Search, the Financial Frontier :: Planning Search Budgets

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Friday, April 23, 2004

Search, the Financial Frontier :: Planning Search Budgets

Written by Jim Hedger and published at 12:45 PM

Search started cheap. Years ago, search engines figured their profit would come from two unique angles, advertising and investments. The advertising front evaporated when it was discovered that Internet users did not click on banner ads as often as was necessary to turn a profit. As for the investment angle, there was a time when search engine firms such as Excite worked to develop the "new-web" in partnership with @Home. Those were the days when high-flying IT companies were valued so highly on the stock market that AOL was able to purchase the Time Warner corporation. Those days came to an abrupt end on Friday April 14, 2000 when the NASDAQ lost over 1/3 of its value in one day. After the tech bubble burst, IT firms including search engines needed to find new means of revenue generation.

Just over four years later, there are far fewer major search engines and far higher costs to advertise on the remaining players. There is also a lot more money flowing in from the business of search. Some, such as Google and Yahoo executives can only see these developments as a good thing. Others, such as the typical small business owner may not see a great deal of promise in these developments, just radically higher costs. Finding a balance between intelligent online advertising options and intergalactic online advertising costs will be a challenge for small business owners in the coming years. As with most challenging business problems, the best decisions come from effective planning based on solid information. The first piece of information small business planners should know is, all major search engines now universally see themselves as businesses first, information aggregators second. This means costs are going to rise substantially over the next few years, even at Google.

Google
Google continues to offer free, unpaid listings to anyone with a website. If you have a website, and that website has incoming links, it is almost impossible not to get listed on Google without using meta tags. While getting into Google's database is as easy as getting another website to link to you, achieving Top20 placement under highly competitive keyword phrases has become far more difficult. According to an article published in today's Internet Retailer, sites that don't place in the Top30 results (first three pages) are almost universally ignored by search engine users. Getting into Google's database is simply not enough to get Google users to visit your website, you need to be found on the first three pages, preferably on the first page of Google results. The question is, how to get there...

It used to be much easier to get a first page placement at Google. Great content, solid optimization, and a few relevant incoming links were all that was necessary to put a website on top of Google. Since the infamous "Florida Update" in November, Google has been working almost entirely on incoming links. Without a strong set of incoming links, even the most well optimized site is not likely going to achieve a strong placement at Google (with the exception of non-competitive keyword targets). This situation has given rise to a new version of an old issue for Google; the commodification of links from sites with high pageranks. Most SEOs who've been in this game for more than two years will remember the fiasco when Google degraded listings from the SEO company Search King and sites linked to Search King. The owner of Search King, Bob Massa decided to sell links from his PR8 site and publicly advertised the new service. Massa found dozens of webmasters willing to spend big-bucks on a link from Search King as they felt the link was valuable to improving placements at Google. In theory, they were correct. In practice, Massa found his site and those linking to his site had their PageRank lowered by Google. Widely vilified in the SEO community then, Massa's basic idea has been copied by dozens of other businesses, the most notable of which is called Buy/Sell Links.

As Google continues to be the most used search tool in the world and prominent placement on Google can either make or break an online business, the commodification of links seems a natural, albeit dangerous, outcome. I use the word dangerous because Google's ranking algorithm is, in my mind, in danger of becoming permanently skewed. I think this practice is also dangerous because it will serve to price a good ranking out of the budget of most small business owners. For example, StepForth charges between $600 and $3500 (on average) for SEO services to small business websites. We also have a link-building service in which we activity find relevant links for our clients' websites. That service costs $12/link. Most sites that come through require at least 50 incoming links to compete with the current Top10 under their chosen keyword phrases. Suddenly an SEO project that would have costed $600 last year is now being quoted at $1200! That's double the cost but in some cases, that is what it takes to get the desired placement(s) on Google.

