The Power of 6%: The Growing Importance of Paid Search

By David DeSimone, Associate Director, Client Solutions, at Varick

Recent claims by Google’s chief economist that search is “really a tough business” elicited plenty of industry eyerolls, including my own. After all, it’s hard to find much pity for a company that brings in $136 billion in revenue a year and clearly owns the paid search segment of the digital marketing industry.

Google’s desire to appear hard-pressed in the search world is understandable, given the growing anti-trust scrutiny coming its way right now. But from an advertiser standpoint, it’s worth taking time to better understand the reality behind today’s paid search landscape, as it has implications for how brands and agencies think about and spend within this important category. Here are three things to keep in mind:

 

6% isn’t piddly—it’s extremely powerful. 

Google’s economist justified his “tough business” sentiment with the notion that Google “can only sell 6 percent” of its search real estate. That seems to make his point at a high level, but if you dig a little deeper, it doesn’t hold much water. While Google might have us believe it’s just “giving away” 94 percent of its search real estate, that mere 6 percent it retains is everything when it comes to search. This is particularly true on mobile screens, where paid search garners more than half of all clicks. Overall, organic reach in search is at the lowest it’s ever been.

 

Google makes the rules. 

Also, keep in mind that if Google truly had financial troubles in the search realm, it could simply rewrite the rules. If 6 percent real estate monetization isn’t enough, there’s nothing keeping the company from increasing that to 9 percent. Rather, in 2016, the company killed off its right-hand rail inventory and hardly missed a beat. The company might make such moves as an apparent service to its users, but make no mistake: Google sets the expectations for user experience, and it does so with an eye toward the bottom line. In fact, after the search giant killed off its right-hand rail, other search engines eventually had to do the same, just to keep pace with the new user expectations that Google set.

 

The necessity of paid search is only growing. 

This all points to one overarching truth for advertisers: Paid search is becoming more important to brands’ overall digital marketing efforts. The rules of organic search—which Google also writes and can change at will—remain opaque. Organic SEO, while important, remains a long-term play that is a particularly hard nut to crack for smaller companies and brands. Although Google might have regulators believe otherwise, the world of search is becoming more and more of a pay-to-play proposition.

Competition for paid search placements continues to rise, as do CPCs. As the voice search and wearables markets mature, the search game will continue to evolve, and all signs point to it doing so in ways that favor Google’s paid search business.

Ultimately, search is not a tough business for Google. It’s a tough business for advertisers. It requires attention, expertise and—above all—continual investment. Are you planning and budgeting accordingly?