This article was originally published on ClickZ on January 24, 2009. I think it’s still highly current, given that this past year has revealed a major schism in the spending patterns of major PPC advertisers. Some “conservative” search marketers have responded to this difficult economic climate by drastically retrenching, while others (the “aggressive” ones) have taken advantage of the competitive void by racheting up their SEM campaigns. This article explains the merits of each approach in the current environment, which remains highly challenging.
For the last five or 10 years, SEMs specializing in paid placements nearly always increased paid search spending year-over-year. This year’s different for some marketers, and not always for the reason you might think. Today’s column is a tale of two SEMs whom I’ve talked to recently: one’s aggressive and the other’s conservative.
Some industry verticals are seeing significant drops in daily search query volume in January 2009 compared to January 2008. With consumer confidence and disposable income lower than last year, Google and other engines may not have as many searchers as last year for a whole slew of categories and industries. At the same time, other categories and industries may be picking up.
The general reduction in advertising is another factor driving a possible reduction in query volume over last year’s levels. After all, search behavior doesn’t occur in a vacuum. We’ve long seen how search and other media affect each other — both in terms of client spending and spending on the part of their competitors. Consumers exposed to a barrage of informative advertising often get curious and enter research mode, which these days means doing a search query.
It’s interesting to see just how much search volume has changed over the years. Google Trends lets you look up any keyword or phrase. Here’s one I randomly picked: Apartment rental. Google indicates that volume for this query is down to one-third of its 2004 query volume level. A travel query like Orlando also shows weakness and may get even weaker in 2009 because inauguration euphoria isn’t likely to juice up the economy all by itself.
This situation poses a challenge to search marketers. In other media, one never thinks about one marketer buying inventory away from its competition. There’s always plenty of similar inventory around. But in search, this inventory is so special that marketers are willing to cut other budgets and fight for the visibility, the click, and of course the revenue.
This illustrates Google’s position of power. Google is in the middle — between the marketer and the consumer — and it controls where the consumer goes and what the consumer sees. Compare this with the control exerted by a newspaper or a radio/TV station and you can see the contrast.
Search budgets are often set either purely based on ROI or on ROI/CPA targets and are often fixed (short-term) budgets as well. If the pie of searchers gets smaller and a marketer wants to maintain order, lead, and click volume, that marketer needs to take those clicks away from the competition by bidding higher or by bidding smarter. Bidding higher across the board on keywords will escalate CPCs (define) and unless conversion rates improve, ROI will suffer.
So, marketer number one (the aggressive marketer) will often take advantage of his superior staying power and reduce ROI to maintain or gain market share. Search is a great place to do this because, whether we like it or not, search is frequently the last touch point. Marketers who realize this and can weather the storm will find their businesses stronger after the fact. Some customers acquired during these challenging economic times will offer a lifetime customer value that makes the short-term customer acquisition costs worth it.
To effectively fight for the most profitable clicks as query volume declines, aggressive marketers may increasingly focus on analytics, technology, and campaign management. Many marketers I talk to have never been under much pressure to adopt a cherry-picking strategy for click acquisition. A bit of waste in the campaign was considered a cost of doing business.
Interestingly, the conservative marketer may need to adopt a similar focus on campaign management, analytics, and technology, but for the opposite reason. This marketer will want to trim the least profitable clicks, reducing budget and seeking out the highest ROI while maintaining a reasonable sales/lead volume.
The conservative marketer and the aggressive marketer are both trying to figure out what a click is worth before they bid on it. Keyword-level decision making no longer passes muster in this economic climate.
Regardless of whether your marketing budget got slashed or you’ve been given the imperative to kill the competition now that it’s weak, approach your search campaigns analytically and ensure you’ve got the tools and technologies in place to cherry-pick the great clicks while passing on the ones with a poor profit profile.