Search, it is almost universally agreed, can determine whether an online travel company triumphs or fails – with the ubiquitous Google dominating every conversation the industry has about the issue. Steve Jones investigates.
Google has the power to put you out of business. Make no mistake, if it de-lists you, it can wipe you out. It is just so incredibly powerful.”
So warns TUI head of new media Graham Donoghue as he chats about his company’s e-commerce strategy.
Scare-mongering? Exaggeration? A little melodramatic? Don’t you believe it.
With a 60% share of the UK search market, Google’s importance to the travel industry – and every other industry come to that – cannot be over-estimated.
Donoghue’s point is not to suggest it is the schoolyard bully of the online world and seeks to make life deliberately difficult – though it unquestionably could – but to underline the power that it wields, such is its market dominance.
That said, it is flexing its muscles in other, financial ways, says Donoghue, notably by cutting the 15% commission it previously gave to marketing agencies, some of which found its way back to advertisers.
“It’s a like it or lump it approach,” he explains. “But what’s the option? Don’t work with 60% of the market?
Google, an idea hatched in a garage and now worth around $131 billion, (although there was a fair amount of undisguised joy recently when the company ‘only’ posted an 82% increase in quarterly profits) leads the way in a search engine arena to which the online travel industry is now inextricably linked.
The powerful combination of natural, or organic listings, coupled with the paid for ‘sponsored’ listings, drives untold numbers of potential customers to websites that brands on their own couldn’t hope to attract.
Thomas Cook head of online operations Andrew Doe, echoing the sentiments of many travel firms, says: “It is a vital part of the online marketing we do. Google is the starting point on the web for many people. Any company trying to do business online has got to take engines very seriously.”
Hotels.com UK head of marketing, Matt Walls, believes search engines are “a reality of life”.
“They are becoming the first port of call and it has put them in a powerful position. They have seen an opportunity and created the resources that make them invaluable to consumers,” he says.
Such is the distribution reach of the Internet, it has been suggested search engines have almost become virtual global distribution systems. Not so, says Google UK head of travel Dan Rob.
“We don’t own any content and a GDS could argue that it does own a degree of content, or certainly control the content,” he argues. “That said, the distribution coming through search is getting ever larger, stronger and more important to the travel industry.”
The majority of travel firms have a two-pronged marketing relationship with search engines: maximising search engine optimisation, getting high in the natural results, and adopting a pay-per-click campaign.
The art of SEO is constantly referred to as a ‘black art’ by those in the industry, a slightly generous way of saying they haven’t got a clue how it works.
When a user enters a search term, spiders or crawlers analyse the billions of web pages and return what it believes are the most relevant websites. The headache for websites is that because the mathematical recipes, or algorithms, change on a regular basis, they must attempt to second guess exactly what the spiders are looking for in order to achieve a high ranking.
Global Travel Group director of travel development, Jason Edwards, says alterations in the autumn – made without warning – saw it dramatically slide down the results from third or fourth in the rankings. “It threw everyone into a panic,” he admits.
It is this uncertainty and unpredictable nature of the system that has led many online players to adopt PPC, over which they have a far greater degree of control.
Google’s Rob disputes the notion that search engines make it difficult for the industry by constantly altering the algorithms.
“I don’t see it as a black art at all,” he says. “I think it’s an investment in structuring websites so they are easily crawled by our search technology and so we can define what is relevant to the user. People do get upset when their pages are suddenly dropped. But changes to the algorithms are not done to stop websites from getting traffic. It’s simply to make sure we bring back more relevant information for consumers.”
In addition to producing more relevant listings, algorithms also change to prevent abuse of the system by sharp webmasters. Should the algorithms remain unchanged, companies that are economical with the truth about their websites’ content could forever buck the system.
MSN UK search business manager David Graham says: “We all change the algorithms to improve the relevancy but also to keep ahead of the spammers. Webmasters have to keep up with it.”
