Online marketers unhappy with Microhoo saga outcome

SAN FRANCISCO--As you might expect, search engine marketers aren't crazy about how the Google-Yahoo-Microsoft power struggle has played out.

It's not that they disapprove of Yahoo remaining independent of Microsoft. It's just that Google's search market share, at nearly 70 percent in June, has only grown stronger during its rivals' kerfuffle. Online marketers here Wednesday at the RBC Capital conference said Google's dominance limits their options to deliver on search ad campaigns.

"We always have a need for multiple sources of quality traffic and we don't see that need going away as Google's share increases," Will Margiloff, CEO and founder of Innovation Interactive, an online marketing agency, said during a panel discussion. "Complexity is good, consolidation is bad."

Another online marketer on the panel put it like this: "In the last 10 years, I've seen a dramatic decrease of competition between Google, Yahoo and Microsoft, and that's increased the importance of success on Google. When our clients come to us to talk about search, what they really mean is, 'Let's talk about Google.'"

It's no big surprise, but the current economic malaise appears to have marketers scouting even harder for the next viable competitor to Google. Online advertising spending is holding its own against other media in the downturn, but it's softening in some markets like real-estate or travel ads. And more than ever, marketers are focused on their return on investment for ads. That means they want to load up on performance campaigns like paid search and email campaigns, which can result in action, and spend less on brand ads that are harder to measure, executives said.

The consolidation of power could be hurting also-ran Net giants, too. AOL reported a paltry 2 percent growth in quarterly ad sales on Wednesday, despite its investments to become a viable online ad venture. Google and Yahoo, in contrast, have shown double-digit ad growth in the second quarter.

To be sure, Internet marketing executives were hopeful about the performance of Google rivals, even while they downplayed their importance. Marketers said that Yahoo, Ask.com and others are performing well for search ad campaigns. One marketing executive pointed to the fact that people spend more time on Yahoo than on Google as a reason not to discount the Internet veteran, for example. Another highlighted Google's trouble gaining traction against Baidu in China.

"Google's certainly doing well, but it's good for all of us that others are doing well, too," said Russ Mann, CEO of Covario.

Internet marketing executives also talked about Yahoo's opportunity to combine data from display ads and search to present advertisers with full-service campaigns that are more measurable. Development of new auction systems and behavioral ads, through Yahoo's purchase of Blue Lithium and Right Media, could help the company improve the performance of display ads, one executive said.

Marketers will also have to get more sophisticated about spurring action, or "clicks" on their paid search ads, with the aim of boosting conversion rates of shoppers from 1 percent to 2 percent, according to Margiloff.

That will also help the bottom line of the search marketing agencies.

To wit: executives from online marketing agencies iCrossing, Innovation Interactive and The Search Agency said that their businesses were up slightly so far this year.

"There's not a de-acceleration of spending, but there's an intensified focus on return on investment," said Michael Jones, an executive from Internet marketing agency PepperJam.