US Online Advertising Grows by 27% in 2007

Online advertising in the US grew 27 percent last year, according to an IDC analyst. Internet ad spending totaled $7.3 billion for the fourth-quarter of 2007, about 28 percent more than the same period in 2006, according to IDC. For the 2007 calendar year, it reached $25.5 billion, representing year-over-year growth of 27 percent.

However, there was less positive news for Google as for the first time ever, IDC's research found Google actually lost market share. "Their domestic sales growth has slowed down," the analyst said. Google's net U.S. market share was down 0.5 percentage points to 23.7 last quarter compared to the prior quarter.

Mobile web set to unleash a "huge revolution" says Google CEO

The arrival of a truly mobile Web, offering a new generation of location-based advertising, is set to unleash a "huge revolution", Google Inc Chief Executive Eric Schmidt said on Friday at World Economic Forum in Davos, Switzerland.

Although consultancy firm Forrester predict mobile ad revenues of under $1 billion by 2012, Schmidt countered this figure by claiming that the mobile Web was reaching a tipping point.

"It's the recreation of the Internet, it's the recreation of the PC (personal computer) story and it is before us -- and it is very likely it will happen in the next year," Schmidt told a panel at the World Economic Forum.

Google aims to be a prime mover by launching an open U.S. wireless network.

51% of U.S. Travel Booked Online in 2007

According to the PhoCusWright Consumer Travel Trends Survey the year 2007 was the first in which more travel was purchased online than off-line in the U.S.

The report goes on to predict that "the gap between online and off-line will continue to widen as more and more travelers shift behavior to online shopping and buying." The study said that 51% of U.S. travel was booked online in 2007, and it projected that percentage to increase to 56% in 2008 and 60% in 2009.

Interestingly, the survey also suggests that the more complex travel products, such as package holidays, are being purchased less frequently online, while simple products like plane tickets and car hire are being purchased more frequently.

Omni Hotels Launch Brand-wide Mobile Web Site

Omni Hotels announced today the launch of a new, brand-wide mobile Web site. Guests can now conveniently access hotel information from any Web-enabled mobile device. The mobile Web site can be used to book a reservation, get hotel information or look at special offers. In addition, Omni Hotels is the first hotel brand to feature online check-in as a mobile Web site function. This unique feature enables travelers to check-in before they even arrive at their destination, ensuring that guestroom keys are ready and waiting upon arrival.

“Our goal was to give travelers the means to check-in to the hotel while on-the-go, obtain maps and get directions to the hotel,” said Kerry Kennedy, director of e-commerce for Omni Hotels. “Today, these are becoming necessities for the busy business traveler.”

Omni Hotels’ mobile Web site is powered by Usablenet Mobile. The technology employed for the mobile Web site automatically detects what type of mobile device is being used. When a guest visits omnihotels.com, a mobile-friendly version of the site optimized for the wireless device, provides a rich user experience with speed, ease and all major functions of the full Web site for the mobile user.

"Users visit 22 sites before making a travel booking" says Google UK MD.

Speaking at the recent Internet Advertising Bureau's annual Engage conference in London Google's UK MD, Matt Brittin suggested that 25% of all searches end in a purchase.

However, this does not appear to be the case in the travel sector as Brittin goes on to say that an average user looking for a travel product would make 12 searches, visit 22 sites and take 29 days before they ultimately made their booking.

"67% of online searches are driven by an offline "impression"

According to David Feldman from Iprospect, speaking at SMX Travel@PhoCusWright, 67% of online searches are driven by an offline "impression" such as word-of-mouth, TV, Radio, brochures etc.

In other words, online searches are heavily impacted by offline marketing activities. Most search marketers are aware of the power of offline promotion to drive traffic to websites, but 67% does seem to be a suprisingly high percentage.

Presumably this is a global average and includes the huge volume of searches that are stimulated by news and media coverage. For example, the most used search phrases at any one time are often related to news events or to celebrity names.

The percentage of traffic to most travel websites that has been generated by offline "impressions" is likely to be much less than 67%.

Is a Pay Per Click meltdown inevitable?

