What is the future of paid search?
With more search conducted on mobile, all the senior executives at Google must be asking themselves that same question, and another broader one: How can the company monetize search across platforms?
Despite the slew of products that Google launches for online, mobile, print, radio and television ? and not all of them successes ? its bread-and-butter revenue source is paid search on the wired Web. Those little ads atop the organic search results pages and to the right of those listings pay for everything ? from Android and Google Analytics to Gmail and the snacks in the Google cafeteria.
Each time someone clicks on those paid search links on the Web, Google pockets a percentage.
Try as you may, Google has steadfastly refused to release information on click-through rates on its paid search ads, and the media has not pressed the company for much-needed clarity in that area.
However, paid search is so 1990s.
Consumers have changed the way they search for information when they are connected to the Internet. And mobile has a large role to play in that evolution of search ads.
Take this admission from Google in an AdMob-related blogpost Thursday, May 27 by Susan Wojcicki, vice president of product management at Google:
Mobile search is central
One of the key ways that people find and access information on their mobile devices, just like on the desktop, is through search. As smart phones have proliferated, we?ve seen dramatic increases in mobile search volume. Over the past two years, Google's mobile search volumes have grown more than fivefold, at an accelerated pace. In the first three months of 2010, people with smartphones with ?full? WebKit browsers (such as the iPhones, Android devices and Palm Pre) searched 62 percent more than they did in the previous three months.
Increasingly, people aren?t just typing search queries into their mobile devices. They speak them, they take photos of them and they even translate them from different languages.
In addition to traditional search ads on mobile devices, we?ve worked to develop entirely new search ad formats. ?Click-to-call? search ads, for example, have been really popular. They enable advertisers to include a local business or national phone number directly in their ad text that you can click to reach the business directly via phone. This is a really great way for you to easily get information from a relevant business (say, a local restaurant), and a highly effective way for advertisers to connect with interested customers.
With many more advances to come, search advertising will remain the central way that many businesses connect with consumers on mobile devices.
That posting not only acknowledges mobile?s role in the evolution of search, but it also indicates some ways that Google might monetize such activity. The click-to-call search ads are a clear example.
However, anything that Google does related to search on mobile will have to take into account four limitations.
First is the widespread concern over privacy, not just through search but also on social media, mapping, location-based advertising and data collection.
Federal regulators and privacy groups are increasingly alarmed how consumer activity online and on mobile is easily tracked. They worry about abuse of such knowledge, though none can cite examples of such illicit behavior.
Still, it doesn?t help that Google is in trouble with the European Union for inadvertently collecting Wi-Fi consumer data while it was filming streets and buildings for its Google Earth product. Google only admitted to this slip-up when it was disclosed by a third party.
And there may have been stray instances of other major online brands including Google suffering breaches of data over email.
But such infractions have been few and far between, and no serious brand of Google or Yahoo or Apple?s stature intentionally seeks to undermine its relationship with consumers and regulators.
That being said, any attempt to link advertising with searches on mobile will attract tremendous scrutiny from the authorities.
The second limitation with monetizing search on mobile is the sophistication required of advertisers.
Take the click-to-call example that Google?s Ms. Wojcicki cited in her blogpost. For local advertisers, it will require multiple phone lines in the office and the ability to take call after call without any interruption. Technology and staffing will have to support the click-to-call functionality.
For bigger brands, they will need to hire a call center or ramp up their existing efforts to answer the flood of calls during the flight of an offer-driven campaign. This would be different for auto dealers, however, where click-to-call search ads route calls directly to them.
But in all other cases, click-to-call search ads require phone banks and attendant staff answering calls 24/7.
The third limitation is the many ways that consumers search on mobile that are not simple click-throughs: clicking on search engine links, speaking into the phone, taking pictures, translation, geo-location and social media. Not all lend themselves to paid search without privacy concerns or ruining the experience.
When consumers search on mobile ? as they do online ? the expectation is that the result is organic in some form or the other and not limited to sponsored results. If it is only sponsored, then the results are biased and have the Yellow Pages effect ? pay for play.
So unless Google manages to offer some kind of editorial value to a general search effort, the effort might come across as simply an ad and not a market-driven, organic result.
For example, the results that pop up while speaking into the phone have to be unbiased, offering searches both the organic and the sponsored listings. The organic result will have to be based off an algorithm, while the paid listing is bid up or down depending on popularity.
Yet it will be a challenge to intersperse organic and paid listings without cluttering the experience for searchers. Of course, the charm is that consumers can delve deeper into these searches by visuals, links or direct phone calls.
As for picture-based searches, Google will have to work with millions of small businesses to get them to pony up for clicks on listings when consumers click on, say, a McDonald?s image with the contact details.
While Google has already accumulated this experience for its wired Web searches and also for mobile, just imagine if every image search is cluttered with ads of local businesses. That?s guaranteed to eventually drive away consumers from searching this way.
Finally, there?s the issue of volume of searches on mobile and the transition from the wired Web.
If consumers rapidly evolve their searches away from the wired Web to mobile in all its different forms, Google will have to make sure that it draws the same revenue in this newer medium as it does from the older one.
Will as many consumers click paid links on mobile as they do on the wired Web? And how to price clicks on mobile paid search if the quantity and bids aren?t as high as the wired Web?
If the search giant doesn?t handle the transition well, it could jeopardize its core revenue base of paid search on the wired Web. And that would be bad news for the amount of innovation that Google is driving on mobile.
So that?s something Google and others of its ilk should be thinking about: How to ensure a strong revenue base off mobile as consumers switch their search activity from the wired Web to mobile, or at least complement searches across channels.
For those who don?t think that this transition could happen, just follow the history of AltaVista and Yahoo, both search giants of another era who were upstaged in less than five years by a smarter algorithm.
The only thing better than a smarter search algorithm is a smarter consumer ? and mobile is making everyone smart.