For more than four years, Phoenix-based Watt Masters, formerly Buehler Brothers Electric, a third-generation, family-owned electrical service business specializing in residential electrical installs, repairs, and troubleshooting services, has maintained a Web site. In keeping with the family focus of the business, the company owner's nephew created the site, complete with keyword optimization that positions a link to the business' Web site at the top of the natural positioning list on several Internet search engines. However, in the firm's continued search for marketing ideas, it was decided that investing in paid placement, or sponsored links, also would be a positive move. According to Tom Buehler, company president and owner, there was an immediate increase in the volume of calls after becoming a sponsored link. Currently, Buehler estimates that 20% to 30% of calls to the firm result from these paid search engine ads. “We definitely noticed the difference in the volume of calls since we became a sponsored link,” Buehler says.

The Watt Masters' online marketing strategy reflects a change in the advertising habits of businesses that cater to their local markets. In its fifth annual survey, “What Local Media Web Sites Earn,” Williamsburg, Va.-based Borrell Associates, a research and consulting firm that tracks local advertising and helps online companies develop executive strategies, reported that U.S. local online advertising grew to $7.5 billion, up 31.6% from $5.7 billion in 2006. According to Borrell's findings, newspapers account for the dominant share of all locally spent online advertising at 35.9%, but Internet companies, such as Google and Yahoo!, are fast approaching, with 33.2% of the share. Yellow pages operators control only 11.7%.

This data falls in line with several recent consumer surveys. In 2006, Irvine, Calif.-based local search engine marketing (SEM) firm WebVisible and New York-based Nielsen Research surveyed U.S. consumers about their local search behavior. Out of approximately 2,000 U.S. consumers randomly selected from the Nielsen/NetRatings MegaPanel, 74% rated search engines as the No. 1 resource for finding local business information, whereas only 65% rated print Yellow Pages — the former workhorse of local advertising — as the go-to directory. This was followed by 50% of respondents reporting searching on Internet Yellow Pages, and 44% of respondents looking to traditional newspapers. (Percentages are greater than 100 because respondents were permitted to select more than one answer.)

Although usage for the print version of The Yellow Pages remained unchanged from 2006 to 2007 with 13.4 billion references, as reported by The Yellow Pages Association's (YPA) “Industry Usage Report,” conducted by Knowledge Networks, Cranford, N.J., the long-term outlook for print directories as cited in Princeton, N.J.-based The Kelsey Group's “The Kelsey Report (TKR): Global Print & Internet Yellow Pages” has softened considerably since last year's forecast. TKR is predicting print revenues to decline globally at a compound annual growth rate of 1.4% from 2007 to 2012, declining from $33 billion in 2007 to $25.6 billion in 2012.

Currently, adults who use The Yellow Pages average 1.29 lookups a week, down from 1.4 lookups in 2003 and more than 2.0 lookups in the 1990s. The decline in lookups was especially severe in major cities such as New York and Los Angeles, where residents average 0.6 lookups per week. This decrease in The Yellow Pages usage is widely attributed to young adult populations that haven't formed a habit of using The Yellow Pages.

Called “Millennials” or the Digital Generation (born between 1980 and 2000), they're one reason that, despite the billions still spent on print advertising, industry analysts are stressing the importance of Internet marketing to penetrate local markets.

“The Yellow Pages doesn't compare to online anymore,” Buehler says. “I know a lot of people just throw them out. Why keep them around if you can just go on your computer real quick and look up everything you need?”

Dollar for dollar

In the past, small- and medium-sized businesses (SMB) have protected their print Yellow Pages investment at the expense of other media, according to The Kelsey Group, the provider of strategic research and analysis, data, and competitive metrics on The Yellow Pages, electronic directories, local search, SMB advertising, and local media. Given the structural changes in the local ad market, the organization believes the next downturn will favor media choices that are more flexible and provide a lower cost per lead than print directories, which would signal a profound shift. “The problem with the regular Yellow Pages is that it's very expensive,” Buehler says. “Dollar for dollar, the online advertising is worth more for the money.”

In a comparison between Seattle-based Erwin Electric's Yellow Pages bill and what it spends on online marketing, its Internet campaign comes out way ahead. For The Yellow Pages, it spends approximately $34,000 a month to generate around 250 calls per month, whereas for the $7,000 it pays for online marketing, it receives approximately 100 to 150 calls a month.

