• by Steve Baldwin , July 21, 2008

Last week the online advertising industry woke up to the fact that it is not immune to the effects of a broad-based macroeconomic slowdown. Even Google (whose Q2 results were actually stellar), got punished, but that's just because Wall Street's incredibly high expectations are never matched by reality. Elsewhere, at ValueClick and  MSN, poor results (attributable to weakness in the display sector) suggest that the industry may be on the verge of a watershed moment in which search and display don't converge, but go their separate ways, with one deemed the winner and the other the loser.

Signs of the Apocalypse?
I don't know if you've checked out the ads running on Yahoo's home page recently, but it seems that many of the big brand advertisers that were there a few months ago have dwindled to a handful of true believers. Today, DR advertisers predominate, and DR advertisers are far more likely to pay rates tied to CPO than the kind of traditional premium CPM rates that Yahoo has been able to exact in the past. Untargeted RON/ROS advertising isn't about to drop dead tomorrow, but targeting is where the future lies, and this is why Jerry Yang and Sue Decker have been singing the "convergence of search and display" song. The problem is that this convergence is just a promise at this point; there is no guarantee that it will ever be delivered.

Back to 2000-01?
I'm sure I don't have to remind you that just a few years ago, the nascent online industry basically collapsed in the violent implosion of the tech industry meltdown. While there are even odds that today's grim climate will continue far longer than the recession of '00-'01, the lifeline for advertisers is PPC search, which, unlike untargeted display, is a far more efficient medium for gaining leads, customers, and market share. No, paid SEM isn't a perfect medium (and you can go broke if you don't know what you're doing), but there is no question that it works exceptionally well, which is more than you can say for BT, social media marketing, video, and other over-the-horizon experiments.

More Reasons to Be Cheerful
While it's generally true that it's harder to get positive marketing lift from SEM than in years before (thanks to increased competition from advertisers for scarce SERP real estate), the fact is that there is considerable low-hanging fruit that has yet to be reaped.

 I met recently with a large e-tailer whose site was basically a joke. This company (whose name you'd recognize) had probably spent a million dollars revamping its old site, and while it looked great, the Web developer (a big one) had committed just about every SEO sin you could imagine. SKUs didn't have unique URLs, URLs were riddled with special characters that thwarted the search spiders, and the only static pages were category pages.

It's amazing to think that companies are still building sites that are so completely unsuited to a Web ruled by search engines, but they are, and that means opportunities will continue for marketers who get search right.

It's 2008: Are Agencies Stuck in a Time Warp?
Generally speaking, the ad agencies continue to demonstrate an unconscionable level of ignorance toward the power of search. Yes, there are a few brave souls championing search as the linchpin of tomorrow's marketing successes (several write for MediaPost), but they're lonely voices in a wilderness whose inhabitants still speak in the outdated acronyms of Gross Rating Points and think that online advertising means banners that nobody clicks on. Search is so far off these agencies' radar screens that Universal-McCann's main ad guru, Bob Coen, doesn't even count search expenditures when he tallies his annual report on ad spending.

While many find this situation depressing, it should be encouraging news to anyone who works in SEM today, because it means that with every day that passes, the old-line ad world falls further behind, whereas those who've bet their careers on SEM succeeding will have a great future ahead .