Tuesday, January 03, 2006

Wilting flower?

Here's a Henry Blodget post on FTD and the expense of search marketing (some interesting comments there as well). Ultimately I think the fact that FTD (or any other retailer) finds keywords too expensive is nothing more than the market establishing a supply/demand equilibrium - while FTD may find it too rich, one or more of its competitors doesn't. It's (unfortunately) not the harbringer of lower pricing for search marketing. So long as the number of new advertisers jumping on board is net positive, prices will increase... On top of that, all the major players in this space are also continuing to experiment with value-add data to advertisers. Whether its demographics, geo-location or keyword user-tagging, pricing will continue to rise based on incremental perceived value and results by individual advertiser.

However, as search marketing nears an equilibrium per keyword, its market based pricing will trend to a fairly unlevel playing field. Consider a Dell case-scenario. A few large volume companies could effectively squeeze out competitive ad placements by keyword, based on their effectiveness to measure and manage cost and revenue generated, making it prohibitely expensive for less efficient (ala FTD) and smaller companies to engage. Hence why you don't see your corner El Burrito commercials during an episode of House on Fox. Limited inventory is funny that way...
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