The Chasm: a gapping no man's marketing morass that swallows high tech companies whole. Its territory that was first charted by high tech marketing gurus Regis McKenna and Geoffrey Moore. For those of you who earn a living selling High Tech, you’re probably familiar with the term, explained in depth in Geoffrey Moore’s book, Crossing the Chasm.

Those fortunate enough to cross the chasm and survive, then have to face the next challenge of staking territory "Inside the Tornado", a whirling maelstrom of demand that places one company on the exalted pedestal claimed by the market leader, leaving the rest to fight for the leftovers. Of if you don’t know what the heck I’m talking about, stick with me and I’ll give you a crash course in chasms, tornadoes and main street, where the gorillas, monkeys and chimpanzees run wild (and after reading this column, please buy the books. This is required reading for high tech marketing!). After I explain the model, I’d like to take you through an exercise we just worked through, where we tried to fix the location of search marketing on the model. We were surprised with what we came out with at the end of the day.

The Technology Adoption Cycle Model: an Overview

At the dawn of high tech, a fundamental dilemma presented itself that cried out for a new marketing model. The problem was the pace of change. New technology completely replaced existing technology at an ever increasing pace, fueled by the quantum leaps in processing power brought about by improvements in chip technology. Customers found themselves with obsolete technology on their hands every few years. Moore refers to this as discontinuous innovation, where the user is forced to completely replace their existing technology, usually with a significant amount of pain and inconvenience. As the new technology was introduced, it was found that is was absorbed into the market place at different rates. Soon, it emerged that the market was segmented in an entirely new way, based on consumer’s interaction with and adoption of technology. Given this, it was first assumed that marketing high tech would follow a smooth and linear progression from market segment to segment.

The model is a bell curve, divided into different segments. At the leading edge are the innovators and visionaries, those who are constantly looking for the new thing, who aren’t afraid of technology and who hope it will give them the drop on the competition (today, think Bluetooth, wireless and mobile computing). Then came the pragmatists, one half of the majority of consumers, who aren’t afraid of technology but are risk averse and will only make the jump when uncertainty and pain of adoption has been eliminated to a significant extent (think PDA’s). After this comes the other half of the market majority, the conservatives. Here, price is the driving factor and they’ll only buy technology when it’s fully commoditized and margins are razor thin (think the standard desktop computer). Finally, there’s a small handful of consumers on the far end of the curve, the laggards, who will be the last to adopt (currently buying their first fax machine) and the skeptics, who just hate technology in any form (currently writing their hate mail on an IBM Selectric). The theory was that success in one segment could be leveraged to gain entry into the next segment.

Crossing the Chasm

After high tech marketers finished congratulating themselves on coming up with a model that seemed to make sense given their unique marketing challenges, they ran straight into an obstacle. Actually, it was a huge, gapping hole in their model. It seemed that at certain points, one market segment didn’t really talk to their adjacent segments. The biggest gap was between the early adopters and the pragmatists. The difference between these two segments, although beside each other in the model, was such that there was virtually no communication and certainly not a sufficient amount of trust that would allow the early adopters to act as a reference base for the pragmatists. High tech company after company cruised through the early market with hypergrowth in revenues, and then scratched their heads in dismay as sales dried up and they seemed unable to penetrate new markets. They had entered the Chasm.

The trick to crossing the Chasm was to give the pragmatists what they were looking for, a whole solution with risk and uncertainty ironed out, the security of dealing with the leader in the industry and a sufficient number of other pragmatist references so they knew they weren’t making a bold leap into no man’s land. Obviously, a small company with limited resources couldn’t do this over the total market, so the only way was to pick a beachhead, or vertical market, where you could engineer or partner to provide the whole solution and dominate within a set period of time. Once you dominated this market, you used it as a base to move into adjacent markets, referred to by Moore as the Bowling Alley.

In the Tornado

Pragmatists constantly balance the advantages of a new technology against the risk inherent in changing to the new paradigm. At a certain point in the product life cycle, the balance between these tips to the positive side, and the pragmatists tend to move en mass to adopt the new technology. This creates a fire storm of demand which Moore calls the Tornado. The big winner here is the perceived market leader, because adopting their technology represents the least risk, as they set the standards. This is the gorilla. Other fauna of the Tornado include chimpanzees, potential market leaders with good products who weren’t chosen, and monkeys, who clone the leader and sell it at a lower price point.

