Internet retailers are spending more to get better results with search engine optimization (SEO) and pay-per-click advertising (PPC). Internet Retailer surveyed 245 web merchants and found they prefer search marketing to other marketing channels including affiliates, email marketing and direct mail because of better performance.

When this same study was conducted two years ago, researchers found that search marketing was used by relatively few. Only 21 percent of web merchants had used SEO or PPC advertising for over 4 years, 40 percent were using search less than 2 years, and 13 percent had no experience with search. Other findings in 2005, showed that only 20 percent of chain retailers, catalog companies, virtual merchants and consumer brand manufacturers spent more than 50 percent of their online marketing budgets on search, and 42 percent devoted less than 10 percent to search.

This has changed radically today, as indicated by the current findings, summarized below:

• Search marketing drives over 50 percent of sales for 30.2 percent of the web merchants surveyed, or approximately 80 retailers.
• No reductions in paid search advertising are planned as 82.8 percent of the merchants said they were not reducing PPC spending this year.
• Retailers prefer search because it delivers: 57.4 percent of the merchants said search marketing performs better, or somewhat better, than other marketing channels, including email, affiliate marketing and direct mail. A mere 12.7 percent said it performs worse.
• Some retailers prefer paid to natural search for driving traffic (39.2 percent), while others (34.7 percent) prefer natural over paid search. Smart merchants (26.1 percent) use both natural and paid search equally.
• Retailers believe natural search delivers more conversions (46.1 percent), while a lesser number (37.3 percent) believe paid search performs better, and 16.6 percent believe natural and paid search perform equally well.

Organic Search

Optimizing natural search campaigns is a high priority for most merchants. For some merchants, this is due to rising keyword prices. Merchants plan to improve their natural rankings on Google, Yahoo, Microsoft Live and other search engines with the following strategies:

• To achieve higher rankings, 80.9 percent plan to rewrite keyword descriptions on their home page and product pages.
• 67.9 percent will use actual customer query information by including these phrases on their product pages.
• 58.1 percent will start optimizing image file names and image display captions by using common product keywords therein.
• 61.8 percent will improve site navigation to help customers convert.
• When you stop to think that 70 percent of traffic is organic and 30 percent is paid, it makes a lot of sense to beef up SEO efforts.

Paid Search

We mentioned above that most retailers would spend more rather than less on paid search. Here are the numbers:

• 58.5 percent plan to spend more on paid search.
• 32.8 percent plan to stay with their current budgets.
• 8.7 percent will reduce PPC spending.

The merchants were asked which search engines deliver the best return on investment (ROI) and results are as follows:

• 79 percent said Google produces the best ROI, no surprise here.
• 13 percent prefer Yahoo instead.
• 4 percent get good results with Microsoft Live Search
• 2 percent prefer results they get on AOL.

Click here for more information on this survey: http://www.internetretailer.com/article.asp?id=21902