Blue Nile | InternetStockBlog.com:
Second, during December, we saw extremely aggressive increases in the cost of online advertising. Our cost per click on Google, for example, rose by over 50% from a year earlier.
Does this point to weakness in search marketing in general, or just weakness in marketing high ASP items online? I suspect a little of both. Earlier in the call, the CEO mentioned that jewelry had a bad Q4 online. So which is it?
Our marketing efforts during the fourth quarter were skewed toward search engine advertising. Given our experience over the past few years with paid search, this seemed like a prudent decision entering the quarter. However, with increased costs for paid search in Q4, we were unable to drive as much profitable traffic as we would have expected.
This one is really interesting. The CEO views search as a worthwhile core competency to develop rather than hire an agency. This is an important trend I think. eBay, for example, has been making similar decisions. To me, this means that folks in the SEO/SEM space that are providing technology solutions have a brighter future than folks who are just providing “bodies that bid on keywords”.
As far as the first part of the question, we don’t use an agency; we do all of our own work on search. We’ve used agencies in the past, and overtime we’ve just built that capability up in-house. We feel it’s strategically an important thing to have in-house. So we have, both on the marketing side and the technology side, resources dedicated to analyzing and bidding for online keywords. And we will continue to play in that market.
Here’s a very interesting datapoint (IMO) about the international search market. Still really really early to call this one on the paid search side. This might indicate a lot of revenue upside at Google and the other players in years to come.
We do very, very little today in search internationally. Our website in the UK, we are quite happy with our website in the UK, by the way. It has got just a trickle of traffic coming into it, but it’s converting very, very well and it has been scaling. Again, it’s a relatively small base, and you can put out very large growth numbers when you’ve got a small base of sales. But we are very happy with how that has been happening. As far as competition, I think, as you get into some of the markets outside of the US, there’s almost no competition. And that’s one of the reasons we are in the UK trying to build that business. And I look back at 2005, and potentially in 2005, it was even early for us to go international.
