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Why Paid Search Is Growing

By - August 16, 2004

I was going through some of Safa’s presentations on the search market (thanks, Safa!) and found this chart. We already know this, but it’s compelling to see it laid so bare:

safadata


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11 thoughts on “Why Paid Search Is Growing

  1. brian says:

    how could e-mail be more expensive than search when it costs nothing to send out e-mail (after getting customer lists)?

  2. Good lists cost good money, and I imagine fighting anti-spam measures is not getting cheaper.

  3. I was not able to find the exact reference to the chart in the link you provided but certainly agree with the relative scale of costs… The trick of course is what the customers are being acquired to do.

    Certain channels perform better than others for different product types. A search link is not likely to capture as valuable a customer, or as complex a product as direct mail for example.

  4. I agree with Jonathan’s point about certain channels performing better for different products, but in mulling it over, I’m not so sure the complexity of the product or value of the customer has anything to do with it.

    Remember that a search link is tied to a site. The keyword ad and related site could just as easily be selling a $10 book (which, to Jonathan’s point perhaps, direct mail would never be used for) as they could offer a $50,000 car or a $1 million enterprise technology package. I’d argue that in many ways, the search ad could perform better for the higher end items due to the interactive nature of the web and the investments many such companies are making in their online experiences.

  5. Ok wait. Is search there generic search? Because if it is paid search then the numbers are wrong, unless a lead is somebody that clicks. As long as you don’t give up anything, that is not really a lead. So i would say somebody giving an address is a lead. But emm… you don’t get a lead for 50 cents on paid placement in good keywords unless you have 100% conversion rates ;)

    Also, $2 per Lead if lead is an address on banner ads is somehow not believable for me. Any more info on where this data comes from?

  6. Josh Stylman says:

    The data initially came from a report called the Golden Search, published by investment bank Piper Jaffray. The report was led by Safa Rashtchy, arguably the most knowledgeable analyst covering the sector. Since it’s initial release in 2003, Safa has continually updated the data to reflect current market conditions; these particular stats came from his presentation at the Search Engine Strategies show in San Jose.

    You are correct in your assessment though. These numbers do, indeed, consider a lead a clickthrough – not necessarily some post-click conversion (eg: sale, email submission). Still, there is no question that this is far and away the most effective direct marketing channel around.

  7. john says:

    Could you post a link to the actual research you got this chart from?

  8. Chris says:

    Yes – this is interesting, however, it is not “cost per lead” but rather “cost per click or visit” that this chart references…. conversion rates from click to lead vary widely, but are rarely over 50% – more likely 10% or so…

  9. Chris says:

    further to the above… the quality of the lead will vary with the marketing medium – and in my 10 years of online experience, email clicks are about 3x more valuable (and likely to convert to leads) than search…. email lists contain prequalified and highly targeted users… search can be anyone searching of any age/job title etc.. VCs need to consult industry experts to get these #s right! :)

  10. L. Jay Adams says:

    I am also interested in reading Safa’s article.
    Apparently it is no longer available on the piperpublic website referenced above.
    Is there any way to get this article?

  11. Jonathan Boutelle says:

    I would also like to read this article. Where can it be found?