Google’s unexpectedly great fourth quarter earnings may have been its last truly upbeat news for awhile, as indicators begin to pile up suggesting the recession has caught up to search.
Agencies have begun to say publicly and privately that their clients are spending less on search advertising — or at least less than they’d expected. Razorfish noted last week that while the category has so far been relatively inoculated against the fall-off in demand that’s hurt display ad sellers, that will change. “We do anticipate that as budgets tighten, search will also be impacted by the economy this year,” the agency said in its Digital Outlook Report this week.
Meanwhile a survey of search marketing pros suggests spending will increase by about 9 percent this year, to $14.7 billion. That may sound like the search business is still riding a gravy train, but the growth rate would be less than half what was projected in 2007.
“Issues constraining growth include the global economic recession, which affects both demand and supply-side factors, including a drop in inventory in certain categories as consumers scale back spending (and consequently searches),” according to the report. “However, the global recession also means advertisers are looking for the accountability and efficiency provided by search engine marketing.”
The recession’s ongoing impact on search budgets will become more clear when Google reports its Q1 earnings next month. Eric Schmidt, speaking at an investor conference last week, acknowledged Google is “not immune” to the increasingly generalized economic pain. However any negative impact on the search marketplace as a whole will likely mean slower growth for Google; bets are the company will not lose money. As Schmidt put it in January, “We’re certainly prepared to get through this no problem.”