Yahoo
Yahoo is the second most important search engine, based solely on user numbers. Yahoo spent most of last year acquiring Inktomi, Overture, AltaVista, and AlltheWeb, making it the largest network of major search tools on the Internet. With so many search properties came an equal number of paid-inclusion programs which made little sense to the accountants at Yahoo. In what may be a penny-wise but pound-foolish move, Yahoo introduced a new pricing structure that came into effect late last week. Known as Site Match (for smaller websites), Yahoo's new paid-inclusion program has a pay-per-click component along with an annual $49(US) review fee. It should be noted that Yahoo also has a free-submit option that webmasters can take advantage of however sites submitted without signing up for SiteMatch or SiteMatch XChange will not be spidered nearly as often as sites that pay the fees. This change prompted me to write a rather detailed notice to our clients which can be viewed here. The bottom line is that, under the SiteMatch program, each click will cost either $0.15 or $0.30 per click on top of the annually recurring $49 review fee. Based on the number of visits one of our clients received from Yahoo in February 2004, we estimate approximately $2400 in new costs! As this client is a small business, we are left wondering if this cost, an extra $200/month will prevent her from eating well or taking a much needed vacation next year. Alternately, the added costs might make her think twice about advertising her website at Yahoo. For owners or webmasters of larger websites, Yahoo offers SiteMatch XChange. Under SiteMatch XChange, webmasters negotiate costs directly with Yahoo's subsidiary, Overture so we are unable to provide hard-cost figures for this service. For more information view Yahoo/Overture's new pricing policies.

Now we've established this is going to cost you some more money and we haven't even touched on Microsoft yet! Fortunately, MSN continues to draw from Yahoo so there are no extra costs to mention there. It will happen sooner than later though since MSN is rumoured to be introducing a new search tool sometime between July 2004 and January 2005.

Planning a Search Engine Advertising Budget
While the costs have never been higher than they are now, there are far more options available for search engine advertisers. All search tools are offering paid-advertisments much like Google's AdWords and Yahoo's Overture listings which in many cases will present lower long-term costs than the previously free traditional listings do. For example, we know Yahoo will charge 15 - 30 cents per click for "traditional" listings but, what if you can acquire an Overture ad for $0.10 per click? Not only will you save the annual fee of $49, you'll still be paying less per click than you would via the traditional listings. With over 90% of the search engine user market covered in one way or another, most webmasters and business owners would agree it is essential to be listed well at both Google and Yahoo. There is simply no escaping the power these two firms currently hold over the search engine market place. It is wise, however, to take a second look at other services these firms offer advertisers.

Perhaps the best example is Google's e-commerce catalogue site, Froogle. Submission to Froogle costs absolutely nothing, however, you may need to involve your IT department to establish an XML feed to constantly send information to Froogle's database. Assuming that Google retains its current ranking algorithm and Yahoo does not make substantial changes to its new pricing schedule, website owners and marketers will need to factor an additional two to three thousand dollars per year at a minimum in order to continue accessing the largest search tools on the Internet. I would like to note that this is a rather big assumption as Google changes its algorithms fairly frequently and is not shy about making radical changes without notice. Yahoo may also revisit its pricing schedule if it finds a lot of opposition from the webmaster community. At this time, however, there are many webmasters who will feel priced out of the game entirely. For these folks, I strongly suggest the other, smaller search engines such as Lycos, Enhance, Vivisimo and AskJeeves, each of which can deliver a small but vital portion of search engine traffic at much lower costs. StepForth staff strive to keep costs down as much as possible and work towards finding ways to limit the financial exposure of our clients. If you think your business or website is being priced out of the market, give one of our representatives a call and perhaps we'll be able to find solutions for you.

In the meantime, Yahoo continues to honour paid-inclusion contracts from Inktomi so many webmasters will find their sites continue to thrive at Yahoo. Sites with suddenly diminished Google rankings can go on a crash, do-it-yourself, link-building campaign but should beware the pitfalls of irrelevant links or links coming from linkfarms. If you require more information about the new fees and costs associated with search engine advertising, please feel free to contact StepForth by phone at 1-877-385-5526 or by Email at info@stepforth.com

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This SEO News was posted by Jim Hedger @ 12:45 PM.