I’ve always thought that there isn’t enough market analysis in search, so I was very interested to read the latest white paper from Latitude. “Is the UK paid search market more sophisticated than the US?” is the question that they have asked, and they’ve answered with a resounding yes. Before I hoist the Union Jack in the office and put a picture of The Queen behind my desk, I just want to make a couple of comments on the problems that all such studies face.
Latitude have made a simple assumption. If US advertisers spent as big a proportion of their marketing budgets on search as we do in the UK (6.6%), then they would have spent another $10.9bn last year. Wow – that’s enough to buy IAC or Ghana, whichever you prefer. So why the difference?
They have made a number of arguments to support their conclusion, not least by looking at a basket of ‘highly competitive’ keywords on Yahoo’s transparent pre-Panama auction. There’s some interesting stuff (I particularly like the Maturity Index), but what would have been interesting is a look at Google’s data. But of course we can’t, because Google is a closed, opaque market, so we don’t know what the keywords cost at different positions.
This is the problem that all such studies face. Latitude hint at some discontent towards this, suggesting that an ‘invisible bid landscape’ (such as Google or MSN’s) could harbour anti-competitive behaviour by the search engines, and might even require external regulation. I’m no fan of regulation, particularly when the challenge of closed markets is soluble for those with the right mathematical approach and technology.
I expect Panama to be functioning the UK by June, and at that point we’ll have a search market that is 100% opaque (apologies to MIVA, Mirago et al). Unless search marketers can model keyword behaviour and prices within these markets, they are a significant disadvantage, whether they’re a media agency, SEM or in-house team. So the more interesting question is, who, on either side of the pond, is equipped to meet this challenge? I know at Efficient Frontier we are. If you’re using technology that was designed for the open market of Yahoo (née Overture, née GoTo), you’re probably not.