Mr. Smith

Website / Online Mechandising / SEO

Online Search Advertising: The benefits of vertical search vs general search

By Donald R. Smith, Executive Vice President, Nor1 Inc.

Vertical search, at least in the case of travel, brings a highly qualified customer to your website - those that are "shopping to buy", unlike the majority of the general search users that are often times just looking at general information on a destination.

Hotel groups are moving an increased share of their advertising dollars to online venues for a few key reasons: Online advertising is trackable, the message can be changed quickly, and most importantly, it is in a medium where the majority of unmanaged business and leisure travel bookings take place. The biggest benefactors are of course, the large (general) search engines: Google, Yahoo and MSN. Hitwise announced recently that Google accounted for 65.13 percent of all US searches in the four weeks ending May 26, 2007.

Yahoo! Search, MSN Search and Ask.com each received 20.89, 8.40 and 3.92 percent respectively. The remaining 49 search engines in the Hitwise Search Engine Analysis Tool accounted for 1.66 percent of U.S. searches.

The online spend on search engines, both the above mentioned general search engines and the travel search players (SideStep, Kayak, Y! FareChase, Travel Supermarket, etc.), is noticeable as the market is shifting from the reliance on the online Travel agencies like Orbitz, Expedia and Travelocity in favor of supplier-direct bookings, which can be attributed to the influence of general and travel search engines.

Consumers' use of travel search is a major driver of growth in supplier-direct bookings with $8B projected bookings from travel search by 2007, allowing greater price transparency for consumers.

Things you should consider (reasons why consumers use travel search vs. general search)

Customer Perspective (La Quinta Inns and Suites)

LQ Management L.L.C. is one of the largest operators of limited-service hotels in the United States. Based in Dallas, Texas, the company operates and provides franchise services to more than 600 hotels in 45 states and Canada under the La Quinta Inn(R) and La Quinta Inn & Suites(R) brands.

In the past three years, the marketing mix for hoteliers has changed dramatically. Ted Schweitzer, vice president of e-commerce for LQ Management, L.L.C. says, "'Changed dramatically', is probably an understatement."

Schweitzer has been with La Quinta for five years and has had the challenge of managing the complicated marketing dollar spend for the well-known hotel chain.

"Five years ago, online search marketing was doing very little," said Schweitzer. "Within the past three years, there's been an incredible shift to online search marketing with search engines such as Google, MSN, Yahoo!, and more recently, travel search. Travel search is certainly an important consideration when I'm looking at balancing the online search marketing dollars, even if the general search engines still make up the majority of online marketing spend. Travel search can definitely target a more qualified audience, although general search, if you break it down correctly with specific terms and markets, does garner successful results as well. Travel search is still in its infancy period and I suspect it will play a much larger role once it obtains a better foothold. My best guess is that it may pick up within the next 18-24 months."

Traditional offline methods such as newspaper, print, TV, radio and direct mail still play a critical role for La Quinta. Schweitzer believes that for his purposes, the online spend, as a substantial percentage of the overall, will eventually plateau and find a point of diminishing returns. "The overall budget will continue to rise, but at this point, it really is about carefully balancing the budget with ROI and building our brand."

The advertising model with each Travel search site is different. CPC (cost per click), CPA (cost per acquisition), and variations of CPA such as commissions are some of the models available. Currently, La Quinta Inns and Suites works with several travel search sites (SideStep, Kayak and Yahoo! FareChase) and maintains an appropriate mix of all three advertising models. The model a hotelier chooses really does depend on its specific need. In La Quinta's case, while all three are used, CPA and variations of the CPA model are preferred.

"CPA is the preferred method," said Schweitzer. "We don't pay for anything unless we get a customer out of it, so there's no risk. With CPC, I'm paying for the clicks even if revenue is never realized. CPM, (cost per thousand, usually used for banner ads) on the other hand, is the least guaranteed, but I can still find the right balance by using our brand value to help drive transactions. At the end of the day, there's never enough return on investment, but we have a strong performing ROI using both general and travel search with a balanced advertising spend."

Conclusion - vertical search can offer a favorable ROI

Some travel search companies work with hotel groups on a CPA, i.e. standard commission processed though a hotel companies central commission processing similar to an agency booking. This takes away the risk factors of SEM (search engine marketing) campaigns. Even with the CPC models, the user is "ready to buy" when they are handed off to the supplier's site, allowing for a very strong conversion ratio.

Like most marketing efforts, hotels want to play in as many arenas that are both productive and cost effective. General search engines can be important in both brand awareness and directing users to the branded site to find out about the hotel and book their accommodations.

While Travel Search is a relative newcomer to online travel, it has been very popular with both consumers and suppliers. Still representing a small percentage of online travel buys, it is one of the fastest growing segments with year over year growth above 100%.

As more and more hotels chains have experienced its growth from search, they have placed increased emphasis and recourses to manage this segment to insure a positive ROI.

Don Smith develops strategic supply partners and creates revenue opportunities through innovative processes and related modules. He oversees implementation of Nor 1’s suite of revenue enhancement products. Prior to Nor 1, Mr. Smith headed up Business Development at SideStep. He positioned the company for a successful sale to Kayak Software in 2007. He currently holds leadership roles in industry associations, such as the American Hotel & Lodging Association (AHLA) and the Hotel Electronic Distribution Network Association (HEDNA). Mr. Smith can be contacted at 408-996-7417 or don.smith@nor1.com Extended Bio...

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