I couldn’t wipe the wry smile off my face after reading AdAge’s interview with Google’s “Chief Economist” Hal Varian last week.
In the context of “Why Google Really Is Recession Proof,” Varian espoused the virtues of Google being a direct marketing company. Per Varian, brand advertising is more “pro-cyclical” and “when the economy goes down, it goes down.” Direct marketing, however, is “definitely not pro-cyclical… direct marketing is a staple.”
I just love how the Google chameleon changes colors as needed to adapt to the marketplace. I remember not too long ago that Google was hyping itself as the greatest thing for brand advertisers since, er… tattoo ads? And, as John Battle pointed out, Google’s even buying the keyword “brand advertising.”
Now I’m not going to get too deep into the whole Brand vs. Direct Response discussion. The truth is Google, and search marketing at large, lies somewhere in the middle of the Brand/DR continuum. There are times (and strategies) that search is a great at driving brand awareness and times (and strategies) where it’s great for DR.
As I discussed in my Recession Schmecession post, it doesn’t matter whether Google’s ad platform is geared towards brand advertisers or direct marketers. What matters is that during a recession people search more as they try and stretch each dollar. For that reason, Google will continue to grow despite overall marketing budgets being cut.
Whether or not marketers spend money to reach people when they just start their research (i.e. head terms used for awareness) or when they are ready to buy (i.e. brand or tail terms used for direct response), when times are tough, search marketing is still a better, more accountable use of a marketing dollar than TV, radio, or print. And that’s why Google investors should not fear a recession; not because Google is or isn’t a direct marketing company.
Posted by: Aaron Goldman, VP Marketing & Strategic Partnerships
Google: We’re All About Branding -- No Wait, We’re DR!
Teaching Young Pups New Tricks
Last month, I posted a rant lamenting the state of digital marketing education in today’s colleges and universities. With “real-world” experience so hard to come by in an infant industry, it’s crucial that “higher education” begin to churn out candidates that can step right into our crazy little search world.
In my post, I observed how few institutions had built out coursework specific to interactive marketing so I was pleasantly surprised to read AdAge’s recent coverage of The Country’s Top Five Digital Media and Marketing Schools.
Apparently VCU, NYU, Art College Center of Design (ACCD?) in Pasadena, UT- Austin and the Miami Ad School all have pretty robust digital marketing curricula. To hear AdAge tell it, these schools marry cutting-edge technology with practitioners boasting true field experience, culminating in digital education nirvana.
Admittedly, I don’t know much about these programs nor do I know anyone who’s come through them but AdAge rattles off some big names in the biz that are either lending their time to the schools or have come up through the ranks, so something must be cooking on these campuses.
Unfortunately, I think the drop-off between the top five and the next hundred is pretty steep. I’d love to hear more about other schools with blossoming digital marketing programs so, if you’re aware of any, please drop a comment.
Closer to home for me, I know DePaul University has a strong e-business masters program and Northwestern University’s Integrated Marketing Communications track is one-of-a-kind. Additionally, IIT has a masters course on “Communications Strategies in a Digital Environment” (taught by one of the savviest online marketing pro’s in the city) and I just got word that the University of Chicago plans to offer a class in the fall on… gasp, Search.
Hopefully this is a sign of real momentum in the collegiate ranks and, someday in the not-too-distant future, we’ll be able to spend less time getting entry-level employees up to speed and more time on client-billable work.
Posted by: Aaron Goldman, VP Marketing & Strategic Partnerships
Recession Shmecession!
Last week Google reported Q1 earnings that surpassed analysts’ expectations sending the stock soaring 20% in the largest one-day gain since its IPO.
Many industry pundits had speculated that Google would report less-than-stellar results after comScore indicated that paid search clicks were down year-over-year, sparking fears that a recession was hurting performance.
