Pay-per-click advertising or sponsored search is at the confluence of two of the most rapidly growing trends in the online world - performance driven marketing and search. The online advertising market is projected to grow from $7.3 billion in 2003 to over $19 billion in the U.S. alone. Further the Internet already represents 32% of annual household media expenditure.
The last several years have witnessed the growth of performance based marketing. Initially online advertising efforts were focused on CPM or impression based formats, similar to the conventional print ad. Unlike print however, on the Internet it is possible to measure actual user behavior and only charge an advertiser once a user takes the action of going to their web page; and therefore only charge for advertising that actually "worked". Because of this, sponsored results tend to be the most relevant. Advertisers put a great deal of effort into choosing keywords that very accurately describe their site - no one wants to spend money attracting visitors to their site who are not truly interested in what their site has to offer. This is known as CPC or cost per click. For advertisers the advantages are obvious and as a result keyword search has grown from 15% to 35% of online advertising expenditure. By 2008 paid search is projected to grow to 58% of online ad spend.
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The fact that this is effective is not a surprise, and neither is the fact that search reaches a large and highly targeted audience. In conventional print and broadcast media, or even with Internet "banner" ads, advertisers must make assumptions about the demographics of an audience; in effect hope that they can "find" the right audience, and that they will get their attention. Conversely in search it is the audience that seeks out the advertiser by researching their own interests. And this happens in huge volume. The average Internet user spends 35% of their time engaged in search, which translates into more than 300 million queries a day in the US alone. The majority of these searches are commercial not informational in nature. Indeed approximately one third of today's search queries are focused on finding local goods and services which has made paid search a highly effective form of advertising for businesses of all sizes, from major multinationals all the way down to mom and pop shops.
This also means that even small to medium sized web sites that typically have a much more targeted user base than major portals, can monetize their traffic by becoming a Revenue Engine affiliate. Your users have already narrowed their focus just by virtue of being on your site and usually have a high degree of trust in the information provided on your site. They are likely to search because of that. If your users are going to leave your site to search anyway, why not give them the opportunity to do it from your site? This will give your visitors added functionality, enhance your website and ultimately generate incremental income for you by monetizing your existing traffic.
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