Search marketing gap between UK and US

A “search gap” has been identified between the U.S. and the U.K., with the U.S. missing out on potentially billions of dollars in earnings.

by Helen Leggatt

In 2006, U.S. companies spent $6.7 billion on search marketing. However, a new Latitude White Paper says that U.S. search engines are missing out on around $11 billion due to a slow uptake of paid search opportunities.

Specifically, IAB/PwC reported that the U.S. company search marketing spends in 2006 were, on average, 2.5 percent of total ad spend compared to the U.K.’s 6.6 percent. The white paper contends that if the U.S. paid search market had evolved as much as the U.K. market it would have spent $17.6 billion.

Compared to the U.K.’s search industry, where search engine commissions have had a “firestarter” effect on search penetration, the U.S. spends much less on search marketing.

The report puts the widespread use of external agencies and search specialists as a reason for the U.K.’s search engine success. Many U.S. companies still use in-house teams who, says the report “tend to be less innovative and do not operate search as effectively as search agencies”.

U.S. companies are urged to research and learn from the U.K. market. “There is no doubt that the engines would get a much more positive and synergistic response if testing was UK-based,” said Dylan Thwaites, Latitude Group’s chief executive officer.

Tags: search marketing, white paper

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Latitude's missing the main reason search gets a bigger % of total ad spend in the UK than in the U.S.: U.K. internet users conduct ~50% more searches per search than their U.S. counterparts, primarily because there's been more thorough broadband deregulation in the U.K. than in the States, leading to higher average connection speeds. Faster connections = more searches = more clicks = more spend. Agency rebates have definitely played a big role, but I'd argue strenuously that those rebates, while getting more agencies involved and more of their clients' spend into the channel, has lead to *less sophisticated agencies* than otherwise would have existed. All UK-based SEM firms have had to do for the last 4 years to build thriving businesses is... have a pulse. Being an agency meant instant 10-15% search engine rebates; no need to add value to the advertiser if you just split the rebate with them as many UK SEM firms do. Likewise, since UK SEM's had the benefit of seeing the growth of paid search in the States, it was very straightforward for them to grasp how they could themselves build businesses around PPC. Many firms like Latitude proposed revshare relationships to advertisers new to PPC and nabbed great margins for themselves while essentially feasting on *uneducated PPC advertisers*. That's one of the reasons you're now seeing so much advertiser churn in the UK SEM landscape.

Posted by: Chris Zaharias on May 11, 2007 23:30