Search Marketers Paying Too Much?

This article made the rounds on Friday (ClickZ). The thrust of this Kevin Newcomb piece is that the paid search auction model is flawed and inefficient for less sophisticated marketers:

"We want to educate advertisers about the fact that in some sense they are being taken advantage of," Ostrovsky said in a statement. "Under the current mechanism, if they don't think carefully about their bidding strategies, they can end up paying a lot more to the search engines than they need to."

This critique of general paid search may be especially true for local. Here's what an A-list search marketing firm said about local keyword prices/buying:

Geographic-qualified keywords have less inventory than generic words and phrases, which drives the bid landscape higher and forces all advertisers to bid more aggressively. This happens a lot with major metropolitan areas like NYC & San Francsico.

There's less competition on a national level. There are a lot of regional advertisers that bid aggressively using geo-qualified keywords only without any nationwide initiatives. In addition, a lot of these advertisers are not as educated on the space and many times end up creating extremely artificially-inflated markets for these keywords.

So this is pretty consistent with what we've been hearing directly from the people on the front lines: people are bidding more for local because it converts better and for some of these "irrational" reasons also.