As I mentioned in a previous blog post, a recession is unlikely to cause people to click less on ads -- maybe buy less, but not click less -- especially once they’ve already initiated a query. Furthermore, I observed that the decrease in paid clicks was likely due to continued rollout of Universal SERPs.
I recently came across a Forbes article from last month that does a good job articulating the impact a recession will have (is having?) on search.
“In good times, when consumers feel cash-rich and time-poor, they can afford to be less diligent about their spending. But as economic pressures mount, sentiment changes. People feel cash-poor and are more willing to invest time and effort in getting the best deal.
What sets the current recession apart is that, for the first time, consumers have a tool that empowers them to subject everyday buying decisions to the kind of scrutiny formerly reserved for big-ticket items and large business-to-business transactions.”
In other words, in recessionary times, people are more prone to search and click as they research ways to best spend their limited discretionary funds.
Google’s Q1 results certainly reflect this trend. In the earnings call, CFO George Reyes reported paid clicks were up 20% year-over-year and 4% quarter-over-quarter -- which is particularly impressive given that Q4 typically spikes for holiday shopping.
Bottom line? It’s clear that search is indeed impacted by macroeconomic factors -- perhaps, just not in the negative way that everyone thought.
Posted by: Aaron Goldman, VP Marketing & Strategic Partnerships
The Slowdown is Universal
Last month, I submitted back-to-back posts arguing against the widespread notion that a reduction in PPC clicks on Google was tied to our current economic “slowdown” -- or whatever Dubya is calling it these days.
Last week, news came out of SES New York reaffirming my take that the root of all this non-clicking may be as simple as the continued rollout of Universal Search.
Here’s an excerpt from Top Rank Online Marketing’s coverage of the SES panel in which comScore released new data on consumption of Universal Search results pages.
“Overall when reviewing universal search results, the study found less clicks from the consumer because the information they were searching for is now appearing directly on the results page such as maps, stock quotes and weather.
According to James, the two major implications of universal search include:
1. Organic search will become increasingly critical
- search result pages becoming the destination
- technology and content supercede marketing spend
- inherent ‘view thru’ value will challenge measurement
2. Paid search will become more competitive
- fewer paid click options on fewer pages
- consumer in control, not marketers
- conversion rates should increase”
Clearly, the SERP is no longer the bridge to 3rd party sites it once was and eyes are being drawn to the images and other advanced results. In my opinion, the best way for Google and others to combat this is to create advanced PPC listings, incorporating images and some of the same functionality of the fancy new natural results.
Google is apparently headed down this path, testing video ads in PPC listings. And with the DoubleClick acquisition now in the books, it has the platform to roll out display ads on SERPs -- something I’ve been predicting for a while.
Meanwhile, Yahoo recently introduced a plug-in for companies to create their own expanded natural search listings. I think it’s only a matter of time before it migrates this platform into the sponsored listing environment -- or at least blow out its paid inclusion product accordingly.
Regardless of what -- and how quickly -- innovation takes place in PPC, it’s comforting to know that the decrease in activity we’ve seen is part of a concerted effort by Google and others to improve overall user-experience and not tied to the problems with our economy.
Posted by: Aaron Goldman, VP Marketing & Strategic Partnerships
The Future of Reading is Here
Yesterday, I speculated about where the future of reading meets the future of search. Looks like we won’t have to wait too long to find out.
Today, there was an article in the USA Today about how the Amazon Kindle is sold out and people are waiting 4-6 weeks to get theirs on back order.
Now that consumer adoption is proven, it won’t take long for the search marketing opportunities to follow. Giddyup!
Posted by: Aaron Goldman, VP Marketing & Strategic Partnerships
The Future of Reading Meets the Future of Search
I’d been meaning to comment on the Newsweek article, “The Future of Reading”, for quite some time as its implications on the search world are profound. But after reading Bryson’s post on mobile visual search, I knew it was time to get on with it.
Just as Bryson looked at innovation in the mobile search within the context of Query Marketingsm, I’d like to apply that framework to recent innovation in the print world.
