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Wednesday, May 05, 2004

Comparison: Natural Search & Loss Leaders

A Loss leader is "A retail item advertised at an invitingly low price in order to attract customers for the purchase of other, more profitable merchandise." Typically loss leaders are used at automotive dealerships, grocery stores, department stores and almost every other major vertical market that has a retail storefront. You know the deal, the local car dealership puts this ad in the Sunday paper that reads "KIA Spectra $7,999 Fully Loaded". You know the deal is too good to be true but you still go because you need a cheap, reliable car and this seems to fit the bill. When you arrive at the lot you're told by the greasy salesman that they've just sold their last $7,999 KIA but they've got the same model with a few more bells and whistles for $14,999. Extremely pissed off, you leave and vow to never don a car lot again. You've been struck by the smooth criminal known as a "Loss Leader". In this day of search engine mayhem it strikes me funny that natural search has become the internet's loss leader. Search engines know that without natural results they'll lose out on the majority of their audience because web searchers are more likely to click on a natural result than a paid result to the tune of 60.5% of them (according to a recent study by iProspect). The irony here is that search engines were originally based on these free results and that's what got them their traffic. Back in the dot com hayday Yahoo began deriving it's revenues from banner ads but then the bubble burst and they began serving contextual ads and revenues were again on the rise. The whole point of the natural results however, is to drive traffic to the pay per click listings. This is where it gets cool though. Even though I believe natural search is a loss leader, it's not akin to the sleezy car salesman. Quite the contrary. In order to have consistent traffic and searches at a major search engine, their natural results must be relevant and reliable. Kind of reminds me of my accounting days. Relevance and reliability are the cornerstones of any accounting system. And relevance and reliability are the "secret sauce" of any good search engine. In the end, we as users win out when the search engines provide us with natural results that meet our needs and we'll go back for more. Even if going back for more means we click on the paid advertisements at the top and side of the natural results. That's today's thought of the day.

By Jason Dowdell at 09:18 AM | Comments (0)

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