Recession Effects On Internet Marketing

Jeff Douglas
MVI Solutions
January 24, 2008

If the pundits are right we may be lurching into a recession. Again if they are right, it will last throughout the year; hence it is not a short term blip in the purchasing radar. In 2008, we need to keep an eye on Wall Street: as our market is sensitive to economic factors such as stock prices, prime rates and quarterly earnings reports. Other than the dot-com bust, we have no data on how search performs during a time of reduced employment and lowered consumer spending - typical hallmarks of recession. During recession, I expect that we may see lots more lookers and less buyers. The malls were very busy at Xmas, but the buying was slow and the discounts and early sales were used extensively to draw in the purchaser. Huge sales reduce margins and increase business risks.

I am supposed to know and understand search in all of its dimensions. Since we are now moving into uncharted territory. I will try to keep you more informed about the trends that I see.

Internet Search is a pull medium, with the consumer doing the pulling via the keyword. In the past decade consumers have continued to elevate their level of engagement with search and have increasingly integrated it into their daily lives. We have enjoyed huge growth as a result.

What happens to search when the searcher's daily life changes - loss of job, loss of home, loss of health insurance - all part of the ugliness of recession. Do laid off consumers reduce their searching as they no longer have the fast broadband connections they once enjoyed in the workplace? Should we be looking at differing times of activity? For many of my client sites, the busiest times are at the end of the workday. Will this shift? Will we see changes in traffic and basic site visitation metrics?

Clients have enough experience by now with search to have developed expectations as to what they believe it will deliver, but those expectations have been framed during a time of continuous growth in the online sector and for the economy as a whole. What will this mean for search? In my opinion unless the site owner has a firm grip on the metrics of search as it relates to the cost of selling the goods, they may falter, particularly if the recession extends through multiple seasons. Last year would not have been too soon to focus attention on improving conversion of paid search. Every marketing dollar is more precious during recession and must be spent ever more carefully. So that being said, improved bang for the buck is a must-have.

Predictions In Internet Marketing For 2008

In no particular order:

• We should see a leveling-out of the search market share pie.
• Google will continue to take share-of-queries from the others, but will cap out at 85% or less. The others will focus on leveraging their non-search ad programs to make up the revenue losses.
• Behavioral targeting potential upside is huge if Google can get it integrated.
• Display ad for advertisers will adopt the Internet as the test model for all new ads.
• What WILL drive up pricing CPC is scarcity, as the premium spaces fill up their inventory. Expect to see a growing gap between premium and non-premium ad space.
• Yahoo will separate its publishing properties (e.g. Yahoo News, Yahoo Finance) from its advertising networks (display, search, mobile), which will give it more flexibility in providing a larger suite of offerings to advertisers.
• Alternately, AT&T will buy Yahoo to help bulk up its mobile and local/directory products.
• Google News will take on Yahoo News head to head for users. This is one area where Yahoo has dominated easily, and it's an under-monetized asset.
• While Wikia's search engine won't pose a major threat to Google, its presence and activist community will cause the major engines to endorse transparency.
• Shopping engines will keep dropping away and major will close
• Widgets become important online presence just like a website, a blog, or social page- get smarter about how to distribute them- we start testing what belongs best in them, either links, search or content
• Reputation management is going to be the hot service this year. With more sites adding and encouraging customer reviews, it's going to be very important to monitor what's being said about your company and provide counter-spin measures to affect rankings if needed.