Amazon recently released the Kindle, an electronic device with a six-inch screen that can store hundreds of books. Weighing just 10 ounces, the Kindle can accommodate 30 hours of reading on a charge and has WiFi built-in to allow you to access the web and, of course, download books from Amazon.
Other features include a private email address that let you receive and read messages and attachments. There’s also a special pen that lets you capture passages from the book you’re reading just like you were using a highlighter. Finally, you can subscribe to newspapers, magazines and selected blogs and get the updated editions sent right to your device.
Jeff Bezos, Amazon CEO, is convinced the Kindle is the future of reading. And, while the jury is still out, you have to figure the man that transformed the book sales industry knows what he’s doing.
In fact, the story of the Kindle may turn out to mirror that of the iPod. The latter was an expensive device created by a category leader designed to replace radio, CD’s, and music stores in one fell-swoop. So, too, with the Kindle you have an expensive device ($399) that could displace newspaper, magazines, books, libraries and book stores.
Key to adoption here is that (just like with music) you have a group of people incredibly passionate about the category. I think the term “voracious” was created to describe avid readers. Skeptics have said that book readers will never replace their trusty paperbacks because there’s an emotional connection, but they also said that about vinyl records, tapes, CD’s, etc.
OK, so enough about the Kindle. What does this mean for search?
Well, quite simply, the print medium is now officially searchable. Sure, we’ve been able to search online editions of newspapers and magazines for quite some time. But there’s still a considerable population that prefers to read their content on the go, in bed, etc. without having to fire up a laptop. These are just the folks that will take to the Kindle.
Never before (outside of Google Book Search and Amazon’s Search Inside the Book, both of which offered limited selections and functionality) have books been searchable.
But I think this is less about being able to search inside books and more about being able to search while reading books. There’s a big difference. Think about kids doing homework and being able to reference Wikipedia with a quick click. Or adults taking on Dostoyevsky and being able to query a bulletin board thread on the topic. Or anyone reading about a product that sounds cool and being able to Google it and purchase instantly. The possibilities are endless.
And, of course, it’s only a matter of time before the same query-based marketing opportunities available on a computer will be available via Kindle. Whether it’s sponsored listings, contextual listings (oy, can you image Vibrant Media hyperlinking every other word in a book?) or even natural print optimization (for publishers that want to make sure their content is found when people are looking for the next piece to buy), there are myriad Query Marketingsm opportunities in a world of digital print.
Bottom line, the Kindle just might spark something big for search marketers.
Posted by: Aaron Goldman, VP Marketing & Strategic Partnerships
Picture the Future: Mobile Visual Search
I’ve never really been one to ask many questions at search conferences, but during SES Chicago in December of 2006 I asked what I thought was an obvious one to the panel of mobile search optimization experts present: “How do you think voice search will change mobile SEO?” I don’t think the panelists were ready for the question, as the answer that I got was that voice recognition doesn’t really work.
In the next panel on Meet the Mobile Search Engines someone from the audience of the previous session asked a version of my question to the mobile search engines, and the Google rep replied that they did, in fact, have something in the works.
A few months later, Google introduced Goog-411, which allowed users to access Google’s local information through voice search. And yesterday, Greg Sterling of Search Engine Land called Mobile 411 the “mass-market entry point for mobile search”.
I’d have to be a visionary to be vindicated, and I’m making no such claim. It’s just hard to ignore that most people prefer talking in their phones to typing on them, and a mobile search engine that made voice search possible might have an easier time finding an audience.
This is about the same point that Sterling makes in his post on Mobile 411: “The appeal of mobile DA/voice search is its simplicity, familiarity, and convenience for callers.” I couldn’t agree more, and it’s for this reason that I think mobile visual search could be as big as or bigger than voice search.
Mobile visual search is search without keywords—without words at all, in fact. A searcher initiates a query simply by snapping a photo of something with their phone, which the mobile search engine then processes with algorithms and returns relevant digital content based on its interpretation of the user’s visual query.
