7-01-05 12:54
Vertical Search: Next Big Thing or
Next Never-Was?
By MATT KINSMAN
Add vertical search-Internet search narrowed to specific results for a specific topic-to the list of the Next Big Things for magazine publishers. The popularity of search-the second-most used Internet application after e-mail-is spurring demand for narrowcast searches that deliver a handful of targeted results and is sparking the emergence of several vertical search companies such as Business.com, GlobalSpec, IT.com and KnowledgeStorm as b-to-b counterparts to Google and Yahoo. Vertical search is estimated to be a $100 million market and now magazine publishers want their share, too.
On the surface, vertical search seems like a natural fit for magazine publishers, which have ownership of both content and audience attention. "Vertical search is about to happen," says Gary Stein, senior analyst at Jupiter Media. "Market conditions are setting up for it: the popularity of search engines; the availability of tools to build it; and opportunities to make money-advertisers are competing for keywords. Magazines are in a good position to host vertical search. The big problem with vertical search is the cost of traffic. Magazine publishers are known for a particular topic-they can get that traffic for a lower cost."
Challenges for publishers range from potentially cannibalizing ad dollars to generating sufficient traffic to make it worthwhile to simply finding the internal resources to both create and maintain a vertical search engine. "Publishers 'get' vertical search but they're struggling to put it in the pecking order of initiatives," says Bill Furlong, CEO at vertical search developer SearchChannel. "Everyone is making money on it, all our clients are profitable. The biggest question is-how do I get my current staff to execute?"
Building Up
SearchChannel is working with a handful of clients, including Advanstar and Watt Publishing, with live vertical search engines in agri-business and healthcare. The company will also expand into manufacturing, human resources, construction, fitness-consumer and government market. "Wherever there's broadcast, there's narrowcast," says Furlong. "It's about becoming a mini Google."
With the lessons of the dot-com bomb fresh in their minds, publishers aren't dumping money into vertical search based merely on potential. "Publishers are waking up to it but they're cautious," says Pat Yanahan, vice president of marketing at SearchChannel. "They're looking for a strategic partner, not just a technical partner. They want the business rationale first, then the technical solution to go along with it."
Publishers are experimenting with several revenue models to apply to vertical search, including subscription, licensing and ad sales. While pay-per-click models are paying off for companies such as IndustryBrains, which offers contextual search options for magazines, some experts advise that b-to-b publishers focus on a one-time payment strategy. "Cost-per-click may not work with all verticals," says Furlong. "There may not be enough traffic to justify it as a revenue model."
Constant promotion is necessary for publishers to draw both users and advertisers. Search Channel creates an affiliate network that lists publishers' sites on other association and content sites and offers a downloadable toolbar function that users can access directly from their desktop. "The key to the success of vertical search, beyond having an on-target index of sites, is constant promotion and reinforcement of the tool's value," says Michael DeLuca, director of business development at Advanstar. "For example, we are offering a downloadable toolbar that resides within one's browser and offering to sponsors the option of embedding our search tool on their own sites. We also reinforce the brand through print publication ads and editorial on top 10 searches."
Is the Traffic There?
Still, some observers wonder whether b-to-b publishers can generate enough traffic on their own to sustain a vertical search model. "Vertical search is a small piece of traffic," says Erik Matlick, CEO of IndustryBrains, which works with publishers to integrate contextual search advertising into their existing Web sites. "If done right, it could be very useful. It's a high quality area but the number of searches are small."
IndustryBrains says it's working with 135 publishers and 2,000 advertisers. "Initially, publishers were scared of it," says Matlick. "They thought it would cannibalize other dollars. Now they recognize there are search budgets and display budgets. This is more akin to their classified ads."
As a former magazine executive (with stints at Fortune, Time , U.S . News & World Report and launching Family Fun and Family PC with Ziff-Davis), Business.com CEO Jake Winebaum understands the potential for magazines developing vertical search. "Magazines are about demand creation and vertical search is about demand fulfillment," says Winebaum. "It works well for publishers who have a deep understanding of a certain topic."
