Pay-Per-Click Advertising Trends Shaping 2002
What's carrying over from 2001 and what's likely to change this year, from Overture's expanding deals to early signs Google may rework its own auction.
Pay-per-click advertising heads into 2002 as one of the few online ad formats that grew through the downturn rather than shrinking with it. Here’s what’s likely to shape the category over the coming year.
Overture’s distribution keeps widening
The company formerly known as GoTo.com, which renamed itself Overture Services last September, continues signing distribution deals that place its paid search listings on major portals and search engines beyond its own site. For advertisers, that means a single keyword bid placed through Overture’s auction now has a real chance of showing up across a much wider slice of search traffic than it did even a year ago, without any additional work on the advertiser’s part.
Google’s AdWords program is drawing more attention
Google’s self-serve advertising program, launched in October 2000 as a CPM-based option, has been quietly gaining advertisers who like the appeal of Google’s growing search traffic and its reputation for clean, relevant results. There’s talk in the industry that Google may be preparing changes to how AdWords ranks and charges for ads, potentially moving closer to the pay-per-click model Overture popularized. Advertisers running early tests on both platforms are worth watching closely this year, since any change to how Google prices or ranks ads would shift the competitive picture for pay-per-click as a whole.
Advertisers are getting sharper about keyword strategy
Two full years into widespread pay-per-click adoption, the businesses running these campaigns have gotten noticeably more disciplined: narrower, more specific keyword phrases instead of broad single-word bids, landing pages built to match the exact term searched and weekly rather than occasional review of bid positions. That maturity is likely to keep raising the bar for what counts as a competitive campaign this year, making it harder for advertisers who treat pay-per-click as a set-and-forget channel to keep up.
Budgets are shifting here from elsewhere, not just growing
Much of the money flowing into pay-per-click this year isn’t new online ad spending, it’s budget that used to go toward banner and display advertising, being redirected by advertisers who want a clearer, more direct link between spend and results. That shift is likely to continue as long as pay-per-click keeps offering the kind of measurable return that’s harder to demonstrate with a flat CPM buy.
Small businesses remain the format’s biggest growth story
The lowest bids on Overture’s auction still start at a few cents, keeping the barrier to entry low enough for small and local businesses that never had a realistic way into display advertising’s biggest inventory. That segment of advertisers is likely to keep expanding this year, even as competition for the most valuable keywords intensifies among larger, better-funded advertisers.
The year ahead
None of these trends require betting on a single outcome. What they point to collectively is a format that’s maturing quickly: more competition for the best keywords, more sophistication expected from advertisers and real uncertainty about whether Overture’s model stays the industry standard or gets challenged by a different approach before the year is out.
More on Paid Advertising, or browse everything from 2002.
