Car crash on SEO Boulevard? Assessing the impact of Google Instant

Much wailing and wringing of hands amongst the SEO community accompanied the launch of Google Instant this month. Instant, according to Google, will take between 2-5 seconds off a typical web search by incrementally presenting users with updated search results as they type. SEO-types are worried that this will devalue their investment in search terms and reduce the effectiveness of this form of online advertising. So is this a ‘fast lane’ for searchers or a car crash on SEO Boulevard? Hmm. It would be hard to see Google shooting itself so comprehensively in the foot were this to be so. (Although the search giant has been known for a degree of foot mutilation in the past – Wave, Lively, Buzz privacy, etc etc) In reality, searchers are likely to see more, not fewer, ads as they surf the evolving search surface (try saying that fast after a drink). Google estimates that between 5-7 times as many results pages will be served for the typical search. So impressions will rise, click throughs may fall. How will this affect ad visibility to users – already, if we are to believe the eye tracking studies, pretty marginal? There’ll also be some instability in the search term environment, but this should settle down in the medium term.

What is interesting is how this will change online search behaviour in the longer term, as Google sets its sights on more and more effective anticipation of searchers’ goals and as Instant is made available on mobiles from the autumn. But don’t forget, this still has to be a sustainable revenue model.

See BBC Technology Correspondent Rory Cellan-Jones’ report (viewable in UK only).


A word from our sponsor

Speaking at the recent Nielsen Consumer 360 conference, Facebook COO Sheryl Sandberg had lots to say about social media, brands and communities. The link contains a video clip of Sandberg’s speech and provides some useful insight into the further commercialisation prospects of Facebook.

Evidence on behavioural targeting

In thinking about the shift towards online promotional activity, one of the perceived benefits to marketers is the potential for using information about a user’s web browsing behaviour to target adverts based on likely interests. However, such benefits can raise potential privacy concerns amongst users. So-called behavioural targeting can be shallow (using cookies) or based on what is called ‘deep packet inspection’. In Chapter 7, you will find a short case on Phorm – a BT firm that has attracted a lot of criticism. The Office of Fair Trading has just published a very useful market study of behavioural targeting in the UK. It includes estimates of market size, an assessment of consumer attitudes, perceived benefits and disbenefits, and potential regulatory remedies.

The end of the world as we’ve known it … but not just yet

January saw the publication of consultancy firm Deloitte’s annual TMT (Technology, Media and Telecommunications) predictions. Three publications are available for free download in each of the three component areas of the firm’s practice. Whilst generally long on assertion and anecdote and somewhat shorter on detailed evidence, the reports are aimed at ‘starting or stoking a particular conversation’ rather than stopping it, according to lead TMT Partner Jolyon Barker. Of particular interest for me in the Media Predictions report is the more measured approach Deloitte is taking to some of the hyperbolic debates over trends and business models in this area: for example, online vs TV advertising; prospects for e-readers; buzz over 3D TV; the reality of TV/web integration. This is refreshing. It’s not a wholesale ‘out with the old and in with the new’ conclusion, but a recognition that the future of media business models and promotional mechanisms is much more complex and nuanced. The notion that ‘linear’s got legs’ (linear watching of TV according to schedules, rather than wholesale on demand through such vehicles as the BBC iPlayer) is an especially interesting discussion. And the fightback of publishing through the introduction of pay walls and micropayments (although the jury is still out on their acceptability) is also an analysis worth reading.

Can online buck the trend?

Received wisdom would have us believe that if there is a type of retailing that is surviving if not thriving in the economic downturn, it is Internet-based retailing. In the UK, headlines have consistently suggested that savvy consumers have abandoned the High Street and taken to the Internet in their droves to take advantage of cheaper prices and cut-throat competition. However, whilst UK online sales appear to have been consistently stronger over the past few months than store-based sales, they have been growing at only of third of their rate in December 2008. And in the US, the position is even worse: online retail sales actually fell year-on-year by 4.9% in the final quarter of 2008 after a decade of continuous growth (albeit at half the rate of conventional store sales, which fell by a staggering 8.6% over the same period). (See chart.) So those headlines aren’t really giving us the full picture – which is, as ever, considerably more complex. Longer term it may even mean us having to throw out some of our conventional notions of what retailing actually is because of the ways in which some consumers are starting to behave both within and across marketing channels. To understand what is going on, we need to look first at the context affecting non-store sales growth and how our attitudes have already had to change.

For example, the view was once strongly held that clothing would never sell online. In 2000, UK retail analysts Verdict estimated that as little as 0.01% of clothing sales were being made online in the UK. The then chief executive of Marks & Spencer, Sir Richard Greenbury, emphasised the “importance of fit and feel, and the personal input of a salesperson, which can’t be offset by even the best electronic service.”  He was willing to concede that commodities “like white knickers” might sell online – but not other products. He was wrong. Data released by the UK Department of Transport suggests that 38% of all households in 2008 have ordered clothes or footwear online – 62% at least monthly . The Interactive Media in Retail Group corroborates this, suggesting that 30% of UK women now report that they have brought clothes online . And the experience of online retailers such as ASOS confirm that this is a train which is far from hitting the buffers of recession.