“We're stepping away from print advertising,” says John Thrower, managing member, Erwin Electric. “It's an unmanageable product.” Erwin Electric outsources its online marketing to Woodland Hills, Calif.-based ReachLocal, a firm that helps small- and medium-sized businesses attract local customers via search engine advertising and online Yellow Pages marketing. “With online marketing, I can change my spending level,” Thrower continues. “Some months I might only spend $5,000 even though I've authorized ReachLocal for $10,000. With The Yellow Pages, you're going to pay whatever you agreed upon — regardless of whether it's working or not.”

Name and rank

These days, when most people talk about online advertising, they're referring to SEM. There are three main types of SEM: search engine optimization (SEO), paid placement, and paid inclusion (see What Is Search Engine Marketing? on page C18). According to its recent report, “State of Search Engine Marketing,” Wakefield, Mass.-based. Search Engine Marketing Professional Organization (SEMPO), a global non-profit organization serving the search engine marketing industry, SEO, also called “natural” or “organic” optimization, is still the most popular form of SEM, with almost three-quarters of advertisers using this method.

The second most popular method advertisers use — at 71% — is paid placement, where advertisers bid on keywords they predict their target market will use as search terms when looking for a product or service. When a user types a keyword query matching the advertiser's keyword list, or views a page with relevant content, the advertiser's ad is shown. Advertisers only pay when a user actually clicks on an ad to visit the advertiser's Web site. These ads are called “sponsored links” or “sponsored ads” and appear next to or above the “natural” search results on search engine results pages (see Know Your Options on page C20).

Also considered paid placement, pay-per-click ads may appear on content network Web sites. In this case, ad networks such as Google AdSense and Yahoo! Publisher Network attempt to provide ads that are relevant to the content of the page where they appear, and no search function is involved. According to SEMPO, paid placement is expected to grow in North America to $18.6 billion by 2011.

The third type of SEM, paid inclusion, is less popular than the first two. With paid inclusion, the search engine company charges fees related to inclusion of Web sites in their search index. Paid inclusion products are provided by most search engine companies, the most notable exception being Google. Some detractors of paid inclusion allege that it causes searches to return results based more on the economic standing of the interests of a Web site than on the relevancy of that site to end-users.

On top

Generally, the higher a site appears, or ranks, on the search engine page, the more visits or hits the site will receive. For vendors, sometimes the difference between a top spot listing and second place can mean thousands of dollars. “If you're showing up on the fifth page of Google, you're too deep,” says Nathan Hanks, chief distribution officer, ReachLocal. “No one's going to get to the fifth page in the organic results. You need to get higher.”

To do so, firms can add more relevant text to their Web pages, making concessions to how search engine algorithms work. However, a guaranteed spot at the top comes automatically with paid placement. “Our front page of the Web site had some of the keywords embedded into it, but we hadn't done anything before now to get our name at the top of the list,” says Chris Teets, manager, Alexandria, Va.-based Galaxy Electric, a residential and commercial electrical contracting firm. Galaxy Electric has also outsourced its online marketing to ReachLocal.

Fortunately, some firms have access to the expertise within their own ranks, such as with Buehler's nephew at Watt Masters. “He did all the keywords so that the Watt Masters Web site is on top a lot of the time,” Buehler says. “I've had people call and tell me it would cost $5,000 to $10,000 to do what he did — and he was only 20 years old when he did it.”

For Watt Masters, both the natural search results and paid placement has been a fruitful learning experience, as well as a way to increase leads. “We learned what to do through our own research and by going online and learning how to use it,” Buehler says. “We could be up there 100% of the time if we want.”

Companies, such as Savvy Sites, San Diego, and New Target, Alexandria, Va., can help companies design sites for maximum exposure on search engines. Such optimization services focus on tweaking and adjusting a site's content so it has the best possible chance of landing near the top of keyword searches. There are also many online resources and blogs that can help firms with their online marketing campaigns.

Some firms, however, may want to consider hiring professional services to handle SEM strategies. This can actually save time and money, and depending on the provider, may provide extra perks. “What happens if their campaign isn't running right?” asks Hanks. “Then they have to go back in and figure out if it's the keywords or the budget. That's time consuming for somebody who's been out in the field for 12 to 14 hours.”

