Search engines – what's next?

Originally published on EuropeMedia.net, 03/04/2002

In a series of articles, Duncan Parry has talked to the UK versions of search engines including Google, Ask Jeeves, MSN and Lycos about their experiences in the current economic climate, their plans for 3G and their plans to expand search services.

In this two-part article, he summarises the emerging trends and looks at some of the developments that may take place in the future.

Advertising: targeting technologies for bricks-and-mortar

Although none of the search engines would comment on the exact fall in advertising revenues they have seen in recent months – unsurprising as they all have competitors and investors to think about – it is clear they have seen a fall.

They also believe the use of advertising technologies to target the right audiences for individual advertisers will ensure their advertising remains competitive. Ask Jeeves, for example, displays adverts based on keywords in the questions consumers type in at Ask.co.uk.

Both AltaVista and Lycos highlighted a trend that has emerged since the “dotcom bust:” their advertising clients are no longer dominated by the dotcoms.

“Last year, a large segment of advertising came from internet companies. This year, we have seen more traditional companies come onto the web and investing in online advertising (Axa, BA, IBM, Fiat, etc). This is a positive sign for online advertising,” AltaVista told EuropeMedia in December 2001.

Continuing this trend, Lycos stated “…we are now beginning to see a growing acceptance, by traditional bricks-and-mortar companies, of new media advertising as part of the overall marketing mix. This acceptance will continue to grow as users start to spend more time online than watching TV, reading print and listening to the radio”.

So, as established bricks-and-mortar businesses seek to advertise more online, and search engines compete for their advertising budgets by offering highly-targeted advertising solutions, online advertising will continue to have a place in the revenue streams of search engines and portals.

But it’s important to realise that the search engines will have to look for other revenue streams – something that those that have survived up to this date are already doing, including commercialising the process of listing websites in their search results.

Paid inclusion and pay-per-click – the search engine’s new best friend

Submitting a website for inclusion in a search engine has always been a hit-and-miss affair. Many website owners pay SEO (search engine optimisation) experts to adapt their websites to rank highly in search results for certain phrases that are key to their business – only to have to repeat the process a few months later after their competitors have adjusted their own websites.

Unsurprisingly, search engines are now looking to earn more revenue from these websites and the SEO companies that represent them, while helping (theoretically) to make this process easier.

The trend began with Inktomi (which powers MSN.co.uk’s search results, and until, recently, LookSmart UK’s). The company was one of the first to begin charging websites to submit URLs for inclusion in its database (note that inclusion means a site will be included, it doesn’t guarantee high ranking).

Now, Lycos is looking to offer a similar service, starting in the US, with its search technology provider, FAST. AltaVista has already offered this for some time, as did Excite UK before its demise.

Alongside paying to ensure their URLs are included and updated in these search results (which are based on meta tags, page text, etc), websites can now pay to be listed in directories – that is, human-maintained links arranged into categories.

The granddaddy of such directories is the Open Directory Project, which is run entirely by volunteers worldwide. But both Yahoo! and LookSmart also include directories – and charge commercial sites for a listing. Both employ editors to review and include commercial websites and find non-commercial websites to add.

LookSmart, as reported in January, is also considering setting up a volunteer-run directory of non-commercial websites similar to Zeal in the US.

Lycos also has an editor-led directory, and is planning to start charging for the rapid inclusion of commercial websites.

It plans to continue to add any sort of site for free – although this will take longer. All of these directories feed into the search results consumers see at the search engines.

Beyond paid inclusion in directories or search results, pay-per-click search results above or alongside “normal” search results are one of the search engines new best friends.

In fact, not such a new friend: Overture launched as the first pay-per-click in the US as GoTo.com back in 1997. But the pay-per-click advertising model has only really started to take off in Europe over the last year.

In Europe, UK-based company Espotting is expanding across five territories (UK, France, Germany, Spain, Italy) through partnerships with Yahoo!, Lycos, Ask Jeeves, LookSmart and others. The company is also looking to the Scandinavian nations and Asia, as told to EuropeMedia in March 2002.

Overture is also expanding into Germany and France, and looking to Japan, with partnerships including AOL and AltaVista. Both pay-per-click engines share revenue with the search engines.

Pay-per-click results operate by advertisers bidding to appear when certain search terms are typed in by consumers – and they only pay for this privilege when their website’s link is actually clicked on.

Advertisers increase their bids above each other to ensure they are listed at the top of pay-per-click results, as normally only the first three to five results are used on the major search engines. For example, search on Yahoo.co.uk for “travel “ – the results in a grey box halfway down the page are from Espotting.com.

For the search engines, pay-per-click results offer a new revenue stream without incurring any extra costs: the sale of pay-per-click advertising and development of the corresponding systems are paid for by the pay-per-click engine.

As the search results are editorially filtered by the engine, the search engines can ensure their results remain relevant to the consumer. For advertisers, it offers a low cost of way of acquiring targeted traffic to their websites.

To read the second part of the feature, please click here.