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The term Paid Search refers to advertisements placed on search engine results pages (SERPs)—typically text links that appear atop and/or listed on the right side of the SERPs.
Traditionally, these ads consist of a text link to a company’s website or landing page and are often referred to as Sponsored Listings or Pay Per Click (PPC) ads. Paid Search ads appear on SERPs based on the search terms used in a query. To determine which keywords will trigger an ad to appear, marketers bid on keywords used to find their website—the higher the bid, the higher the position an ad gets on the page.
Over time, the definition of Paid Search has evolved into an umbrella term that includes other types of online advertisements—not just Sponsored Listings on SERPs. Contextual advertisements, or online advertisements placed on websites based on the content of a site or page rather than search terms, often fall under the umbrella of Paid Search and can include text, images, audio or video. For the purpose of this paper, we are focusing our dicussion on the traditional Paid Search advertising model—ads appearing on SERPs.
As the chart to the right illustrates, Paid Search has been a rapidly growing segment of online advertising, with nearly half of total online ad spending now devoted to Paid Search advertising.
Online advertising spending in the US has seen double digit yearly growth since 2002 A and with that, online advertising’s share of marketing budgets has grown among major advertisers and so has the dollar amount allocated to it. At the same time, the relative investment in most traditional advertising vehicles—network television, radio, newspapers and business magazines— continues to drop.
These trends have not gone unnoticed by the media. Network television now shares content online—often free—for the opportunity to maintain branding and open new avenues for ad revenue. Radio and newspapers have reached an understanding with Google to sell excess ad inventory. Google then resells the space and offers creative assistance by certifying approved production sources. (FYI—Oneupweb is a Google-approved radio production source.)
Newspapers and business magazines have shown some of the best results by addressing declining subscriptions through the creation of online versions of their publications. While print ad revenues have, with few exceptions, shown a steady decline, paid online advertising revenues for the publications are rising. In many cases, this has been the one bright spot for an otherwise beleaguered medium.
As might be expected, the largest US advertisers have been among the first to make the shift from offline to online advertising. On the previous page, we have included four prominent examples representing distinct market segments. The trends are the same— an increased share to the online segment, less for traditional media.
The reasons why marketers prefer the online Paid Search formats can be divided into two distinct categories: 1) the growth and increased use of the internet, and 2) the inherent advantages of Paid Search marketing.
The Growing Online Audience
A June 2007 study conducted by Leichtman Research Group found:
Nearly three-quarters of US households subscribe to an internet service.
More than 70% of these households have broadband service.
92% of households with annual incomes over $75,000 are internet subscribers.
Broadband subscriptions grew by 12% from 2006–2007.
According to Internet World Stats, what this audience equates to is:
1.3 billion internet users worldwide. More than 238 million internet subscribers in North America.
120% increase in North American subscribers from 2000–2007.
Worldwide growth of more than 265% during that same period.
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