On Main Street

At some point, the pent up demand of the Tornado is satisfied, and the product emerges on Main Street. At this point it’s a fully commoditized product that presents little or no risk. Prices have been driven down, support is designed in, you don’t have to get your daughter’s geeky boyfriend to get it working for you, and you probably won’t even have to pick up the owners manual. It’s as plug and play as it’s going to get. Only now do the conservatives decide to climb on the bandwagon.

In summary, in the early market, the purchaser is the guy on your block who is always the first to get anything, even though he pays an arm and a leg and fiddles with it constantly to get it working. The pragmatist is the guy who won’t buy it until his neighbor, who is also a pragmatist, has bought it and recommends it. The conservative is the guy who’s going to wait for the best deal, and then say, “Can you believe John (the innovator) paid 3 times as much for this 2 years ago?”

Search Engines: On Main Street?

So, with the model quickly laid out, let’s see how it applies to search engines. When it comes to using search engines, and the Internet in general, I think it’s safe to say we’re through the Tornado and have landed on Main Street. Getting access is relatively painless, most people know their way around a browser and “Googling” is now becoming the hottest in-verb in the English language. Even J-Lo tries to use it once in each new movie.

Paid Search Marketing: Staring into the Chasm?

Paid Search, on the other hand, is a different animal. Let’s look at the empirical evidence. Even though it’s the hottest growing sector of online marketing, the budget allocated to paid search is still a very small fraction of total ad spending. In general, it’s stealing the budget that was allocated for banners and other, less effective, online marketing channels, but it still isn’t dipping into the traditional advertising bucket.

Those that are budgeting for paid search tend to be innovators within a company that are bucking the trend of mainstream marketing, or those companies who aggressively moved into the online space from the beginning and are now trying to squeeze more ROI from their online budget. In either case, the current users of paid search fit the classic early market mould. They are willing to put up with a little pain by cobbling a tool kit together from diverse and sometimes inadequate sources to manage their paid search campaigns. They are willing to invest hundreds of man hours to deal with PPC management tools and interfaces that haven’t had a total solution designed in as of yet. And the reason they’re doing it is to get the drop on their competition. There’s nary a pragmatist or conservative in the bunch.

Organic Search: Still at the Starting Line?

If paid search is creeping up on the edge of the Chasm, Organic search marketing is still settling into the starting blocks. Organic search hasn’t even moved from being a service based industry to a product based one as of yet. It’s a labor intensive job that requires a rather specialized knowledge base. For many companies, it’s not even on their radar. Fellow SEO company iProspect did a survey a few years ago that showed that very few of Fortune 100 companies even bother to consider a strategy for improving search engine visibility. For many companies, organic search optimization is that thing that online casinos and porn sites do. Far from being a credible marketing channel, it’s arcane web based mumbo jumbo with the same level of credibility as spam email marketing. Unfortunately, a rash of fly by night SEO companies have tainted a marketing practice that can be incredibly effective and reasonable.

Lately, we’ve noticed that interest in organic search has remained at the same level for the past 3 years, while most online marketers have flocked to paid search. Ironically, because they have to pay for it, advertisers have a much clearer understanding of the value offered by paid search and are more willing to embrace it. It comes down to measurable results and returns. Until Organic Search can truly offer this, it’s doomed to remain in the marketing Twilight Zone. This is unfortunate, because even the paid search engine’s own research shows that over 70% of searchers click on organic results rather than a paid sponsor’s link.

There has been very little in the way of development of new software solutions in the Organic Search industry. WebPosition Gold is still the most common tool used. My feeling is that until the process of organic optimization is systemized and automated solutions are designed, combined with accurate metrics being introduced to measure effectiveness, SEO won’t be able to gain enough traction in the market place to start moving through Moore’s marketing model.

Google and Overture’s Strategies

Given the previous, what are Google’s and Overture’s plans for the future. Well, when we looked at recent announcements and developments in both camps in the light of the Chasm model, we found something quite surprising. Google and Overture are both working at getting more revenue from the existing customer base, rather than looking for beachheads that will serve as a Chasm crossing strategy to access a mainstream. Both engines are introducing broader phrase matching alternatives, trying to drive revenue into the less competitive keywords. It’s similar to a line extension strategy, which Moore indicates is a classic late Main Street strategy.

Currently, Overture has a little over 100,000 advertisers. While this number marks a dramatic increase over previous years (about a year ago, Overture had about 60,000 advertisers) it still represents a small percentage of the over 3 million public sites that exist. Online advertising spending in total represents 2.5% of all ad spending, with search capturing about 24% of this. So, for every ad dollar spent in the US, about half of one cent gets spent on search engine marketing.

