Search Engines Power Up New Targeting Strategies

During the Internet’s hyperbolic boom years, search engines never lived up to their promise to be the lean, mean targeting machines they were touted as. Online shoppers looking for data on Canon products, say, were more likely to be bombarded with pop-up ads for cars than commercial messages about cameras.

Still, the category surged: Paid search-engine advertising grew from $500 million in 2000 to $1.1 billion last year, according to Salomon Smith Barney research.

Now, Google and Overture, the largest search engine, and data-gathering portals like About.com and Citysearch have announced marketing strategies intended to make online advertisements more relevant to the consumer—whether by pursuing local advertisers or outsourcing ads onto content partner sites.

Analysts say the key players are trying to grow the business while the market is still hot. “They realize that a search can be used not just for customers but to categorize and sell to advertisers,” said Denise Garcia, an analyst at Gartner/G2 in Stamford, Conn. “Once one of them figures it out, the rest all jump on the bandwagon.”

Some 86 percent of the Internet population, or 124 million people, use search engines each month, according to Gartner/G2.

Local and “contextual” advertising have become the talk of the industry, even among giants like Yahoo! and MSN, both of which have plans to move forward with advertising models in these areas.

Google is getting the most attention for its launch this month of a content-targeted plan that redirects the ads of its 100,000 advertising customers to sites such as HowStuffWorks.com and Knight Ridder digital properties. Google’s own search engine gets 52 million hits per month, and the company also powers searches for AOL and Yahoo!, among others.

“If The Miami Herald is doing an article about wildflowers, Google [through its partnership] will put my listing up. That’s exciting,” said Ray Allen, owner of AmericanMeadows.com, a wildflower-seed company.

About.com, a division of Primedia, quietly rolled out a similar plan late last year called Sprinks with partners that include Forbes.com, CNET and iVillage. Since October, it has signed on 15,000 advertisers, said Lance Podell, general manager of Sprinks in New York.

Not surprisingly, Internet ad sellers are promoting the ideas with vigor. “The Internet has finally reached the stage where it’s ready to deliver on the promise of what it set out to do,” said Tim Armstrong, vp of advertising sales for Mountain View, Calif.-based Google.

“Clearly, online advertising was always supposed to be about hypertargeting,” said Andrew Goodman, principal at Page Zero Media, a search-engine-optimization firm in Toronto. “Google is taking it one step further by using meaning-based semantic analysis on all the text on a page.”

Buyers, however, are taking a wait-and-see stance. “Some of the offerings relative to contextual advertising are just text links,” said Dave Smith, president of media shop Mediasmith in San Francisco. “The reality is, advertisers need this kind of thing in combination with an ability to do rich media, to measure their advertisements from a reach and frequency standpoint, and to do research that measures the efficacy of the campaign.”

AmericanMeadows.com’s Allen, former owner of ad agency Caravetta, Allen & Kimbrough, which became BBDO Miami in 1980, is also hedging his buying bets. If contextual advertising does not result in sales, he will drop it for the pay-for-click keyword advertising he already uses at Google and Overture.com.

Meanwhile, USA Interactive’s Citysearch is trying to crack the $90 billion-a-year local- advertising market by wooing the small businesses whose ad spend is usually confined to the Yellow Pages. A Citysearcher looking for, say, plumbers will get listings and ads from those who have paid for placement.

Citysearch started testing the pay-for-click plan in Atlanta and Boston in December, and found that advertising revenue increased by 50 percent in those markets. The plan rolls out nationwide next month, and will be supported by a television and print campaign this summer. Citysearch has not yet chosen an agency or disclosed an advertising budget.

Overture plans to spend more than $10 million this year to develop local search and contextual advertising products. Overture powers sponsor-paid searches on sites that include MSN, Yahoo! and InfoSpace, which get well over 100 million hits per month.

Local advertising for search engines makes good sense, said Gartner/G2’s Garcia. “It took this long because until recently, there wasn’t critical mass and not enough impressions for local advertising.”