It may seem like science fiction to some, but mobile visual search is a thing of the present. Vodafone made headlines today by introducing its own mobile visual search engine, Otello; and startups like SnapNow and Mobot have actually been doing this for a few years. Google has their own Mobile Visual Search engine in Neven Vision, which I suspect had something to do with their recent patent filing for reading text in images and video.
Of course, the audience for mobile visual search is currently not so large as to warrant an optimization strategy for most brands just yet, but, as with mobile voice search (and mobile search in general, to some degree), it might be just a matter of time.
The next question becomes, who is best positioned to help marketers leverage mobile visual and voice search? Is it the mobile marketing agencies? Or the search agencies? Or is it a function of the carriers and search engines?
Here at Resolution Media, we define what we do and don’t within the framework of Query Marketingsm. Basically, if a platform is query-based, digital, and non-interruptive, then we consider it part of the Query Marketingsm landscape and, therefore, a service we are well-positioned to deliver based on our experience stimulating consumer response in this environment.
In this case, as opposed to the traditional keyword, the query comes in the form of a picture or voice prompt. But it’s a consumer-initiated query nonetheless. And it’s certainly a digital proposition. So as long as the advertising and content-placement opportunities within mobile visual and voice search remain non-interruptive, then it makes sense for us to incorporate it into our solution set.
Posted by: Bryson Meunier, Product Champion, Natural Search
Spot Runner Says Two Can Play this Game
Forget Microhoo, maybe its Spot Runner that Google should be worried about. Today’s Media Post Online Media Daily covered Spot Runner’s acquisition of Weblistic, “an online media company specializing in search, and some display advertising.”
Per MediaPost, “the deal is part of a push by Spot Runner to offer a fully automated online advertising and media buying system that anyone can use to create, buy, schedule and evaluate advertising on any medium.”
Boy, sure sounds like Google’s vision to me. What’s ironic here is that Google backed into offline media after having cornered the market on long-tail search advertising. Here you have Spot Runner trying to crack search media after having cornered the market on long-tail TV advertising.
I’m not sure which company is better positioned to make a significant impact on the new media platforms they are entering…
By all accounts, Google’s forays into TV, radio, and print have been slow to gain traction (slow by Google standards, that is). But you can’t count out anyone with a bankroll in the billions. And Google is hiring all sorts of Madison Ave. types to help it really improve its solution set.
As for Spot Runner -- they seem to have the proper insight into what makes TV tick for the long-tail. They approached the market to fill a gap that they identified and a constituency that had long been underserved -- not merely to find a new revenue stream like Google did when getting into TV. Only time will tell if this insight will translate well into the search world, which is already mature (hah, can’t believe I’m saying that!) with arguably few gaps to fill -- or at least gaps Spot Runner can do anything about.
What does Weblistic bring to the table? I must admit I don’t know much about them. I queried their brand name and their top natural listing has a brutal meta description so I immediately question their search prowess. Apparently, these are the guys behind Yellowpages.com prior to its acquisition by AT&T so they must have some good business and tech savvy.
It’ll be interesting to see how this plays out. I’m sure it will take time for Spot Runner and Weblistic to integrate so we’ll have to give them some leash before making any judgment. Fortunately for them, their penetration of the new markets they’re entering into will not be evaluated with the same scrutiny as Google so they can likely afford to take their time and get it right.
Unfortunately, though, getting it right is only one side of the equation -- scaling it is the other. Without the millions of advertisers that Google has, I’m not sure how receptive publishers in the online space will be to giving their inventory to Spot Runner. However, given that Spot Runner is part owned by IPG and WPP, their Fortune 5 advertisers could bring some serious clout to the new platform.
Alas, only time will tell if this acquisition hits the spot for the online media ecosystem.
