SEARCH Engines are going gangbusters. Advertisers – travel companies prominent among them – are lining up to get on board. Just look at the first quarter results for the two biggest brands, Google and Yahoo!.

Google’s first quarter profit quadrupled to US$369.2 million. Revenue – almost entirely from online advertising – increased 93% to US$1.3 billion. The news pushed Google shares, which listed last August at US$85, beyond US$220.

Meanwhile, Yahoo!, the most popular US website, posted net income of US$205 million for the first three months of 2005, more than double its US$101 million profit for the same period last year.

Big money, massive profit growth rates, something is very real happening here. In simple terms, the Search Engines are getting mobbed by businesses large and small which want to advertise with them.

And this is just the beginning. Search Engine Marketing (SEM) – the art of highlighting websites, brands or products in response to consumer “keyword” queries – is still in the first flush of youth.

Google, which has entered the lexicon and seems to have been around forever, is just 10 years old. Yahoo! was started in a Stanford University trailer in 1994, and listed a year later.

Here in Australia, the SEM story is equally positive. Why? Because SEM is cost-effective (for now at least) and it works. In fact, Australian internet advertising in general is on the rise with SEM the current star performer.

According to a survey by emitch and Roy Morgan Research, prominent advertisers estimate that 9% of their total advertising budget (or around A$800,000) will be allocated to the internet in 2005.

These experts are increasingly shifting their spend to SEM and believe the major strengths of the internet as an advertising medium are (1) targeting capabilities; (2) customer reach; and (3) cost effectiveness.

They also saw “immediacy” and “accessibility” as major strengths.

And with travel one of the most searched for categories on the Internet, there are clearly major opportunities for travel businesses to market online, with very real benefits for those who get in early.

The buzz among travel industry early adopters is very strong. At the recent Search Engine Room conference in Sydney, around 25% of the 250 attendees came from travel, with many actively using SEM to great effect.

Importantly, it’s not just airlines, hotel and destination sites who are getting on board. Corporate travel, car hire and destination sites are all using a mix of organic and paid search to generate sales leads.

Organic search results are the links which appear on the main panel in response to a keyword searches such as “cheap airfares” or “Gold Coast hotels” – while paid search is generally the boxed listings to the side.

Most experts like to have a mix of the two to balance risk and return.

Paid search advertisements are priced – and ranked – according to demand. Researcher Frost & Sullivan estimates that the average cost of a keyword is around A$1, although prices can range from 10 cents to $50.

Organic results are much less predictable with high rankings determined by a number of factors, in particular relevance of text, number of site links and popularity.

In Australia, the clear search engine market leader is Google with around 50% of eyeballs, followed by ninemsn and Yahoo! (which also offers organic and paid search to numerous partner sites, including ninemsn, through Overture).

Combined, these sites are just about the most popular segment on the Internet, and Nielsen//NetRatings reckons search engines have a “reach” of 71% among the 13+ million Australians with Internet access.

That’s a lot of potential customers. Can they find you?

May 13, 2005

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