You Will Weather This Storm by Gerry Bavaro , Monday, November 10, 2008
LAST WEEK I WAS ON a panel at DPAC (the Digital Publisher & Advertiser Conference) moderated by fellow Search Insider Aaron Goldman, of Resolution Media that focused closely on the issue of whether search is indeed "recession-proof." Here are some observations and advice based on my talk addressing this issue.
First off, are clients cutting back search spend? The answer here at Didit is, not really. In fact, we're still seeing aggressive spending for Q4, but percentage increases for this period would probably be higher if the economic crisis wasn't happening. We do wonder, however, whether spending in Q1 will soften more than usual.
Should clients be cutting back search spending as we move into the meat of Q4? We strongly caution against this. Pulling back now is like locking the door to your store. But many marketers may need to adjust their ROI expectations, due to declining AOV and conversion rates (for lead-gen). This in itself may not translate to actual budget cuts. Even managing to a negative ROI may be necessary if things get really bad. In bad times, cash flow is king -- and the good news is that paid search will probably still beat your other forms of marketing and keep cash flow coming, even if it's at a less acceptable ROI.
How are recession-caused changes in buying behavior influencing what we as search marketers do? Well, customers are becoming more precious and an increasing weight is being assigned on LTV (Lifetime Value) as a success metric. Even if consumers aren't immediately purchasing, being able to factor in latent gains can completely transform the long-term profitability of your campaigns. We may be at an inflection point in the evolution of search, which finally breaks out of the "immediate ROI" calculus toward a more holistic understanding of what's really important. The challenge, of course, is a company's operational ability to track, report, and analyze those numbers that span channels and departments. The catalyst for true search/media integration and a breakdown of operational silos may actually be business-threatening times like these; breakdown, break-through as they say.
Where are we going to see growth? Well, luxury brands -- at least at this point -- seem immune to the spending slowdown. But there's no question that even upscale shoppers are becoming more discerning and willing to take advantage of discount offers, where before they might not take notice (it's hard to NOT find an offer swirling around you right now). Financial services are also poised for growth as consumers flock to truly trustworthy places to put their money. Call it the "fine print revolution": all the boring details that might have been skipped over in a hurry in olden days are now becoming top-of-mind, even for the average Joe and Jill. Online education is also in demand as workers -- displaced or just scared -- take action to upgrade their skill sets.
So what should our response as search marketers be? Without question, now is the time to test, test, and test again. Hard times have changed consumers' attitudes and only by testing and adjustment can we find the campaign sweet spot of the moment. Don't stop at just landing page or creative/copy testing: make sure you can test and refine campaign segmentation. Find a part of your campaign that can drive tremendous efficiency (using geo, time of day, etc.) or scale (using a power term that may operate inefficiently but can be supported because of efficiencies elsewhere). It goes without saying that you'll need a capable automation/bid management platform, plus expert "wetware" at the controls, to make this kind of sophisticated strategy operational.
I'm optimistic that search is going to fare well, even if times get really tough. But make no mistake: there will be a winnowing of spenders, and those who can't run their campaigns on all cylinders will fall by the wayside as profit margins get slimmer and budgets get tighter. Make sure you've truly mastered all the important levers that drive SEM efficiency, and you'll make it through this storm to the calmer waters that lie ahead.
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