Posted by: Aaron Goldman, VP Marketing & Strategic Partnerships
Lack of Clicks Does Not a Recession Make
Lots of noise in the press the last few days that the recession has officially hit the search marketing world.
ComScore recently released January stats showing flat growth in paid clicks via Google year over year. The news sent investors scurrying and Google’s stock dropped about 9% -- which translates to billions in market cap.
It seems this data reflects that consumers, armed with less discretionary income, have curtailed their online spending and thus… no, wait a minute... the comScore research says nothing about reduced spend or lower conversion rates for search marketers. It just says people clicked on less ads.
Pardon me, but what does a recession have to do with people clicking on ads? Spending less, I’d understand -- but clicking less? They’ve already performed the query. They’ve already stated they are interested in X product, Y service, or Z information. Is something happening while they’re navigating the SERP reminding them they don’t have the money so they better not click on that ad? I think not.
And it’s not like search volume is down. Per Compete, the number of queries on Google in January was up 50% year over year.
Additional ammo against the search-sky-is-falling camp comes from Hitwise. They point out that traffic from Google to retail sites is actually up year over year.
And Tech Crunch notes that Yahoo paid clicks are up 15% year over year. Surely, you can’t say that the recession is affecting Google users but not Yahoo’s?
So what’s cooking here?
Google provided rationale for lower paid clicks in its Q4 earnings call, citing weeding out of low quality advertisers and reformatting AdSense placements to reduce accidental clicks.
However, there’s one contributing factor that has not been alluded to in the press -- outside of my last Search Insider column, that is. The continual roll-out of Universal search on Google could very well be reducing the number of clicks on SERP paid listings.
With the eye drawn to images in the middle of the natural results, people no longer consume SERPs top down. Instead, they start in the middle of the page and sniff around from there. So it’s a lot more likely they’ll get diverted before making it to the sponsored listings at the top or on the right.
What does this mean for paid search marketing? For one, it means clicks on paid listings should be more qualified. If someone took the time to scan past the images and the natural results surrounding them and made it to the paid ads, they must really want that product/service/information.
At the end of the day, savvy search marketers know the click is not the end-all-be-all of campaign performance. It’s all about post-click activity that ultimately leads to revenue -- online and/or offline. Let’s hope investors pick up on this and start using the same metrics to evaluate the health of our industry.
Posted by: Aaron Goldman, VP Marketing & Strategic Partnerships
Keeping an Eye on Net Neutrality
After reading the MediaPost article, Comcast, Net Neutrality Advocates Spar at FCC Hearing,
I’m not sure whether I think that Comcast limiting network bandwidth to peer to peer sites is against net neutrality. However, I do know that net neutrality is an important concept and that, considering this issue has yet to be solved, it is important to track all discussions on the topic. I find it hard to believe there is a reasonable argument against net neutrality. What do others out there think? Is this an example of Comcast simply managing its network bandwidth or is this the beginning of a slippery slope?
Posted by: Matt Spiegel, CEO
Yahews Corp?
Doesn’t have quite the same ring as Microhoo, aye? Nonetheless, word on the street is that Yahoo is talking to News Corp. in an effort to stave off an outright acquisition by Microsoft. In a letter to shareholders, Jerry Yang said he believes Yahoo should remain independent and Microsoft’s offer “significantly undervalues” Yahoo.
What are we to make of comments like these and discussions with other potential suitors, including AOL and even Google? Is Yahoo legitimately pursuing these alternatives? Or is it just trying to muster up leverage so that Microsoft will increase its offer? My guess is a little of both.
Speculation around the News Corp. deal has Yahoo gaining control of MySpace, IGN, Photobucket and other Fox Interactive Media properties in exchange for a 20% stake in the new entity. From what I’ve read, this would give MySpace a valuation of some $10 billion. Seems hefty considering News Corp. paid less than $600 million for it a few short years ago. However, given Facebook’s $15 billion valuation and the fact that MySpace has more users and far more revenue, it doesn’t seem that far-fetched.