Yet, other things being equal, the business-to-consumer firms which employ Internet technologies to reach customers should be just as exposed to the real economy as conventional firms. And fundamentally, the requirements placed upon online retailers by consumers should be no different from those of store-based businesses: creating and sustaining value for shoppers through skilled product sourcing which will earn their customers’ long-term loyalty. But of course other things may not be equal. Store-based retailers have higher fixed costs in relation to their branch networks (including rental and business rates) by contrast with online-only firms, despite the recent fall in rental levels as landlords seek to fill voids and retain existing tenants. The lower transaction costs that online firms are more easily able to generate and sustain may favour them with consumers who will be more price-sensitive during a downturn. On the other hand, much online shopping is dominated by discretionary purchases, where spending is likely to be more at risk. Similarly, most purchases are made by credit card, a form of payment that tends to come under significant pressure during economically difficult times. And current research is also showing that online users are seeking to trim their overall telecommunications costs, along with other discretionary expenditure. Finally, the reality of much of the contemporary retail scene is essentially multichannel: such retailers see these channel differences at first hand as they seek to understand the changing balance of risks and returns from the contrasting routes to the consumer in which they are simultaneously involved. So, for example, whilst US electrical retailer Best Buy experienced a -1.3% like-for-like store sales fall during 2008, its online proposition experienced a 34% growth (albeit from a smaller base). And UK clothing retailer Next grew its clothing sales online by 1.2% in the first 14 weeks of 2009, by comparison with a -2.3% fall in store sales over the same period.

In all this, there is an implicit assumption that existing online or multi-channel retailers are in control of this process. I would suggest that they are incidental (and potentially temporary) beneficiaries of some more significant shifts in consumer behaviour. What are the indicators of this shift? Here are three examples.

  • The significant financial uncertainties of recent months have increasingly favoured sites like Moneysupermarket. Interviewed for the Daily Telegraph at the end of 2008, CEO Simon Nixon suggested that: “People are going to the website as they are basically tightening their belts. Customers are also reviewing what they pay in insurance and utility bills rather than automatically renewing… but customers are more savvy now than they were maybe 12 months ago. They are looking at perhaps two or three price comparison sites. But the market is not very mature and I would say most people will be looking at comparison sites online within the next three to five years.” The growth in the popularity of vouchers and rewards is also indicative of consumer interest: according to Nielsen, 9.8mn UK consumers used a voucher or reward site in 2008, with such sites experiencing a doubling of unique visitors between December 2007 and 2008.
  • Another indicator of the longer term shift is the extent to which social networks are playing a role in a variety of sometimes poorly understood ways in driving retail business, despite – or perhaps because of – their current fashionability. This may range from raising awareness of new products to driving referrals to retailers. At their height (before getting into financial difficulty in 2009) the blogs of Shiny Media (see table) attracted 3.1mn unique visitors each month offering 40 blogs in five categories (fashion, technology, lifestyle, sport and gaming), which included two lifestyle blogs launched in the US in 2007, and a YouTube channel ( Commercial blog publishers play a potentially powerful role in creating new product buzz for marketers, but must tread a careful line between blatant product endorsement and spirited independence if they are to retain both the trust of their audience and the support of brand manufacturers in making available new products. Retail and other brand marketers are becoming cannier at advertising on such sites as well as on more conventional social networks. Internet analysts Hitwise reported that UK social networks provided over 7% of referrals to retail websites in March 2009. Retailers like Hotel Chocolat have become adept proponents of affiliate marketing: 25% of direct sales are now driven through this source. Similarly, strong multichannel brands like Mothercare are making investments in social media – such as their Gurgle parenting forum ( to, amongst other things, sustain buzz about the brand during the downturn.
  • Finally, though, the economic downturn has stimulated the further growth of new forms of intermediation. As some consumers need increasingly to make ends meet, they are resorting to both selling their own goods (both second-hand and new) online as well as seeking out new and nearly-new bargains. The OXFAM online charity shop made £5mn in its first year of operation in the UK, selling 3,400 women’s tops, from Abercrombie to Armani. eBay’s refocusing of its efforts away from auctions and towards a more conventional online marketplace may have been mistimed, given the bargain-seeking behaviour of an impoverished shopper, although UK eBay traders generated £2bn in sales in 2008. Sites like (“the Internet version of a Tupperware party”), and aStores ( encourage consumers to establish their own stores building upon their own buying experiences, and reward them with commission.

So perhaps in an economic downturn, we’re all retailers now.

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