A report recently published by Forrester suggests that Pay Per Click bid costs have risen by an average of 33% in just 12 months. The "US Interactive Marketing Forecast, 2007 To 2012" surveyed click costs for the 1st quarter of 2007 and compared them to the 1st quarter of 2006.

This is no surprise to most online marketers who are facing an uphill battle to maintain the profitability of their PPC campaigns in the face of an explosion in the number of new advertisers over the last couple of years. Pay Per Click has become a widely used advertising tool and an established component of nearly every business's marketing plan.

So what does all this means for the typical PPC advertiser? For a start they will be getting 33% less visitors than last year for the same ad spend. More importantly, they will need to increase their conversion rates by 33% just to maintain the same campaign ROI.

The reason for this inflationary pressure is the continually increasing number of advertisers that have been drawn to the PPC model and, as a result, more and more advertisers are vying for the same limited search space.

This has been exacerbated by the fact that many companies have based their whole online business model on PPC advertising (especially Google Adwords), and they are being driven to bid higher and higher in a desperate attempt to maintain their prominent position for the most lucrative search phrases.

At the same time, many of the larger businesses that have traditionally dismissed search marketing as unnecessary have gradually come to the realisation that it is, in fact, a powerful sales and branding tool. These large businesses take a different economic approach to PPC advertising and are not necessarily playing to the same ROI rules as the smaller player.

So, not only does the online travel marketer have to deal with increased competition, they also have to deal with more and more campaigns that are being run unprofitably.

Many savvy businesses have managed to offset this inflationary pressure by ignoring the more expensive generic phrases and buying more 'long tail phrases' instead. These are longer and more specific phrases that generate lower search volumes, but they often produce higher conversion rates and are generally cheaper to buy than the more popular phrases. Many businesses are also implementing more sophisticated ROI measurement systems so that they manage their campaigns more profitably. Others have scaled back their PPC spend and started looking at alternative channels.

The big question going forward is how will continued click cost inflation impact on the future of search engine PPC as an effective advertising model? There is no doubt that Pay Per Click advertising has outperformed many other channels in recent years and there is enough margin left for ROI figures to decline further, and yet still be good enough for it to remain a profitable advertising tool.

Of course, there will be a 'tipping point' at which continued click cost inflation will render PPC as unviable for all but the most niche markets. Some commentators are already forecasting the imminent demise of PPC advertising due to untenable click costs and the increasing development of new advertising opportunities offered by the many social media websites. The highly popular Facebook has recently announced the launch of their own innovative new marketing platform called Facebook Ads (see below), and this will undoubtedly take advertising dollars from the traditional PPC platforms such as Google Adwords.

Despite the doom and gloom I still don't believe that the demise of PPC as an effective advertising medium is a foregone conclusion. It will certainly continue to get more challenging to make a PPC campaign profitable, and there will almost certainly be some kind of shake out eventually, but I believe that the outcome of all this could still be positive for many advertisers.

To explain the reason for my optimism we need to look at the key causal factors behind the current situation. There are many contributing factors to the continual increase in the number of businesses using PPC advertising. To a certain extent it has been a victim of its own success as many businesses have been drawn to the excellent returns that are possible.

Also, the increased popularity of affiliate marketing has spawned thousands of new advertisers all effectively selling the same product. This is particularly true of the hotel sector. But perhaps the biggest contributing factor of all is the simplicity of the management interface created by Google and, to a lesser extent, Yahoo and MSN.

It's relatively simple for anyone to set up and run a Pay Per Click campaign with very little knowledge or expertise, and this has encouraged many small businesses to enter the market without having to pay for outside assistance. For the same reasons, many larger businesses manage their own campaigns in house by delegating the responsibility to a person in the marketing department who may have no prior experience of PPC management.

However, the simple and intuitive management interface is deceptive and hides a sophisticated and complex marketing tool that requires a relatively high level of knowledge and expertise in order to get the most out of it. I am often shocked by the limited PPC service product knowledge of many business owners and marketing people that I come across, despite the fact that they control significant PPC spends.