One way of being ‘favoured’ by spiders is to have many relevant links, both to and from your website. But it’s a risky game, with search engines prepared to get tough with any transgressor.
Ask Jeeves vice-president for European product management, Tony Macklin, says: “People try to manipulate search engines by creating dummy sites that link to other dummy sites and create a ‘link farm.’ Part of my team is dedicated to identifying and removing these sites.”
Google warns companies they could be blacklisted should any manipulation be detected.
While the natural listings are critical for search engines in engendering trust among consumers, it’s the paid-for listings where their money is made.
The growing importance of the Internet, and search engines, as a key advertising channel is best demonstrated in a study carried out by the Internet Advertising Bureau and PricewaterhouseCoopers.
Figures reveal that during the first half of 2005 the online advertising market hit almost £491 million, a 62% increase on the corresponding period in 2004, which had already outstripped 2003 by 60%. In the process, it overtook radio advertising for the first time, “a landmark” according to the IAB.
The market was expected to hit £1 billion by the end of 2005.
Of the £491 million – £57.7 million generated from travel – more than 40% was attributed to PPC.
Overture UK sales director Richard Firminger claims the PPC revenues are continuing to soar – and will keep on doing so. “We have seen a proliferation in the number of advertisers and a consistent increase in the budgets of almost every single organisation that advertises with us,” he explains.
“The PPC model has only just begun. It’s in its infancy. We are getting between 2% and 3% of the overall advertising market but it’s not anywhere near done yet. I can see a day when search takes 10% of marketing spend, possibly more. We are at point where we could treble in size.”
Kuoni senior e-business manager Matt Rooke declined to reveal the operator’s PPC budget but confirms Firminger’s forecasts.
“If I compare what we are spending this year with what we spent last year, there is no other activity which has had such an increase in spend,” he says.
Overture category services director Nick Jones believes it is imperative that paid listings are relevant for the user. To simply take money from the highest bidder and ignore the relevancy would undermine the whole model.
“We control relevancy very strictly and have a team of 40 editors who check every bid for a search term,” Jones explains. “You can only appear against a search term if you retail that product or provide information about it.”
The process must be viewed as a cycle, he adds, which benefits the search engines, consumers and advertiser.
“We only make money when a user clicks on a listing and the user will only click if it’s relevant. So there is no value letting an advertiser bid on whatever they wanted just to drive traffic. The advertiser would get no value either.
“Advertisers are realising it can be expensive so they are making the terms they bid on relevant and honest.”
With such a fluid model, budgets can also quickly evaporate, particularly when you list against the expensive generic search words which drive volume. It can be risky for smaller companies who perhaps don’t have the resources to efficiently manage their campaign.
One independent agent, new to the PPC arena, invested £2,000 in a campaign, failed to track the click rates and his money vanished in a week.
Global Travel’s Edwards is unsurprised: “Unless you dedicate resources to SEO it’s hard to get up the rankings so agents turn to PPC in order to get visits to their website. But you also need resources to track the PPC.”
But many travel firms are now recognising that it does them no good to simply drive traffic to their site, particularly on these generic key words which convert poorly. This explains a general trend for travel firms to list against more specific phrases.
Thomas Cook’s Doe adds: “It’s less volume but it’s better conversions at lower cost.”
So what is next in the realms of search? The search market has evolved as quickly as the rest of the online world, perhaps even faster.
Lewis Lenssen, managing director of digital search marketing company Accord, believes previously even poorly executed campaigns generated reasonable returns for travel companies.
But he adds: “Now search advertising is mainstream it is essential to professionally manage campaigns and to understand the media in order to ensure a positive return on investment.
“Search has become an essential part of the travel consumer’s research and purchase process.”
Meanwhile, speculation has been rife for a while over the prospect of search engines returning not just website listings but results with prices and availability.
Google has taken a step in that direction in the US, a move described in a recent report by research company PhoCusWright as a “shot across the bow of the online travel industry”.
Results returned on a search for flights between two US cities include two boxes for departure and return dates with users able to deep link into Expedia, Priceline, Orbitz or Hotwire after entering their required dates.
