The success of pay-for-performance (PFP) search in 2003 is just the beginning of what we can look forward to. With the IAB's revelation that search accounted for 36% of online ad spend Oust 1% behind banner advertising) in the first half of 2003, the future certainly looks bright. We believe the industry will experience more tremendous growth as companies continue to see search as a valuable core part of their marketing plans.
We're already seeing a much broader acceptance of search marketing in a range of areas. Spend in the home and garden, telecoms and IT sectors all doubled in the last year, and an even bigger growth can be seen in the automotive sector, where spend has trebled a reflection of the fact that more people are using the Internet as a research tool to evaluate later purchases offline.
This year will see companies like Overture dedicate their resources to developing products and technologies that not only improve the quantity and quality of leads for advertisers, but also increase the overall relevancy of listings for consumers.
A number of tools and initiatives already exist for advertisers to enhance the use of PEP, from exact, phrase and broad matching, to search-term suggestion tools and methods of tracking the best-performing listings. Advertisers are now in a better position than ever to optimise their search marketing campaigns.
In addition to products and services like these, the commercial search industry will undoubtedly continue to be focused on two particularly hot areas: contextual advertising and local search listings.
Contextual advertising (where relevant advertiser links are embedded on content-based pages) will be a strong area for growth this year. For example, users reading a Web page about cars may see in-page advertiser links for second-hand cars, car insurance or car-buying services. This is an important growth area, not only for search engines and portals looking for new ways to monetise the page, but also for advertisers to complement PFP search campaigns.
With Content Match, Overture's contextual advertising product, advertisers can benefit from a separately bidded marketplace for their listings and pause individual search listings whenever they choose essential tools to directly control costs for each Content Match listing and thereby maximise the return on investment for each search term. Because the contextual advertising model is different to PFP, in that users aren't actively searching when relevant listings are served on the page, the separately bidded marketplace is an important choice to give our advertisers.
Another primary focus this year will be local search. This will let advertisers market to interested customers within a defined radius of their business location. Overture is currently testing a local search service so that people can receive sponsored and general search results for businesses in their area.
We mustn't forget broadband and the huge opportunity it represents for the search industry. A broadband user's consumption of media is significantly higher than a user on a slower connection and, according to the latest research from Nielsen//NetRatings, broadband users spend an average nine hours extra a month online. The UK is currently lagging behind the rest of Europe (35% of UK home Internet users have access to broadband, compared to 55% in France), but the ongoing price wars for 1Mb/s broadband connections should help to drive down prices in the UK and encourage further take-up.
In essence, relevancy will always be the key to survival in this industry. The future of search lies in improving the precision of search technology to the point that it fully understands user intent. As an industry, we should be able to unravel a user's true intent behind a search, even if this isn't directly communicated by their input. When we reach that level, we'll be able to provide users with the highest quality search experience possible, and advertisers the strongest return on their marketing investments.