• by Gerry Bavaro , October 6, 2008

The financial crisis is top of mind among marketers across the U.S. Many are wondering what it all means for the advertising industry as a whole -- and, importantly for us in search marketing, how we'll be affected. Here is my take on how the changing macroeconomic environment will influence the evolution of SEM.

Conversion rate -- king becomes God. Probably the most common question I've gotten from clients, prospects, and general marketers alike (even questions while on a panel at OMMA NY recently) is whether our clients have reduced their paid search spending in response to the current economic conditions. The answer continues to be "no." We have not seen decreases in budgets. Instead, we've seen almost a 300% increase in landing page/Web site improvements being made to increase conversion rates, plus more formal landing page and ad copy testing.

It's no secret that paid search is measurable, accountable, and a marketer's profit center right now compared to other forms of media that do not perform as efficiently or possess its flexibility and control. We need to be careful, though. We're spoiled by paid search -- but at a time when consumers are tightening their belts on spending, looking for deals more than ever, and rising shipping and other costs of doing business are driving profitability down, campaigns must be more efficient than ever. There's never been a better time for critical usability issues, messaging, and offers to be solved, changed, or tested across Web sites. Conversion is king, but will become God if you can acquire a marked increase in acquisitions or revenue at the same or decreased spend. For agencies and in-house teams alike, it's always foolish to overlook how Web sites are performing in terms of converting visitors to desired customers; right now it can be the real difference between success and failure.

Fundamentals are critical, differentiation is key. Times are financially tough for many consumers in the U.S., and only getting tougher. With decreased profitability across paid search campaigns and organic SEO efforts, and plain old budget constraints, the fundamentals become absolutely critical, and the differentiation of agency services, and various technologies and tools offered in the market are key to success. It's not good enough to just have an internal team or agency focused on paid search: this team must have true expertise. What this means is experience in maximization of efficiency, testing processes that can identify improvement and growth opportunities, and a command of data that gleans insights quickly and clearly. The team must translate this into business points and discussions that can capitalize on these opportunities.

Additionally, we're finally turning a corner in search, with the diligence in regards to technologies for bid management, analysis, and other campaign management initiatives acquiring a strict focus. With drastic differences in technologies, in most cases the search technology platform you use is the core element that determines success.

Display media vs. search -- catalyst for innovation & rapid convergence. The current financial crisis is driving a dialogue focused on one basic fact: media buying can be smarter and more efficient. As search marketers, we should all be thankful for this, because the business challenges companies face are creating concerns about less measurable and accountable media, creating more dialogue about, and a desire for, the same kinds of control, measurement, targeting, and accountability that has propelled paid search forward so rapidly. Ad exchanges, API-based bidding technologies for display media, integrated media dashboards, and advanced behavioral, demographic, and other targeting methods taking advantage of real-time data are all fast-moving industry initiatives that exemplify the fundamentals of SEM and SEO. We should see an acceleration of these initiatives as we move into Q4 of 2008 and Q1 of 2009 in an economy that most believe is just starting to experience its troubles.

Brands get real -- very real. Branding is a dangerous word in some search marketing circles. The jury's still out on the brand effects of search, although there have been quantitative studies claiming its successes (including findings that we've published recently regarding the effects of search on potential voter behavior in the upcoming presidential election). As consumers -- like undecided voters -- become more discerning about the brands and products they purchase, they are likely to research even MORE before buying, by increasing the frequency and types of searches made across all engines. Brands need to get very real about their perception in the marketplace, and the role they can play in the lives of those referred by others. Marketers should take a scalpel to their brand-heavy buys, and hone in on influencers with clever messaging, applications, and dialogue-building that leverages social networks, blogs and more that is grass roots. Finally, brands normally afraid of higher-priced generic terms in paid search should reconsider their strategy, as competitors will be struggling to afford high positions -- and impression and click share will be ripe for the taking.

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