The boxes appear below the sponsored listings and above the natural results and works on the PPC model, giving Google another, potentially lucrative revenue stream.
Google’s Rob plays down the development and declined to comment on any future plans.
Overture’s Jones, meanwhile, says the move is “away from the core of what we do” although live prices do feature in paid-for listings. “We’ve had some real success, particularly in the travel industry where pricing can be key,” he explains.
Lastminute.com head of site management and search marketing Duncan Horton says of Google’s US development: “I believe at some point it will come to the UK. It’s good relevant search functionality but it’s another revenue stream.
“What’s interesting is that you only get three natural listings on the page. Around two thirds are adverts. It increases the pressure to optimise your site to feature in those top three.”
Great Hotels Organisation chief executive Peter Gould, a long-time advocate of SEO over paid-for ads, warns producing a natural search with live pricing and availability will “put a bomb under everything.”
“This is the holy grail,” he believes. “The day when you can search for hotels in Barcelona, for example, and it brings back not just a list of possible websites but accurate product with prices and availability, will revolutionise search. It will cut out the many laborious stages of the process.”
Meanwhile, with broadband take-up steadily increasing, video search is among the mediums tipped to take off in the travel arena, with both Google and Yahoo! launching video products.
Whether video search would work on a PPC – or pay per view – model is open to debate but there seems little doubt that it will come.
Kuoni’s Rooke says: “It’s taking search another step forward. More travel companies need to get videos available online and this may encourage them to get footage sooner than they thought.”
Overture predicts personalised search will become a huge growth area, something all the major engines are either planning, or are already exploiting.
The basic premise is that users receive natural and paid-for listings based on their search history bringing greater relevance to the search.
“Gearing a search to personal preference will be powerful,” says Jones. “We see personalisation as being a key driver in the future.”
TUI’s Donoghue predicts a so-called super-search is on the horizon.
“With the growth of broadband people will want to browse and search video content in the same way they browse and search text,” he believes. “I can see a time when a search will bring back text, video, image and sponsored listings. Google has all this now, it’s just segregated. It makes perfect sense to have a super-search where it indexes and pulls together all the relevant content from a variety of media.”
He adds: “I wonder if there is such a word as ‘Googlisation’.”
There wasn’t. But there is now.
The ‘others’ fight back
The major search engines – Google, Yahoo!/Overture, MSN and Ask Jeeves – control around 94% of the search market.
While each has its own natural search listings, only Google and Overture have PPC technology. Jeeves’ is powered by Google while MSN has a deal with Overture.
However, that deal is set to end in early summer, paving the way for MSN to launch its own technology. The advent of a third major player could signal a major shift in the paid-for search landscape.
Trials are currently taking place in France, Singapore and the US and though MSN UK search business manager David Graham refuses to be drawn on the timeframe of a roll out to the UK, industry observers expect it to surface in the third quarter of 2006.
Ben Gibson, group account director at marketing agency The Search Works, which has been involved in the France trials with its client Hertz, says: “There is more opportunity to be targeted in your advertising than other search engines with audiences based on age, sex and location.”
Other developments over the coming months include a revamp of Ask Jeeves, which will seek to become a more direct competitor to Google and Yahoo! and establish more loyalty.
Also on the horizon is the gradual introduction of pay per call. Until now, only Miva and Callgen have adopted the model, but Google has become the latest, and biggest, company in the market to trial the initiative.
The search engine is conducting what UK head of travel Dan Rob describes as a “limited” test with Lastminute.com among the trial partners.
“A lot of business is conducted over the phone in travel. But I wouldn’t say that is an endorsement of the test or that we will definitely be taking it further forward,” he says.
Industry observers have said the rise of pay per call is designed lure SME’s to the web.
“It opens up opportunities for more specialist providers and the SME market,” says Gibson. “Of around 3.6 million SMEs in the UK, 2.7 million don’t have a website. Pay per call will enable them to market on the web.”