Retailers Face Challenge Of Keyword Costs

    February 21, 2006
    WebProNews Staff

As more and more marketers enter the paid search market, competition for desired keywords has driven up the prices.

Internet Retailer suggested marketers need to look more at diversification with their efforts, rather than piling dollar after dollar into search engine marketing efforts.

An analyst cited in the article claimed “many retailers have become too reliant” on paid search. Electronics retailer Best Buy is offered as an example of a company that combines online advertising with other efforts. Those would include television ads and the weekly inserts into Sunday papers listing the latest deals.

Is there really an issue here, though?

For each Best Buy in the marketplace, there are numerous other businesses that lack certain aspects of a national retailing business: brick-and-mortar stores, large numbers of employees, real shopping carts instead of virtual ones, etc.

Paid search provides a way for the smaller business to compete online in some market segments with much larger competitors. If I were a powdered beverage entrepreneur (“Dave’s House of Lemonade – three flavors: Tart, Tight Pucker, and Facial Collapse!”), I could never match Kool-Aid in terms of visibility on TV and store shelves.

But if I take my first round of venture capital funding and use it on keywords and phrases (“lemonade mix,” “frat pranks”), I may be able to convert people specifically looking for such a product much more successfully than the impression-based spending the competitor does on having a pitcher of drinks bust through a brick wall.

AOL Search converted searchers at a 6+ percent clip in January. Out of the four top search engines, Google was last at conversions at 3.83 percent.

If my spending earns a 3 percent conversion, I’ve pretty much matched what the well-moneyed retailers and products convert. Not on scale, of course, but if my costs are low (I save a bundle on sugar with Facial Collapse) I’m still profitable, even with higher keyword costs. That’s not too bad.

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David Utter is a staff writer for WebProNews covering technology and business.