Track and field

Although research on public awareness shows that typical Web searchers generally do not recognize the distinction between organic and paid search listings and that more than half of Web users say they're more attracted to left-side, or “organic” search results, most marketing analysts say this isn't enough. “Actually, it never was,” says Hanks. “But people just caught on to that. Unless they have the ability to remember to ask people where they found them, electrical contractors don't have any concrete way of determining what marketing methods their clients are using and what's giving them the best results.”

One way to avoid the confusion of lead origination is to hire a service to take care of your paid listings. These service providers can also save you the time it takes to create and track your listings. Thrower says he doesn't have the time or the desire to manage that type of project, and even if he did he wouldn't be able to do it as effectively as the company he's hired.

“Electricians can never pinpoint their return on investment with their marketing,” says Hanks.

Using proxy servers, the company provides unique phone numbers for all search engine results. Those numbers act as a tracking number, and also allow for the recording of those phone calls for monitoring and quality control. The company's program also provides a list of calls generated by the marketing campaign so the electrician can measure the results from its paid listings campaign.

“I can see the number of calls we get, I can see what those calls are, where they're coming from, how many were answered, and how long the calls were,” Thrower says. “I can listen to each call within a short period of time after the call has taken place. It allows us to track every call and know how many calls exactly we are getting from the advertising. It's been pretty exciting.”

In addition, the company acts as a liaison between electrician and search engine. ReachLocal bids on keywords and then matches those words to each client. “Most clients would rather do 10 jobs a month at $50,000 than do 200 that don't generate as much revenue,” Hanks says. “We can turn off certain key words and put more emphasis on commercial or industrial installs. The call volume could go down, but the quality of leads could be better with higher-paying jobs. We can control how that lead gets to a particular person.”

According to Galaxy Electric, the service provides all the keywords a company needs. “All of the keywords I would have picked were already in that list,” says Teets. “In fact, the program even purposely misspells words to cover all the bases of how a user would search for services.”

ReachLocal provides its clients with online reports so they can see what searches are being used to find their services. “I can see what's my No. 1 keyword search through No. 10,” Teets says. “We can see how they're finding us.”

Teets notes that most of his customers find his company through a name search. “They'll go to Google or Yahoo! and they'll type in our name,” he says. “They'll find us pretty much immediately, where before even doing a name search we were on the second page.”

Galaxy Electric performs a survey with each phone call it receives. The company has found that the number of leads from its paid search engine marketing campaign has now surpassed those from The Yellow Pages. Although Galaxy would like to shed The Yellow Pages altogether, it still advertises there. “The phone book in Washington, D.C., is used to prop up one end of your couch, but it's still a necessary evil,” Teets says. “We're staying there as part of our branding, along with the signs on our trucks. We're out in the neighborhoods and need to be in the book for those people who still want to look us up by name in print.”

Erwin Electric is also sticking with The Yellow Pages — for now. “My experience with The Yellow Pages advertising is it's a humongous risk, and you can definitely get burned,” Thrower says.

At the end of the day, electrical contractors who have just a simple Web site don't care about people clicking on their Web site, adds Hanks. “They care about the phone ringing,” he says. “By the time their phone rings, they have a stronger lead and somebody who's closer to really needing the service.”



Sidebar: What Is Search Engine Marketing?

Search engine marketing (SEM) is the up-and-coming way vendors are trying to get their message in front of potential customers by seeking to promote Web sites through increased visibility in search engine result pages (SERPs), such as Google or Yahoo! There are three different types of SEM: search engine optimization (SEO), paid placement, and paid inclusion. However, some sources, such as The New York Times, classify SEM strictly as paid placement.

All search engines have some editorial-style listings that are not bought and sold. These are often referred to as the “organic,” “natural,” or “algorithmic” search results. Placement is determined by individual Web sites' SEO, which is the process of increasing traffic to a Web site using targeted keywords. SEO can also target image searches, local searches, and industry-specific searches. In order to control the placement, advertisers' SEO efforts must include considerations for how search engine algorithms work and what people search for in the site's coding, presentation, and structure. Advertisers may also add unique content that is easily indexed by search engine robots.

