Speaking Sensis

Do you remember playing Chinese whispers when you were a little tacker?

A group of kids line up. You whisper a word – let’s say ‘egg’ – to the first one. One by one, each child whispers the word down the line until – miraculously – it comes out the other end…

As ‘football’!

Well, it seems the online advertising industry’s got its own little game of Chinese whispers going at the moment.

The ‘egg’ takes the form of research reports from organisations like the Internet Advertising Bureau and Frost & Sullivan. These reports have confirmed that online advertising’s search and directories segment has now surpassed $800m annual revenue(1).

The ‘football’ refers to the outlandish interpretations of this data being presented by a growing coterie of commentators.

Last week, Paul McIntyre reported in the Sydney Morning Herald that Google may surpass $1bn revenue this year(2) . This was followed up by Julian Lee in Saturday’s SMH , who said(3):

“Yet last year Google received an estimated $800m in revenue from Australian advertisers…”

Recognise that $800m number?

Meanwhile, Crikey took the Chinese whispers to an entirely new level by claiming that(4) :

“…Google’s Australian advertising revenue may have reached $1 billion a year…”

Now, the purpose of this article is not to speculate on Google’s revenue. I’ll leave that to others.

It’s to comment on a common misconception that the $800m odd search and directories revenue is all coming from search engine marketing (SEM). It’s a misconception that’s underpins not only some of the numbers in these articles, but several other observations made about the industry in the past.

So, let’s test that theory.

SEM is an $800m per year business.

Well… not really. You see, the sector to which the $800m is attributed to is called online search and directories. To state the obvious (but increasingly ignored), there’s a chunk of revenue from directories like Yellow Pages® Online in this number. In 2008, Frost & Sullivan (the only researcher to break out search and directories revenue) forecast that the annual revenue from online directories would be approximately $264m out of a total for the sector of $869.7m(5) .

For the record, Frost’s forecasts for the total were a bit on the high side (not surprising given the slowing economy) but they were pretty close to the reality subsequently reported by the IAB.

Okay, so SEM is a $600m per year business

Hmm. Sorry. Not right there either.

The search and directories sector also contains something that Frost calls ‘contextual search’. This is a form of advertising that includes products like Google AdSense. Frost estimated contextual search would be worth approximately $163m in 2008 (6).

The issue here is that while contextual advertising is sold by search engine companies on a cost per click basis (just like SEM), it’s not search engine marketing.

These aren’t ads that people ‘search’. They’re placed on web sites – waiting to jump out at any passing surfer. As such, they’re actually general or display advertising, not search.

And they should be represented that way in industry data. Calling contextual advertising ‘search’ is like saying that peanut butter is actually Vegemite because it comes in a jar and it’s made by Kraft.

These calculations suggest that SEM isn’t an $800m per year business in Australia, as it’s sometimes assumed. In fact, these calculations suggest it’s only a tad over half of that…

SEM is a $440m per year business.

There’s no doubt that SEM is a phenomenal business. It’s grown from nada to nine figures in little more than a decade.

But we need to be mindful of how destructive over-exuberance can be. After all, the entire dot.com boom, and the billions of dollars it ultimately cost investors, was built almost entirely on people getting over-zealous about the industry’s potential.

By all means, get excited about the growth of online advertising. You should.

But, please try to keep things in perspective.

Oh… and let’s try to get the numbers right.

UPDATE

A follow up article today from Julian Lee seems to recognise the fact that not all search and directories is SEM.

(1) PriceWaterhouseCoopers. IAB Online Advertising Expenditure Report, Quarter ended March 2009 and Frost & Sullivan. Australian Search Advertising Market, 2008 – 2012.

(2) Paul McIntyre, Sydney Morning Herald. “Google on target to crack $1bn in revenue”. Thursday 21 May 2009. http://www.smh.com.au/news/technology/biztech/google-on-target-to-crack-1b-in-revenue/2009/05/20/1242498841271.html

(3) Julian Lee, Sydney Morning Herald. “Mystery over local Google’s missing millions”. Saturday 23 May 2009. Page 3

(4) Crikey.com.au, “Google advertising revenue trump’s Australia’s traditional media”, Friday 22 May 2009.

(5) Frost & Sullivan. Australian Search Advertising Market, 2008 – 2012, page 10.

(6) ibid.

These days Whereis® maps can be found online, on your mobile, in your car and Sensis will now send them to your mobile when you call 1234 or 12456! But for more than 10 years you’ve probably been accessing Whereis® maps on your portable GPS device. So it was great to see a recent review of top Australian GPS devices identify and praise Whereis® as the digital map provider powering the top seven ranked GPS units in Australia.

The Choice Magazine review – a trusted information source for Australian consumers – looked at 17 of the leading GPS devices in Australia and tested them for their May publication. The extensive review benchmarked leading brands such as TomTom, Garmin, Navman, Uniden, Mio and the recent ALDI model.

The testing involved selecting and routing to six random destinations in Sydney – a railway station, an airport, a university, a medical centre, a golf course and a sports complex – all starting from the same point. Travel times and distances were also measured between all 17 systems.

The review found Whereis® demonstrated superior quality in terms of mapping accuracy (notably in regional Australia) and was the data powering each of the first seven ranked devices.

So make sure you know who’s powering your GPS device before you buy one – maps do make a big difference.

You may know Sensis as the company many Australians turn to when they’re searching for businesses, people or places.

But searching for celebs? Searching for movies? Searching for music festival lineups or other stuff to do, see and eat?

Welcome to the star-studded world of Citysearch®.

In the past year, Citysearch® has made the transition to a true lifestyle destination. The new site includes video, news, opinions and all sorts of other fresh and dynamic content: everything from celebrity news and the top five scary movies to user reviews and a whole lot more.

And what better way to break up the strategic discussions that occur on this blog than the occasional Citysearch® video.

So here’s a couple to get you started.

As our recent sojourn on the red carpet at this year’s Logies shows, Australia’s showbiz glitterati were only too happy to talk to Citysearch®. Check out Danielle Horan (me!) chatting with Carson, Rove, Sarah Murdoch, Jason Coleman and many more (even Harold from Neighbours!).

And here’s our hard-hitting interview with the media-shy Scooby Doo.

Sensis General Manager, Marketing, Michelle Sherwood is participating on a panel at the Advertising, Marketing & Media Summit this Monday 11 May. The session is titled “When the going gets tough… The tough get marketing”….topical for most marketers today. Joe Talcott, Marketing Director, News Limited is chairing the session and the other panelists include senior marketing practitioners from marie claire, AFL, Medibank Private, ninemsn, MINI and Australia Post.

Sensis will have a double-billing at the CeBit WebForward web, search and e-marketing event in Sydney next week. General Manager, Digital Marketing Services, Thomas Arthur is speaking on Wednesday 13 May about Integrating Mobile Advertising into the Marketing Mix. Group Manager, Mobile, Gregan McMahon is speaking on the following day about Tapping into Mobile Search. Both presenters are hoping the audience comes away revved up about the endless possibilities of the mobile medium!

Meanwhile, Group Marketing Manager, Yellow Pages, Stephen Harvy is addressing a luncheon hosted by the Australian Arab Business Network in Bankstown, NSW on 13 May. This group, which represents a wide range of businesses, invited Stephen along as they’re keen to know more about Local Business Search: how are consumers really searching and how are technologies converging to enhance the consumer experience?

Hope to have an update with key take-outs from these sessions soon…