BusinessWeek claims that small and medium sized companies are being priced out of the paid search market by ‘Brand Giants’ like Best Buy and Zales.

Funny then that Zales isn’t anywhere on the first page results for ‘Diamond Ring’ nor are any other major jewelers I’ve ever heard of besides online pure-play BlueNile.com. But small guys (or big guys with really lousy marketing and web design staffs) diamondring.com, goldmine.com, and worldjewels.net are right there.

Are there major changes going on in paid search? Yes. Are the ‘Brand Giants’ with more budget than sense changing the game in many categories. Yes. Is it the agencies and the tool vendors and engines themselves who are facilitating this wild spending? Mostly. But there is a lot more going on.

• As Andy Beal points out, there is an evolution going on, and in some cases what has ebbed will flow.
• As Nick Carr highlights, big co’s can and do factor ‘branding’ into their willingness to pay.
• It’s also true, or at least published in a study, that 60-90% of the conversions from online search happen offline – so guys with bricks have more ability to eventually capture revenue.

But as the diamond example shows, it’s really wrong to universally characterize ‘Big Guys’ as the cause of click-cost-inflation. Small fry’s can be irrational too. Or they can be smart. The reasonable price for a keyword is the price that makes you a profit – and therefore the more efficient your ability to convert leads to sales, or the better you are at extracting a higher price or a greater lifetime value from customers or a lower COGS from your suppliers, the more you can afford to bid.

So the right reaction to higher click costs may not be to start buying radio ads but instead to reconsider your landing pages, persuasive scenarios, pricing, and everything else that impacts how smart or easy it is to do business with you.

To suggest that this maturation marks the end of the benefit of the web as the great equalizer is just plain wrong. There are zillions of segments where small guys now have a national market that didn’t exist before and there are no big guys to blame if click costs go up. Plus, organic listings can still be won with quality and effort (if you have some time). It’s easy :-)