June 04, 2007 | Monday

Search - The best possible result

Quite why British advertisers should have taken to search so eagerly is hard to say. Whatever the reasons, while the search engines themselves may have originated in the US, they have had the greatest success in the UK. Nowhere else in the world have businesses embraced the opportunity to reach new customers via search engine results pages with as much enthusiasm. 

Quite why British advertisers should have taken to search so eagerly is hard to say. Whatever the reasons, while the search engines themselves may have originated in the US, they have had the greatest success in the UK. Nowhere else in the world have businesses embraced the opportunity to reach new customers via search engine results pages with as much enthusiasm.

Not that you’d know it from the coverage of Google’s rise from suburban garage to global colossus, or Yahoo!’s drive to be the number one online brand, or Microsoft’s latest bid to lead the market. Rarely mentioned is the fact that the UK provides much of the impetus behind their success, nor that in Britain there is a thriving search marketing industry, with hundreds of firms - from large specialist agencies to one-person web design outfits - competing for the business of pushing companies as far
up the search engines’ results pages as possible.

Research by the Internet Advertising Bureau and PricewaterhouseCoopers shows paid advertising on search engines such as Google accounted for 6.6 per cent of all UK ad spend in 2006. This puts Britain comfortably ahead of the US, where the figure is estimated to be closer to 2.5 per cent, and means we dwarf other European nations. For example, paid search spending in the UK last year was greater than in France and
Germany combined.

How has this come about? In my view, whenever the UK achieves pre-eminence, as it has in search marketing, it is almost always the result of firms finding an edge on service, creativity or innovation. The development of the market in carbon ‘offsetting’ offers another example where the UK has turned an innovative idea into a sustainable,
wealth-creating market proposition.

Spotting the potential

Much the same occurred when GoTo (later to become part of Yahoo!) created space for paid advertising on search results pages. Seemingly overlooked by traditional advertising groups and media buyers, it took a totally new breed of agency to spot and exploit the opportunity for a new style of customer engagement that this move represented.

So why haven’t other countries, in particular the US, achieved the same results as we have in the UK? Undoubtedly, one of the reasons behind the UK’s success in search has been the offer of ‘firestarter’ commissions by the search engines. Undoubtedly, these encouraged agencies and specialists to populate the British market, so much so that search as an in-house specialism is now rare in the UK.

But that only tells half the story: commission payments were cut drastically in 2006 without any noticeable impact on search penetration. Crucially, it is the consistency of performance and return on investment seen by the advertisers themselves that has sustained the industry’s growth.

By contrast, an estimated 75 per cent of US search specialists remain in-house, making this a primary cause of the lack of search penetration. Why? Because an agency will be better able to compare and contrast search performance with other media (there is evidence that search compares well against other media). Also, an agency is influential in moving spend from poor performing media to the best performing, making the allocation of budget more efficient and hence more rapidly growing search spend to its natural sustainable level (whatever that may be).

This shift is even more significant with a specialist search agency. Its skills will dramatically increase the performance of a search campaign, again leading to a growth in search spend at the expense of other media.

Wealth of experience

This not only explains why specialist agencies do well. For an in-house search specialist, the scope for learning is tiny: a company running 200 campaigns will learn significantly faster than a company running just one. Similarly, a business with the sole objective of improving search marketing will be more focused on innovation and have better access to capital and resources than a standalone department within marketing or IT.

The same applies to the keyword bidding software that lies at the heart of all paid search marketing. An in-house specialist will, at best, be using one of the commoditised software products so will have no real advantage over its competitors. Specialist search agencies, on the other hand, are more likely to have their own bespoke software, as well as the resources to develop and improve their system’s performance.

In 2000, organic search was much more advanced in the US than the UK. Then, possibly because the search engines themselves were US-based, or possibly in the original, collaborative, enquiring spirit of the internet, many, many people had spent many, many hours unpicking the formulae used by the search engines to rank results, tweaking and fine tuning their web sites to try to climb as high as possible up the
results pages.

Then paid search came along and suddenly the top slots were available to anyone willing to pay the right price. Unlike the US, where the bias is towards organic search, we had less baggage in natural search and an eager entrepreneurial eye that quickly spotted the opportunity paid search presented to advertisers.

So what of the future? Some might think it akin to taking coals to Newcastle, but I strongly believe that the ‘search gap’ between the UK and the US (not to mention the rest of the world) represents an incredible opportunity for Britain’s digital marketing agencies to grow their business, and for the UK to secure its position as the true home of search.

Dylan Thwaites, CEO, Latitude Group, 4th June 2007, Revolution