploited by many, over-relied on by others, it is the area that is commanding interest from marketers, agencies and publishers. So what are the winning strategies and what separates the leaders from the also-rans?

Earmark enough budget to meet demand

Many businesses using search in their ad mix have done so as an exercise in the transfer of business risk. They think that because it is paid for on a cost-per-click basis, there is limited risk. But this is not true. The most common mistake made in search is the failure to provide sufficient budget to meet demand. The consequence is that every prospect generated through brand advertising who then searches for a brand is presented with communication from competitors just as they seek to buy. So under-budgeting is a high-risk course.

But just as risky is not generating that demand in the first place. An over-reliance on search can mean under-investing in the earlier parts of the adoption cycle, and this can drive down efficiency in two ways. It can reduce volume – even if cost per acquisition does not rise – and can make search itself less efficient. Brand advertising increases the proportion of searches for a brand as distinct from generic (more expensive) keywords. So banner ads (and TV) can reduce search costs.

Use of search is often restricted to direct sales. But its impact on brand, and on brand choice, is becoming more commonly recognised. Numerous studies show people do not tend to make one search, but several – starting broad, and narrowing down the options as they move towards a purchase. Getting the right generic keywords – and just as importantly, getting the copy right – is vital in helping consumers to make brand choices in your favour. Moreover, consumers feel “let down” if a major brand they are looking for is not easy to find in a search engine.

Keep your focus on the outcome

Search marketers can also be obsessed with conversions, and this can blind them to valuable outcomes. In a recent ComScore study, 63% of people who bought following a search did so offline. The same study also showed that over half of online sales resulting from a search occurred in a later session. Conclusion? Conventional metrics “see” merely a fraction of the sales that search is driving.

Affiliate marketing can drive huge volumes of online sales. But it can also drive up search costs (by competing for the same terms), misuse trademarks and even put companies in breach of the law. Effective affiliate marketing is managed hand-in-hand with search, ensuring firm rules of engagement and maximising channel efficiency.

Making online marketing work with offline is relatively straightforward. But as the online marketing field matures, a new set of disciplines has emerged, and organisations are responding by putting them in silos. This is the defining difference between successful online marketers and those who are struggling to make it pay. Leading practitioners have moved beyond developing the core skills needed to operate across the online disciplines – they are leveraging the synergies – understanding and using the interdependencies.

As search is expected to exceed &£1bn in 2006, its class-leading exponents are practising a form of joined-up marketing that is generating real competitive advantage. This is going to be a make-or-break year for some, as the gap may become too wide to bridge.