Lack Of Innovation Points To Signs Of Slowing Online Ad Growth

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Marketers have made improvements in attribution modeling to determine how online video, search, social, display ads, mobile and other media contribute to sales or the awareness of a brand. A lack in continuous innovations could have platform providers, search engines, publishers and social sites fighting for ad dollars. Not to bring those offline ad dollars online, but among online media, publisher sites, and social networks.

The trend toward attribution modeling reaveals a need for industry innovation. More than 70% of respondents in a recent 33Across survey admit to focusing 80% of their attention on Web marketing and advertising vs. Facebook, up 23% from March, for example. When asked "Do you see your Facebook spend changing vis-a-vis the rest of the web?" more than five times as many respondents -- relative to the number from the pre-IPO survey -- said they plan to decrease the amount spent on Facebook.

Paid search ad formats need a boost. They've been stagnant for years other than a few tweaks from Google, Bing and Yahoo in organic search results and paid search advertisements. Marketers need more than a click to measure and test the interaction between consumer and advertisement. Companies supporting paid search marketing for desktop and mobile will begin to see investments in search marketing slow unless they innovate and improve services.

A report from search marketing firm Covario released Thursday analyzing 22 quarters of data and budgets reveal slowing investments in paid search during the second quarter of 2012, through paid search marketing remains on track for 19% annual growth.  Covario expects an annualized growth rate for budgets between 18% and 22% for 2012.

Companies had an opportunity to innovate in mobile search marketing before the frenzy began, but many took the wait-and-see approach for adoption rates to catch-up with enthusiasm by platform providers. Reports like Covario's highlight this slowing, though Covario analysts would likely point to seasonality as a reason for slowing growth. Marketers should also view search marketing as a maturing industry lacking innovation.

Growth in paid search advertising rose 17% in the second quarter, compared with a year earlier, and up 5% sequentially from the first quarter, according to Covario. Keyword pricing rose for the first time since Q3 2011, up 6% sequentially.

Several factors will drive the uptick in keyword pricing an industry changes. "The year-over-year balance in impressions (7%), clicks (18%), and cost (17%) demonstrates a healthy increase in CTR (11%) and zero change in CPCs," according to the Covario report. "The quarter-on-quarter trends for impressions (10%), clicks (-1%), and cost (5%) paints quite a different picture. The combination of a 10% decrease in CTR and a 6% increase in CPCs suggest that keyword pricing – and not volume – is largely responsible for the sequential growth."

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1 comment on "Lack Of Innovation Points To Signs Of Slowing Online Ad Growth".

1. Rob Schmults from Intent Media
   

   commented on: July 5, 2012 at 3 p.m.
   Is innovation the solution to "platform providers, search engines, publishers and social sites fighting for ad dollars?" Or is it more likely that such competition will drive innovation as companies are forced to compete vs. just riding a rising tide? My vote is for the latter.

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