But enough about the numbers. What would a Yahews Corp. deal mean for search marketers? Well, my guess is very little. There is the potential of added distribution for Yahoo’s search network -- although Google has MySpace’s search inventory locked up through 2010. As far as I know, FIM does not have any proprietary search technologies.
So this deal would really be centered on scaling display media -- which is a proposition not to be overlooked. Combining the behavioral targeting of Yahoo and Blue Lithium with the glut of impressions available via MySpace and Photobucket would add much needed volume to laser-targeted segments.
That said, as a search guy at a search firm, I am much less excited about the prospects of Yahews Corp. That’s not to say Microhoo is a no-brainer. Going from 3 players to 2 may not be in everyone’s best interests -- not to mention the significant hurdles to integration. But there’s no denying it would have a much bigger impact on the search landscape, what with Live Search’s 10% market share and the innovative adCenter technology. And, for better or worse, you have to admit it’d be exciting.
Posted by: Aaron Goldman, VP Marketing & Strategic Partnerships
Happy Presidents Day!
How Search may affect future Presidents Days...
2008 Presidential Election Candidate Reputation Study
At the time of this study, fifteen of the eighteen declared 2008 presidential candidates had negative search engine listings associated with their name, with both Republicans and Democrats achieving less than 50% positive sentiment, according to research from Marketing Pilgrim, an internet marketing blog and consultancy. The study examined the search results for the names of ten Republican and eight Democratic candidates across the first twenty search results on Google and Yahoo.
Online Political Spending to Hit $73 Million in '08 Cycle
Spending by political advertisers on Internet ads, marketing and promotional efforts is poised this election cycle to be 150 percent higher than the last presidential election cycle. However, although a new PQ Media report shows it could hit $73 million by November, Web revenues from political advertisers are still a drop in the bucket.
Internet Marketing Report on Presidential Campaign Websites
This report examines the use of SEO and social media in the 2008 presidential campaigns using by manually examining the candidates’ websites.
Search About to Upset the Political Applecart
According to the Pew Internet & American Life Project, more than 75 million Americans over the age of 18 look online for news or information about politics or the upcoming campaigns. That's more people than voted for either George Bush (62 million) or John Kerry (59 million) in the 2004 presidential election.
The online population and the voting population largely overlap each other.
· 69% of registered voters are Internet users
· 79% of registered voters under age 60 are Internet users
· 84% of registered voters under age 30 are Internet users
· 63% of those who voted in the last election are Internet users
· 81% of those under age 60 who voted in the last election are Internet users
· 87% of those under age 30 who voted in the last election are Internet users
Posted by: Brooke Nichols, Marketing Manager
Will the CMO Weather the Storm of a Sagging Economy?
I continue to be struck by the quick turnover of CMO’s. I hope we are beginning to see a reversal of this trend, but there is little question that marketing will often be used as the scapegoat if sales falter because of the economy. At the same time, there is little question that too many CMO’s are caught in actions and strategies based on the past, not the current realities.
This Adage article written by Avi Dan, who is former global executive director of Euro RSCG and managing partner of Berlin Cameron Red Cell, gives CMO’s some great food for thought. Avi’s point, “Check out the circuitry of your OS” emphasizes this truth.
The media landscape has changed because consumer behavior has changed. It is no longer good enough to talk about integration of traditional and digital media efforts, nor is it enough to talk about connecting legacy systems to finally understand what marketing truly impacts sales. The tools and talent exists for these things to happen today, my guess is that the CMO’s that will weather this storm (and last longer than two years on the job) are those that are quickly adapting to these new opportunities (and requirements).
Posted by: Matt Spiegel, CEO
What is Fair Agency Compensation?
As the head of new business here at Resolution Media, it’s my job to create mutually beneficial frameworks for relationships between us and our clients. Clearly, there are many variables that make up a strong client/agency partnership -- trust, expertise, thought leadership, access to internal/external resources, well-managed expectations, etc. However, in the business development process, there is one that always bubbles up to the surface and, for better or worse, often clouds all others -- fair compensation.
