Economy Down and Google Up

23Oct2008 Filed under: Online Marketing Author: JW

by Mike Moran

As we hear optimists tell us not to worry, it won’t be as bad as the Great Depression, it seems clear that we’re looking at very difficult economic times worldwide. And, as veteran marketers know, any economic downturn means lower advertising expenditures. And so, Google announced a huge gain (what?!) in revenue last week. What’s going on here?

Alan Rimm-Kaufman says it’s the prisoner’s dilemma playing out. As the economy worsens, advertisers double down with bets on paid search, trying to stay out the top of those results even when their sales don’t keep pace with their ad spending.

While possible, I wonder if we are seeing something that should give us more optimism: Marketers are finally making wholesale commitments to performance-based marketing.

Often, the status quo is a very comforting state of being. We don’t have to think. We don’t have to take any chances. If things are going well, many of us coast along. But when time are tough, when everything looks bleak, that’s when we finally get up the courage to change.

My suspicion is that we might be seeing such times. I’ve spoken to a couple of companies ready to dramatically increase their paid search spending because they are scared. They are worried that they can’t just do the same old stuff in the face of depressing economic news. They believe that only the most effective and efficient advertising channels are where they want their money. So, they are dropping or sharply curtailing traditional media spending and increasing paid search.

One of these companies is a large household name that is cutting back on TV, while others are small businesses that are rethinking their newspaper and industry magazine advertising. One is pulling out of its traditional trade show booth. All have told me that they are bosting paid search.

It reminds of something I noticed in some difficult times a few years ago. Several companies I know clamped down on employee travel, eliminating it “temporarily” unless the travel was to see a customer for a possible sale. Employees used more phone calls, WebEx, instant messages and other means to collaborate at a distance, and the these businesses learned that they could permanently reduce employee travel expenses. What started as a temporary cost-cutting maneuver became a permanent new way of doing business. I think the current downturn could produce the same change in busines practices for paid search.

Now, what a couple of companies tell me does not constitute a trend, and Alan’s assessment that Google’s success is an unsustainable short-term reaction is possible. But I think it’s something more. I think that businesses are being forced to decide in which baskets to put their few advertising eggs. And Google’s recent success is just an acceleration of the tendency for marketing to become more results-driven.

Time will tell who’s right. But if you’ve just been poking along doing the same stuff every year, perhaps this is the year to ask yourself whether every one of your marketing expenditures is the best possible use of your money.

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