He also sees the drawbacks. "For true b-to-b publishers, the content is limited in scope. It's almost impossible to do [vertical search] on your own," says Winebaum. "You need a lot of volume. It's not just search but how many searches on a particular keyword. There will be even more niche players coming into this business. Publishers like McGraw Hill have enough presence in markets like construction that they can start doing this themselves. For others, it will be harder."
The Pay-Off
Advanstar is experimenting with several different models for monetizing vertical search. The company introduced Dental Explorer Search (a complement to its eight dental industry magazines) with a soft launch in March and a full launch in April. Currently advertisers can purchase a category sponsorship for $5,000 per month for a one-year contract.
The program has been profitable from the start. Advanstar sold three sponsorships immediately and has added another three since (for a total of about $360,000) and booked revenue into 2006, according to DeLuca. Advertisers are primarily category leaders in other Advanstar products and DeLuca says there doesn't appear to be any cannibalization of ad dollars so far. "We haven't seen it hurt spending in other areas but we're early into it," he says. "This is more akin to direct response than straight ad-spending."
Ad clickthroughs on Dental Explorer Search average 1.75 percent-compared to the industry average of 0.5 percent. The program started with 41 users per day and is now averaging 115 users per day. The average number of daily searches has grown from 157 at launch to 366 searches per day.
Dental Explorer Search includes 250,000 Web sites. "The biggest task is designing the index-how many sites will you include," says DeLuca. "You're looking at two to three weeks of work."
With VetMedSearch-a complement to Advanstar's veterinary publications-the publisher is gauging the response to the vertical search engine as its own landing page, rather than a section on a magazine's home page. "We want to see if we can brand the vertical search as a standalone product," says DeLuca.
Advanstar is pleased so far but further expansion into vertical search will be done on a market-by-market basis. "In some markets there may be a disruption of ad buys but that being said, the results speak for themselves," says DeLuca. "It's a sexy product and when we pitch it to advertisers, they're already buying key words on broader search engines."
Watt Publishing launched a vertical search option with its Meat News Web site in 2004. "We saw what Google wasn't providing and we saw what vertical search was providing," says president and COO Greg Watt. "Since then, we're looking to bring vertical search to all our categories."
Vertical search is a learning curve for readers and advertisers as well as publishers. "Our biggest challenge is a solid marketing plan-we're changing habits from using Google," says Watt. "It's also a challenge getting enough people to sell everything. Right now the print sales force is selling it but we're thinking about starting an in-house call center."
Watt says that ad buyers are primarily existing advertisers looking for a new outlet and while he wouldn't reveal specifics, he did say vertical search is profitable and on track to double revenue in 2005. "It's a high priority," Watt adds. "It will be part of our overall mix with good margins."
Other publishers are still feeling their way. "We're not doing it in any significant way at the moment," says Leonard Timm, vice president of digital media at Vance Publishing. "We do see value in giving readers more targeted results. We don't have a timetable but I expect to do something this year."
New Direction
Still, other publishers are already moving beyond traditional vertical search. Entrepreneur is a relatively old hand at vertical search, dating back to the launch of its smallbizsearch channel in 1998.
That program went through various incarnations until Entrepreneur revived it late last year as a vertical search engine. The magazine uses both pay-per-click and sponsorship fees, and teamed with Business.com to drive more traffic. The search engine gets about one million page views per month.
Entrepreneur is generating $1 million on smallbizsearch. Still, the magazine believes the real potential may lie elsewhere. "We're evolving smallbizsearch into something else-going forward we will rely less on vertical search and more on broader, yet still specialized searches," says Chuck Fuller, senior vice president of business development.
In the meantime, vertical search offers a richer, more diversified Web model."Our primary revenue stream on the Web is CPM. But that doesn't lessen the importance of smallbizsearch," says Fuller. "If there is a let down in the CPM model-and I'm sure there will be-we'll have enough diversification to sustain through the downturn."