Just what is fair compensation? This has been a hot topic in the industry rags lately. 2 recent articles caught my eye and prompted this post. Ironically, they both appeared in the “Small Agency Diary” section of AdAge. Having seen Resolution Media go from small agency to big(ger) agency in a few short years, I can appreciate the plight of small agencies to achieve fair compensation. However, I can also attest to the fact that the issue doesn’t get any easier to solve when you’re a big agency.
In assessing various compensation structures, Tom Martin asks, “How long does it take to think a thought?” He notes that, during fee negotiations, clients often feel that the proposed services “just shouldn't, couldn't possibly take that long and cost that much.” To which Martin asks the afore-mentioned question and usually gets it turned right back on him. At which point, he asks if the client wants a big thought or a small thought. After going around and around a bit like this, Martin lands on the real question at hand -- “How much should a solid good ole thought cost? And should that cost be based on the time it takes to think it or the value the thought itself creates?”
Which leads me to John Barker’s AdAge piece in which he questions the validity of agencies being compensated based on hourly work. Cutting right to the chase, Barker points out that “agencies shouldn't be rewarded for mediocrity or penalized for brilliance.” As Martin might say, why should agencies get paid more because it takes them longer to come up with good, big ideas? Or paid less, because they came up with one in no time at all?
So how do clients and agencies achieve fair compensation? I’ll leave you with Martin’s perspective…
“So what is the right answer? There isn't one. Compensation is an imperfect science at best. The first step is for clients and agencies to learn to trust again. Clients need to invest in agencies and agencies in clients. We need to create compensation packages that underwrite effort and reward brilliance regardless of how long it takes. Clients and agencies need to recognize that four singles are just as valuable as a home run. We all need to rededicate ourselves to the core offering -- thought -- and ensure that the person or persons responsible for creating the really big, really valuable thoughts are justly compensated.”
Posted by: Aaron Goldman, VP Marketing & Strategic Partnerships
What Impact Will Slowed Search Engine Growth Have on Agencies?
Last, week I asked the question, “How Will the Recession Affect Search Engines and Agencies?”
My thoughts centered on the impact a recession will have on mid and long-tail search marketers. Given that these companies are newer to search and/or have less cash reserves to weather a financial storm, they are the most likely to pull back on their paid search campaigns with the economy tanking.
While this doesn’t present a big problem for search agencies, as they don’t typically represent small search marketers, this poses a major challenge to the engines that have been growing revenue dramatically quarter over quarter as the tail gets longer. And slower growth yields shareholder frustration, sending stock prices South. For proof, look no further than Google’s $70 slide in the 4 days following the announcement of Q4 earnings that missed analysts forecasts.
So what does slower revenue growth for the engines mean for agencies?
With stock prices retreating, it will become increasingly difficult for search engines to justify hefty R&D budgets -- especially those that are more long-term focused. Less innovation means less opportunity for marketers to expand their search programs. This, in turn, makes it more difficult for search agencies to grow their client’s campaigns and, thus, their own businesses.
Additionally, slower growth will likely bring more consolidation in the space. Without the usual growth from search, companies like Yahoo that are re-organizing to better meet the needs of the market, will have to take more drastic measures. That could mean buying other companies or getting bought themselves. Microsoft’s unsolicited bid for Yahoo certainly reflects Steve Ballmer preying on Jerry Yang’s current financial woes. A consolidated Microohoo could serve to make the role of the agency less vital if marketers can easily cover 90%+ of the search landscape with just 2 partners.
These are just a couple examples of how a slowdown for the search engines can negatively impact agencies. I think the bottom line is that high tides lift all boats and low tides sink them. It will be difficult for any constituency to thrive when the major search providers aren’t doing well -- that includes end-users, too, as they feel the brunt of slower innovation and less choice in the marketplace.