Since 2001, most major search engines carry paid placement listings, also called “sponsored listings,” “paid search ads,” and “pay for placement.” Paid listings generate revenue for search engines, which, in turn, helps them provide unpaid editorial listings to searchers for free. Paid listings are usually segregated from editorial results and labeled as ads. The exact position of the paid placement listings can vary. Usually, they appear above or to the right of the editorial links. Today, paid search ads are more readily identifiable in search engine results.

With paid listings, advertisers are guaranteed a high ranking, or guaranteed placement. Paid listings allow site owners to bid on the terms they wish to appear for. Advertisers agree to pay a certain amount each time someone clicks on their listing. These listings are also referred to as “pay-per-click” (PPC) or “cost-per-click” (CPC) advertising. The higher an advertiser bids, the higher the advertisement will be displayed in the list. The advertiser pays only when a searcher clicks on its listing and connects to its site. However, advertisers should be wary of PPC search engines that offer clickers money or incentives to click through their results.

Paid inclusion — when the search engine company charges fees related to inclusion of Web sites in their search index — is definitely on its way out. Paid inclusion products are provided by most search engine companies, the most notable exception being Google. Some detractors of paid inclusion allege that it causes searches to return results based more on the economic standing of the interests of a Web site than on the relevancy of that site to end-users.



Sidebar: Know Your Options

Google's AdWords is the most popular search advertising program, used by 96% of respondents to a survey taken by Wakefield, Mass-based Search Engine Marketing Professional Organization (SEMPO). Yahoo! Search Marketing was a close second, with 86%. Microsoft's adCenter program is growing rapidly as 68% of respondents reported they are now using the program, up from just 29% in the previous year.

Google AdWords

Google sells sponsored listings that appear above and to the right-hand side of its regular search results. Google AdWords ranks sponsored listings based on a number of variables, including the CPC (bid price), click-through-rate (CTR), and landing page quality. If your goal is to build visibility on search engines quickly, then Google AdWords is an essential option to explore. It can put you in the top results of many major search engines within a short period of time. Google distributes its paid ads to other partners. This provides you with exposure to more potential traffic. When setting up an AdWords campaign, you may choose to have your ads appear in the Search Network and/or Google's Content Network (AdSense), or you may opt-out of either.

According to SEMPO, it is worthwhile for anyone interested in paid listings to open a Google AdWords account and experiment with the program. Google's self-service AdWords program charges a per-click fee, in addition to an activation fee, but there is no minimum monthly spend.

Yahoo! Search Marketing

Yahoo! Search Marketing (YSM), formerly Overture, also allows advertisers to bid on specific terms. Up until the recent “Panama” improvement, YSM ranked sponsored listings based on cost-per-click. For instance, if you wanted to appear in the top listings for “residential service,” you might agree to pay $0.25 per click. If no one agrees to pay more than this, then you would be in the No. 1 spot. If someone else later decides to pay $0.26, then you slip into the No. 2 position. You could then bid $0.27 and move back on top. Yahoo! Panama brings YSM's ranking algorithm for paid ads more in line with Google by considering additional variables, such as click-through-rate and landing page quality.

If your goal is to build instant visibility on search engines, Yahoo! Search Marketing is an excellent option to explore, putting you in the top results of many major search engines within a short period of time. A YSM account requires a minimum deposit, and advertisers set their own daily budget.

Microsoft adCenter

Launched in May 2006, Microsoft adCenter allows advertisers to bid on the keywords they wish to have their ads show up for. The system uses what is called the “black box” bid and ranking method; similar to the way Google and now Yahoo! determine cost per click (CPC). The CPC is a combination of how much you are willing to bid (max bid) and your click-through-rate in comparison to the others bidding for that particular keyword. Upon launch, adCenter distinguishes itself from competitors by being the first to offer geographic, demographic, and daypart targeting. It requires a service fee for account setup. After that, you pay the cost of the clicks. Bidding starts at $0.10 minimum, although sometimes the program allows $0.05 bids.

Targeted bidding allows advertisers to specify: (1) users in a specific geographic location; (2) users searching on specific days of the week or during specific hours of the day or night; and (3) users of a specific gender or age.

Source: Search Engine Marketing Professional Organization (SEMPO)