Give Me Buyers, Not Searchers! by Steve Baldwin , Monday, May 4, 2009
Search has often been called "direct marketing on steroids," and the analogy is actually uncomfortably accurate. The muscular aspects of search, including its immediacy, granular trackability, and reach (there are about 5,000 search queries per second right now) conceal a fundamental weakness so grave that one might more correctly describe it as "direct marketing on Quaaludes." Before you send flames via this article's comment form, let me explain what I mean.
Offline direct marketers have long had the ability to buy lists of many different types. The lowest-priced lists, which are called "compiled lists," have the least likelihood of resulting in conversions because they only contain very basic information about people, e.g. the fact that an individual resides in a certain DMA or is a member of a certain professional group. Compiled lists aren't exactly worthless -- in fact they may work very well for marketers selling products like shoes (everybody has feet, after all) -- but their cheapness reflects their low conversion potential for specialty marketers.
Up the value chain a notch, we find lists containing more behavioral data, such as lists of people who've "raised their hands" by filling out a catalog request form or otherwise expressed interest in a product, service, or manufacturer. These lists are more expensive because they're more likely to result in sales. But just because somebody wants to peruse the L.L. Bean catalog doesn't mean that they're ever going to order something through the mail.
The most valuable direct marketing lists are of people who've actually bought something. These people haven't merely raised their hands; they've reached into their wallets. Many retailers make a fortune selling their customer databases to other firms hungry for such data (provided they are not direct competitors). Response rates and ROI from such lists are orders of magnitude higher than lesser lists, as are the prices for renting them.
OK, let's get back to search. Marketers buy keywords to trigger ads, searchers click on them, essentially "raising their hands" to express interest, and the search engine gets paid regardless of whether or not an order takes place. The obvious problem is that the overwhelming majority of such paid clicks don't convert. A whole cottage industry has evolved counseling search marketers about the importance of compelling copy, landing pages, segmentation and bid strategies to raise conversion rates, and that's not a bad thing. The problem is that nobody has addressed the fundamental problem, which is that most clickers, shoppers, and other "hand raisers" have neither the will or the way to actually execute a transaction. Put more crudely, the vast majority of clicks that search marketers buy are wasteful, everybody knows they're wasteful, but we all keep paying for them just the same. In any other industry this situation would have long become intolerable and something better would have replaced it, but we just grit our teeth and accept it -- how crazy is that?
What search marketers want more than anything is what old-line direct marketers have had for a long time: lists of people with money in their pocket and a history of executing online transactions. Search engines have this data (how many sites now run Google Checkout?). But inexplicably, the engines refuse to let marketers bid for these valuable people, reducing them to fighting over keywords that only prompt waves of noncommittal "hand raising."
Why? Conspiracy theorists would argue that the engines would make less money selling search media this way. Another possibility is that the engines fear that if the masses ever learned how much intimate information the engines have gathered about all of us, including our buying behavior, privacy advocates would raise hell (a fear that's never deterred offline direct marketers from working this way). Mark my words: the first engine to come out with a way for marketers to buy qualified buyers will blow its competitors to Kingdom Come.
It's ironic that an industry that so conspicuously trumpets its "innovativeness" is stuck in such a Jurassic time warp. But there are third parties working on a solution. It seems to me that as long as we're targeting, slicing and dicing every minute aspect of a user's online activities, we shouldn't overlook the most important one, which is whether he or she has the capability of ever being a customer. None of this is rocket science: it's just common sense, and if search engines won't sell media this way, it's high time that third parties take the plunge.
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