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I got a letter today. It was in a plain white envelope – it kind of looked like a bill – so I opened it. Here’s what it said inside:

“*** Notice ***

San Mateo County Resident

Property Code: 623DLC06056

Notification Date: March 6, 2006

Due to recent changes in our mortgage policy guidelines, there is a new program available to San Mateo County residents. Public county records indicate the property located at [My Address] may be eligible for an immediate payment reduction.”

I also received an email from the sender “Davis McDonald” with the subject line “Re: Invoice #39845B” and the message “FINAL NOTICE: We tried contacting you awhile ago about your low interest mortgage rate. You have been selected for our lowest rates in years . . .”

And, of course, if I searched Google for “San Mateo mortgage rates” I would see lots of text ads with messages like:

“Current California Mortgage Rates. Mortgage loan rates from lenders in California – Rates updated Daily”

Each of these marketing messages – direct mail, email spam, and targeted PPC ads – have one thing in common – they are all trying to conceal what they actually are – marketing.

In the case of the direct mail letter and the email, both marketers went to great lengths to avoid giving me any indication that they had a marketing pitch in store for me. The assumption, clearly, is that if I recognized that the letter was yet another offer to refinance my loan, that I would not even open it. And since “open rate” is one of the most important factors for direct marketers, this was clearly a major part of the advertiser’s strategy.

The strategy was continued after I opened the letter. With words like “notice” and “public county records”, the letter is designed (again) to give me the impression that this is some sort of official document, not a marketing pitch.

In sum, marketers have discovered that consumers are so skeptical of marketing, that any marketing message, no matter how great, will likely send their communication directly to the garbage or the junk folder.

At this point, you will no doubt suggest that paid search is different. After all, paid search isn’t an unwanted, often mass-mailed invasion of your mailbox; instead, it’s targeted, and it only shows up when a user actually types in a specific query. This is worlds away from the 3000 junk emails you get every week in your Yahoo bulk mail folder.

But think for a minute about how SEM – or Google for that matter –  rose to prominence; two words – banner blindness. By 2003, consumers were sick of banner ads on Web sites, so much so that the term ‘banner blindness’ was invented to describe the rapidly decreasing click through rates on banners.

I actually conducted a focus group once where we asked users to complete a specific action on a page. The action we wanted them to do could only be completed by clicking on a large 468X60 banner in the top-middle of the page. Guess what? As we watched users surfer the page, time and time again the users simply moused right over the banner ad, as if it didn’t even exist!

Why? Because consumers have trained themselves to avoid marketing, and banners are now synonymous with Internet marketing. And even when consumers do see the banners, they look at them with disdain – certainly not a good thing from an advertiser branding perspective.

So low and behold, in the early 2000s, Google popped up with a simple proposition – a better search algorithm, and a simple function-focused user interface with – sing along with me – no banner ads. The public ate it up.

The public also ate up text ads, so much so that some FTC officials worried that the blurry line between text ads and organic search results was too blurry for most consumers to understand the difference between the paid and free content. Thus, you now see text ads with a different background shading and the message “Sponsored Links” somewhere on the page.

Even with this minimal warning label indicating “marketing”, text ads still get an enormous click through rate as compared to banners. At this point, it seems that the average text ad on Google gets about a 1% click through rate. Assuming ten ads on every page, that translates to a 10% advertising click through rate for every Google page view. That’s huge, especially when you compare it to a banner-driven page that is probably lucky to get a .5% overall click through rate.

The big question for me is whether banner blindness may eventually be joined by “text ad blindness.” If consumers get more and more savvy about Internet marketing, and start to realize that the same people that are creating “click on the gorilla with the banana” banner ads are also creating text ads on their search result pages, it seems very likely that consumers will respond by either ignoring the ads, or just choosing not to click on them.

To make matters worse, Google appears to be consciously expanding their “broad match algorithm” for text ads. In the olden days, if I bought the keyword “Green colored widget” and no one else was buying that word, I would show up alone for that search result. Today, it may not matter whether I have bought a specific “tail term” – Google will show all the advertisers who have purchased the word “widget” right alongside – and often above – my specific keyword. Why is Google doing this? Revenue, of course. If there is only one advertiser paying $.10 per click for a tail term, Google makes $.10 per click. But if there is suddenly competition from ten advertisers, some of whom are willing to pay $3 per click for “widget”, Google’s revenue skyrockets.

And on top of increased relevancy, Yahoo still offers a “paid inclusion” program that enables advertisers to pay to have their URLs included in the organic search results. These URL listings are not labeled as paid advertisements and are totally indistinguishable from normal, algorithmic results. Imagine what consumers would think of search engine results if they realized that a percentage of the results were actually advertisements pretending to be natural listings!

Thus, in addition to increased consumer skepticism, Google (and Yahoo, for that matter) are making a conscious effort to drive revenue through less relevant search results. A nice short-term “hit our quarterly numbers” strategy, but a strategy that is likely to only speed consumer avoidance of text ads.

For these two reasons – marketing avoidance and decreased relevancy, it seems likely that SEM is heading down the same path as direct mail and email.

I used to actually click on emails from people I didn’t know with subject lines about “My Invoice” or “PayPal Security Procedures”, but I figured this game out (and Yahoo improved their spam folder – thanks Yahoo!). And I’ll admit that I still open blank envelopes that look like they could be important, but as soon as I see the marketing message inside, I throw the offer away without hesitation. I figure that anyone that has to deceive me just to open their offer probably isn’t going to be giving me a good deal.

If you judge consumer acceptance by click through rate, the average consumers seems to still like text ads. Will that still be the case in five years? To some degree, sure, text ads will always be less invasive that banner ads, rich media, pop-ups, etc. At the end of the day, however, text ads are just that – ads – and consumers will figure it out, and act accordingly.