June 21, 2011

Search represents the largest share of online ad spending in the US and around the world, and the competition for valuable branded keywords is heating up. eMarketer estimates US marketers will spend $14.4 billion on search advertising this year, and companies across verticals are trying to grab competitors’ traffic—or just increase their rivals’ pay-per-click costs—by bidding on brand terms in their sectors.

L2 Think Tank’s “L2 Digital IQ Index” for financial services companies found that fully half of credit card brands participated in competitive buying practices on Google—nearly as many as did any paid search advertising on the site—while 20% did so on Bing. According to the report, more than two in five retail banking brands bought competitors’ keywords on Google, and 12% did the same on Bing.

The report noted that the competition was so intense, some brand terms had up to four companies bidding against each other on the major search engines.

Competitive buying is also common in the travel industry, according to MarkMonitor. For search terms related to hotel booking, nearly half of all advertisers bidding on paid search terms are companies bidding on the competition’s keywords. Comparatively few actual buys are made by competitors, meaning competitive bidding drives up the price of keywords without often resulting in the competition running ads on the terms.

The MarkMonitor report estimated that hotels worldwide lose $1.9 billion worth of bookings to competitors because of such practices.

iMediaConnection advises marketers to take a proactive approach in dealing with competitive buying in order to protect their brands and avoid losses by affiliates and other marketing partners. But options are limited when true competitors are involved; search engines don’t limit competitive buying unless a true bait-and-switch is involved.

For more information at http://www.emarketer.com

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