For everyone’s sake, let’s hope things don’t play out this way and the net result of the recession is a boon for search as marketers (big and small alike) move budget away from less accountable media.
Posted by: Aaron Goldman, VP Marketing & Strategic Partnerships
Microhoo - Here We Go Again!
After years of swirling rumors, today Microsoft offered to buy Yahoo for a cool $45 billion. While details are still emerging, I thought I’d share the POV I put together back in May of last year when MediaPost asked me for my thoughts on the potential merger. Looking back on what I said back then, I’m not sure I’d change my stance. This could be a great thing for Microsoft, Yahoo, and the industry at large but it will take a lot of time and energy for the synergy to be fully realized…
Microsoft and Yahoo are a perfect match for each other. In Microsoft, you have a leading technology company with the people and processes in place to create and refine leading edge technology solutions for the proven benefit of end users and enterprise corporations. In Yahoo, you have a leading online media company with the people and processes to leverage digital content for the proven benefit of end-users, advertisers/agencies, and content creators/publishers.
Historically, Microsoft has been deficient in creating scalable digital advertising solutions (it wasn't until the recent launch of AdCenter that it offered any real compelling advertising opportunities for marketers). Historically, Yahoo has been deficient in creating scalable technology solutions to deliver better advertising (it wasn't until the recent Panama update that Yahoo did anything meaningful with the Overture search technology it acquired in 2003).
Bring these two together and you have a company that can excel (pun intended) on both sides of the equation and deliver value to all core constituencies – end-users, enterprise, agencies/marketers, content creators/publishers, etc. It might take years for Microhoo to effectively integrate the two companies to deliver on this promise -- but it's becoming increasingly difficult for them to compete individually with Google in the race to control the lion's share of digital marketing budgets. Joining forces just may be their best bet.
Posted by: Aaron Goldman, VP Marketing & Strategic Partnerships
How Will the Recession Affect Search Engines and Agencies?
There’s been a lot of talk lately about whether or not search is a recession-proof industry. The consensus seems to be that, while not recession-proof, search is certainly recession-resistant and will weather the storm better than most, if not all, other forms of advertising and media. The conventional wisdom is that, as times get tough, marketers will allocate their budget only to the most accountable and profitable mediums -- and we all know search tops that list.
There is one aspect of how the recession will affect our space that has been largely ignored, though -- the impact on small and medium sized businesses. Most of the speculation I’ve seen in the trades centers on what a recession means for the Fortune 500. This is understandable since the majority of ad spending comes from these companies. However, in search, it’s a different story. There are currently over 500,000 search advertisers. The reason Google has been able to blow away Wall Street’s expectations each quarter is not that the big guys are spending more; it’s that more and more little guys are getting into the game.
While I agree that many Fortune 5’s may keep their search budgets intact during an economic downturn, I don’t think the same can be said for the 400,000+ search advertisers that are spending less than $50k per month on search (note: I don’t have data on what the break-point is with respect to total advertisers and monthly spend so I’m just drawing a line in the sand here).
As the recession cuts deeper and consumer spending pulls back further, many of the mom and pops and mid-sized firms that just started investing in search are likely to back off. To them, search is still an unproven medium. And, to many of them, the Internet in general is still a business-model disruptor that they don’t fully understand. It’s unlikely that these folks will have the confidence and foresight to maintain their search presence through an economic downturn. As for those who still have yet to test the search channel, I certainly don’t think a recession will be the time they try it out for the first time.
This may be comforting news for most search agencies out there since they represent the 100,000-ish big guns that will keep spending, but it’s bad news for the search engines that rely heavily on revenue from the tail to support their continued growth. That said, in the search ecosystem, is what’s bad for the goose bad for the gander? Is the fate of search agencies and engines intertwingled? I’ll probe deeper next week but would love to hear thoughts from the community in the meantime.
Posted by: Aaron Goldman, VP Marketing & Strategic Partnerships