Minding The Gap Between The UK & US Search Markets

A new white paper from UK-based search marketing firm Latitude Group says that search engines are missing out on $11 billion of potential revenues “if paid search penetration in the US was at UK levels.”

Why? “The US has a much higher proportion of in-house search marketers, who tend to be less innovative and do not operate search as effectively as search agencies, slowing the flow of funds from other media,” according to the white paper, authored by Latitude Group’s chief executive officer Dylan Thwaites.

Other key findings include:

  • Search engine commissions have had a fire starter effect on search penetration in the UK
  • US search agencies have reacted slowly to the paid search opportunity
  • Cost-per-click prices are marginally higher in the UK, but there is no evidence to show that the engines are
  • abusing their market dominance

The white paper is summarized in this press release (PDF); you can also download the complete white paper, An Analysis Of The $11bn Revenue Shortfall In The US Search Marketing Industry (PDF).

Related Topics: Business Issues: General | Channel: Strategy | Stats: General

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About The Author: (@CJSherman) is a Founding Editor of SearchEngineLand.com and President of Searchwise LLC, a Boulder Colorado based Web consulting firm. He also programs and co-chairs the Search Marketing Expo - SMX conference series.

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  • Rhea

    I take offense to the less innovative comment, but can relate to feeling stifled and unable to bounce ideas off of other search related professionals as an in-house marketer. Sounds like an interesting paper that could stop recent trends towards in-house SEMs?

    ps – mind the gap, lol, how fitting…

  • http://www.giganews.com CaptainObvious

    Nice title. I’ll always remember my first trip to the UK and the Orwellian voice booming “mind the gap” on the tubes.

    On a side note, it should be noted that part of the reason UK based paid search may not be attracting US advertisers is method of payment. Credit card (Visa, MC) penetration in the UK is still fairly low and any US advertiser needs to be able to support Paypal or Switch Solo to effectively enter that market.

    With the merger of Switch and Maestro and the subsequent release of Switch Maestro cards with MasterCard support, this issue should diminish over time. In the mean time, supporting Switch Solo is troublesome for many sites and not fully supported by many payment processors.

    In this case, I think there is a little more to it than just an ignored market. Until credit card penetration increases in Europe as a whole I think that the ability of search advertisers to enter those markets will be diminished.

  • http://www.latitudegroup.com Matt Brocklehurst

    I would like to clarify that the point the White Paper makes is NOT that US in-housers were intrinsically less innovative. The Paper points out that in-housers have less opportunity for peer-learning and creative review which can hinder innovation. A sentiment which seems top be shared below.

    Matt Brocklehurst
    Head of Marketing
    Latitude

  • Dave Wilson

    It is just possible that part of the picture is being obscured here. To my mind, an in-house marketer, having a better understanding of their business and industry is likely to be much better at pruning or excluding irrelevant keywords, optimising bids appropriately to their niche, tailoring landing pages they probably have full control over and probably spending more time on account optimisation, since they only have the one.

    If this were true I would expect to see, in a market with more in-house specialists, lower CPCs and larger gaps between bids, exactly as has been found.

    Conversely one might expect agencies who receive a commission from the search engines to be more aggressive in their biddings, target less relevant terms and try every new thing that comes along, without as much thought as to how it might meet a client’s business objectives. After all, the more they spend, the more they get paid.

    Perhaps I am just a cynic!

  • http://www.latitudegroup.com RichardGregory

    Hi Dave

    You’re right to be cynical about some of the agency bidding models but that’s all part of a good relationship. How long would you keep an agency that was simply spending your money and not improving ROI?

    Some agencies work on a performance basis to avoid this worry. Alan Rimm Kaufman did a great write on this very site – http://searchengineland.com/070424-073956.php

  • Red_Mud_Rookie

    Having come from working agency side for several years and now sitting on the inside I reckon it’s 6 of 1 and half a dozen of the other.

    I think if you have members of a team who have agency experience then you have the “complete” in-house search team.

    Dylan’s just trying to drum up more business as always ;-)

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