ADOTAS EXCLUSIVE — There is never a dull day in the world of search marketing. Wall Street analysts just cut Google’s estimates for the 4th quarter. Last week, Google and Yahoo abandoned their plans for an online ad deal that would have allowed Yahoo to place ads on Google’s Web sites. This comes on the heels of inconsistent earnings reports where Google’s third-quarter beat expectations, while Yahoo’s profit for the same quarter dived 64 percent.
In light of all this uncertainty, what can we expect for the paid search marketing industry in the year to come?
If history serves as a guide, there’s a strong chance spending on search marketing will continue to thrive throughout a recession. Why? Because in a downturn, companies can’t afford not to spend on search. While other less measurable forms of advertising (TV, print, display) are being questioned and facing cuts, search is surviving because it’s linked more directly to revenue. For marketing programs not to face the guillotine in this economy, they must produce results. Search is extremely measurable, enabling advertisers to easily tie revenue and ROI back to the ad level. Such revenue accountability is crucial for advertisers in a down economy, when every penny counts.
In fact, the paid search industry was born (out of necessity) during the last economic downturn; Google rose to fortune from the ashes of the dot-com bust. Advertisers could no longer justify spending large sums on banner ads of dubious ROI and they needed a results-driven, revenue-generating marketing method. Search was the answer. In 2000, paid search accounted for 1.3 percent of online advertising spending, and by 2003 it accounted for 35 percent. During the lean years between 2000 and 2003, paid search advertising delivered the right value proposition to marketers who were expected to do more with less. Today, budgets in this area account for 43 percent of overall online ad spending, and are expected to maintain dominance in the years to come.
During this slowdown, now more than ever, marketers need to use online advertising methods that deliver real results, boosting revenues in a time when it matters most. Despite a softening economy and turmoil in some other ad media, U.S. spending on paid search advertising should grow solidly in 2009. In fact, eMarketer predicts that as U.S. advertisers continue to shift their budgets from traditional media to more cost-effective, measurable Internet advertising, paid search spending will not only rise in fiscal 2009, but double between 2009 and 2013 to reach nearly $24 billion.
According to an October research report from Marin Software and JupiterResearch, large advertisers would be spending more on paid search if they could: they are lacking the tools and technology to scale their campaigns. The report found that 92 percent of large search marketers spending more than $50,000 monthly on paid search advertising would increase their pay-per-click (PPC) spend on SEM programs an average of 22 percent if major technology and campaign management impediments were resolved. These impediments include insufficient personnel to manage programs, fear of risking ROI performance, inability to meet financial targets as costs per keyword rise, difficulty proving campaign effectiveness to management, and lack of available tools to handle large-scale needs.
The fortunes of Google and Yahoo may be at an uncertain juncture, just like every other company in today’s tough economic times, but all indicators seem to suggest that marketers will to continue to spend strongly on paid search advertising in the year to come. However, if a slowdown in consumer spending does occur, search marketers will need to elevate their game in order to continue to meet, if not beat, their ROI targets. That means using the best tools available to improve the financial performance of their campaigns and to operate their campaigns as efficiently as possible. That’s the best way for search marketers to hedge themselves against an uncertain future.