It is no secret that Web search results, be they generated from a search engine’s index or be they paid placements, are remarkably effective at driving qualified traffic to a Web site. Since the first search engines appeared, marketers realized this fact and have sought ways to optimize their sites to appear at the top of certain search results pages or to buy their way there. Over the past two years, paid search placements through services such as Overture and Google have grown exponentially as more and more advertisers have jumped on the bandwagon. As is common when something appears to be going too well, rumblings have emerged. Some marketers have started to question whether users are becoming less attentive to paid results and whether the increased interest from advertisers has led demand to outstrip supply, therefore driving costs higher and ROIs lower. Some have even openly expressed concern that the paid search industry bubble may soon pop.

While these concerns are not completely unfounded, I do not believe that we are going to witness a bubble bursting. Paid search placements are just too powerful of a tool for the industry to implode catastrophically. Undoubtedly, there will be changes within the industry, and the placements themselves may evolve, pricing methods may mutate, etc, but the concept itself is inviolable. Yes, there have been rising CPC costs, but in our experience, the ROI for search placements still far exceed most other options such as banner-style ads or direct e-mail runs.

The reasons that paid search placements work so well are well known and understood. By the very nature of the search process, people are self-selected to receive information on the topic in question. If they conduct a search for “pest control product” and they see a paid listing for roach killer, there is a significantly higher probability that they will click-through to the advertiser’s Web site than had they simply seen a banner-style ad on a magazine Web site such as Better Homes and Gardens. Clearly, even though Better Homes and Garden is a reasonable place to run such an advertisement, most users on that site would most likely not be looking for pest control products – they are more likely to be looking for tips on tending their orchids or ironing their pants.

Furthermore, searchers are interested in that topic at that very moment. The person is far more likely to respond to the search ad than to an ad or blurb in an e-newsletter dedicated to pest control because the searcher clearly is interested right now, while a reader of an e-newsletter may have had a past, or potentially a future, interest in a pest control product rather than an immediate need.

This inherent filtering mechanism combined with the cost per click pricing model makes paid search undeniably effective. You reach the right people, at an appropriate time, in the correct context, and you only pay when they actually click on your listing and come to your Web site. From our experience, the response rate as indicated by the click-through rate, the quality of the traffic generated, and the cost to produce those results are far better than anything else. Even with rising CPCs, the ROI is still significantly better.

In addition to their search distribution agreements, providers such as Overture and Google are also providing these placements to major content sites (such as CNN and ESPN) where they appear with content pieces directly related to the search term(s) selected by the advertiser. These too have proven tremendously effective and have increased the reach and utility of such campaigns. By expanding their distribution networks, paid search providers have been able to increase the supply, which has in turn mitigated some of the pricing pressure derived from perceived shortages.

In short, paid search placements remain one of our most effective online marketing tools. Our clients find them to be both tactically effective and cost efficient. Despite the challenges that the industry may face going forward, there is not likely to be a crash in the paid search distribution industry any time soon.