The other indication that paid search hasn’t hit the mainstream market is the amount of customer pain involved in trying to use this channel effectively. It’s incredibly time consuming and while some PPC management solutions exist, none have approached the status of a total solution that will be required to encourage widespread adoption amongst a mainstream market. Currently, both Overture and Google have been aggressively working on rolling out conversion tracking solutions. While admittedly this is a key need with the market, there’s still much that has to be done before the average marketing manager will feel comfortable planning and executing a paid search campaign.

SEO’s, At Your Service?

This introduces another anomaly that prevents the adoption of search. Advertising is a complicated business. That’s why there are advertising agencies and media buyers. Placing, executing and tracking multiple campaigns across different media requires a high level of expertise. Traditionally, there has always been a strong service component in advertising. When looking at online, you would assume the same would be true there. But search has so far fallen outside the domain of the traditional marketing folks. It’s one thing to manage several multi million dollar campaigns with a reasonable margin on each for your trouble. It’s another to manage 2000 keywords on Overture, for an average budget of $60 per word, with no built in margins. There’s just no money in it for an agency.

With the high degree of manual work required and the low revenue potential, paid search has either been a do-it-yourself endeavor or something undertaken by search engine optimization and marketing firms willing to put up with the pain. If you were to compare search to a typical technology scenario, we would still be in the era of the system integrators, providing the glue to hold the whole process together.

Microsoft, Looking for the Next Tornado?

With a little crystal ball gazing to see if a chasm crossing is in order, one can’t ignore a prominent sign looming on the horizon. Microsoft is moving into search in a big way, and nobody has ridden more tornadoes to the top than the big M.

Microsoft tends to sit on the sidelines and let the little guys fight it out in the early market. Once Microsoft has identified a market they think has the potential to be a winner, like the 10,000 pound gorilla they are, they move their considerable mass into the fray and either buy up the most promising contender or just sit on the competition. It’s been done with word processing, e-mail, browsers, currently with CRM and soon with search.

To date, which strategy Microsoft will choose to take with search hasn’t been made apparent, but the way is definitely being cleared for their entry into the market. A Microsoft VP dropped a large hint that Google was in their sights during an interview, a beta spider is actively crawling the web and the recent announcement that LookSmart has been dropped opens up available real estate on MSN. Despite both Microsoft’s and Google’s comments to the contrary, rumors persist that Google could be on the block with Microsoft as the highest bidder.

However it plays out, one thing seems certain. Microsoft is putting its money on search marketing’s chances of being the next “big thing” and they haven’t lost a lot of bets in the past.

What Does This Mean for Search Engine Marketing?

If we’re right, paid search will probably be dragged across the Chasm and into the Tornado by Microsoft’s entry into the market. Google, if not bought out by Microsoft, will probably end up as a chimp, as will the Yahoo/Overture combo. At this point, neither looks like they’re making any moves to secure a beachhead in the mainstream market. The LookSmarts, Kanoodles and FindWhats of the world will make up the chorus of monkeys.

Regardless of the players, it will mean that search marketing’s current $2 billion dollar revenue take will increase dramatically, with the lion’s share going to the market leader. Remember, the windfall in this Tornado for Microsoft is that there’s already an established revenue stream. When it crushed Netscape in the browser wars, Microsoft secured a large share of a strategically important but non revenue producing market. A number of third parties developers (i.e. bid management software, analytics, keyword analysis solutions) will be initially tapped by Microsoft to provide the pieces that make up a whole solution, with these players eventually being designed out of the solution in favor of an integrated Microsoft offering.

With paid search acting as the bridge across the Chasm, organic search will be dragged along for the ride, creating its own tornado, albeit on a much smaller scale. But this can only happen if developers pay more attention to organic search and start designing solutions to eliminate the frustration, uncertainty and pain involved in the process. If organic search remains dependent on a large body of service providers with an inconsistent reputation for quality and value, it will be stuck as an early market phenomenon.

Author's note: After writing this, I thought it appropriate to run it past Mr. Moore, who, after all, "wrote the book"! Part of me was half expecting something similar to the scene in Annie Hall, where Woody Allen, exasperated while standing in line at a theatre listening to someone butcher the theories of Marshall McLuhan, actually brings Mr. McLuhan, who proceeds to rip the pretentious philosopher apart. So it was with no small sense of relief when I read Mr. Moore's return email, "I think it is a great recap of the ideas and I am delighted they continue to be of service and happy to have them published in your newsletter. Please continue the good work! Geoff"

Thanks Geoff. I'm sure I feel almost as smug as Woody!