An article on BusinessWeek mentions about the increasing cost of search engine marketing and the decreasing effectiveness of clicks generated from those clicks. According to DoubleClick Inc., the cost per click has increased 31% on average from a year ago. Smaller businesses are finding more competition from bigger companies trying to snatch consumers via search engine advertising.
Consumers are more likely to buy from a well known company like BestBuy and Walmart.com instead of their smaller rivals. Also the big companies can provide bigger discounts on products on their websites due to their volume and inventory, therefore, undercutting smaller players in the market. Buyers are also now better bargain hunters on the internet, and would buy from the big company sites.
The entry of bigger rivals and the increase in the CPC (cost per click) is forcing the smaller companies like BabyAge.com and medium retailers like Ice.com and eBags to scale back on search engine advertising. They are now trying to find niche publishers such as blogs.