This ease of entry to PPC advertising has not only fueled the increase in advertisers but I believe that it has also contributed to an increase in the number of campaigns that are poorly managed and, in many cases, unprofitable. As click costs continue to rise and returns decline many of these advertisers will simply fall by the wayside or drop out in order to look for more profitable marketing channels. Others will hand the management of their campaigns to experienced online marketers who will refocus their campaigns and make them more economically viable. Other advertisers will move part of their PPC budgets to new emerging online opportunities from social media sites such as Facebook.

Forecasting a PPC 'meltdown' might be a little too dramatic and 'rationalisation' is probably a better description. Either way, the end result of this process will be fewer advertisers and a higher percentage of profitably managed campaigns.

Creating and managing an effective search engine PPC campaign will still be challenging, but the smaller advertiser will have a better chance of realising a viable return.

Facebook unveil Facebook Ads

Popular social media website Facebook have announced the launch of Facebook Ads, an ad system for businesses to connect with users and target advertising to the exact audiences they want. Facebook Ads will enable users to learn about new businesses, brands and products through the trusted referrals of their friends.

“Facebook Ads represent a completely new way of advertising online,” said Facebook founder and CEO Mark Zuckerberg . “For the last hundred years media has been pushed out to people, but now marketers are going to be a part of the conversation. And they’re going to do this by using the social graph in the same way our users do.”

Advertising messages will gain distribution through what Facebook has termed the “social graph,” the network of real connections through which people communicate and share information. When people engage with a business’ Facebook Page, that action will spread information about that business through the social graph.

Users can become a fan of a business and can share information about that business with their friends and act as a trusted referral. Facebook users can interact directly with the business through its Facebook Page by adding reviews, writing on that business’ Wall, uploading photos and in any other ways that a business may want to enable. These actions could appear in users’ Mini-Feed and News Feed, Facebook’s popular products that allow users to share information more efficiently with their friends.

The advertising system works by allowing businesses to build their own pages on facebook. Starting with a blank canvas, the business can then add all the information and content they want, including photos, videos, music and Facebook Platform applications. Outside developers have created a range of applications to enhance Facebook Pages, such as booking reservations or providing reviews of restaurant pages, buying tickets on a movie page or creating a custom t-shirt. Companies launching applications for Pages include Fandango, iLike, Musictoday LLC, OpenTable, SeamlessWeb, Zagat Survey LLC and Zazzle.

Facebook's Zuckerberg goes on to say, “It’s no longer just about messages that are broadcasted out by companies, but increasingly about information that is shared between friends. So we set out to use these social actions to build a new kind of ad system.”

Facebook is a hugely popular and successful social utility with more than 52 million active users. There is no doubt that by opening up their membership through this new advertising platform, Facebook have changed the way that many businesses will view customer interaction in the future. The challenge for travel businesses is to learn how to harness and maximise this powerful new advertising medium.

Kayak announce new paid search platform

Kayak.com have announced the launch of the Kayak Network, a new paid search solution for the European travel sector. A number of high profile brands such as British Airways, KLM, lastminute.com and ebookers.com have already signed up to the service.

The new advertising platform is similar in many ways to existing Pay Per Click services, but the Kayak Network enables advertisers to target their marketing based on specific search criteria including destination city, origination city, trip dates, length of stay, specific airline/hotel/car brands and car type. Another innovative feature of the service is that the user's search information including destination, departure date and length of stay, for example, are relayed to the advertiser enabling them to offer tailored information rather than a static landing page. Kayak believe that this innovative approach will result in stronger click through rates and higher ROI.

Annie Wilson, Kayak Business Development Director for Europe, offered "The conversion rate is higher than other sites because Kayak Network provides advertisers with contextual search parameters and sends the user's search details such as dates of travel, destination and preferences to the advertiser. They can then use the information to create more relevant search results, thus increasing the likelihood of consumer purchase." More information is available from the Kayak Network.

The web is still the top holiday planning tool

A third of US Internet users now research and book travel online, according to the Conference Board and TNS' "Consumer Internet Barometer" study.

Two in 10 consumers used the Internet more this year than last to research travel arrangements, and 18% increased their online bookings.

However, the same survey concludes that the number of consumers using the internet to research travel outnumbers those that book online by nearly 2 to 1.