Recession: PPC Threat or Opportunity?

Before I delve into this week’s column, I want to share a chuckle I had this week. Yahoo has joined OpenSocial, the “common API for social applications across multiple websites,” but Microsoft and its big social media investment, Facebook, are notably absent from the founding OpenSocial corporate membership. This adds one more wrinkle to Microsoft’s bid to acquisition of Yahoo.

Back to paid search strategies. This may be the best year ever to experience a little self-inflicted marketing pain while the economy also provides some pain. Not all pain is productive, but the pain you endure while testing and improving your marketing campaigns is worthwhile. Just like going to the gym and pushing yourself just a bit harder, the pain of testing and experimentation is often procrastinated. If a recession will make all marketing more challenging this year, you’ll need the extra leverage that your successful experiments and tests provided.

Recession: PPC Threat or Opportunity?

The traditional and financial press is screaming, “Recession!” If they’re right and we face an upcoming recession of indeterminate length, many marketers will be feeling pain. Some may be crazy enough to cut their PPC (define) search budgets, allowing competitors to swoop in and grab market share and profit. Other marketers may have the opposite reaction and allocate both a greater share and a larger overall budget to the media famous for high conversion and effectiveness — PPC search — even as overall marketing budgets shrink. Online media and search are among the most measurable of all media, and search is particularly good at capturing late-stage buyers where conversion can be most easily measured. If this happens, regardless of what your CMOs have advocated, you need to be ready to fight.

Consumer reaction to the recession could also go one of two ways. Consumers with lower disposable income or those not feeling confident about the future will likely spend less on products and services overall, further fueling the recession. However, online commerce and using online information to solve problems and research services may have several things going for them that act as a buffer during economic uncertainty. First, online shopping for products and services is considered a value-buying channel by many consumers. With free shipping and gas nearing $4, a trip to the local Wal-Mart or Target may be less attractive than the convenience of online shopping. Will these factors save search from budget cuts? Only time will tell.

Can Marketers Withstand the Pricing Pain?

SEMPO released partial results of its “2007 State of the Market Survey” during SES New York. One finding focused on the willingness of marketers to increase bids. The data isn’t dramatically different from prior years, but it’s important to understand what your competition’s perspective on search bidding may be. Sixty-two percent of advertiser respondents said they could tolerate further rises in paid placement prices, with 45 percent being able to tolerate an increase of 20 percent or more. Unless you feel particularly aggressive, you need a strategy that allows you to bid in an aggressive environment. Only 21 percent of advertisers report they can’t afford to pay more for leads or conversions because they’re currently at maximum efficiency, a slight decrease from 2006 and on par with 2005. Sixty-seven percent of advertiser respondents plan to increase their spending on paid placement campaigns in 2008, compared with nearly 100 percent from last year’s survey.

Why Testing Matters Now More Than Ever

If you’re at your pricing plateau, and even if you aren’t, you can’t go wrong implementing a testing plan with a good chunk of your monthly budget. Testing new keywords, ads, campaign structures, and landing pages is one of the only ways you’ll break through a stagnant campaign and add some reserve price to your bids. Testing requires you to endure some pain, however, because some tests will fail. Unless your campaign is particularly immature and you haven’t flushed out most of the decent-volume keywords that belong in your campaign, it’s preferable to start with testing ad creative along with a review of account structure.

These two campaign improvements are fairly closely linked. That’s because if your Ad Groups aren’t properly structured, you can’t write good creative for them without doing fancy dynamic keyword insertion (DKI), and that can backfire. Start with your most important Ad Groups, giving their structure a fresh look. Are the keywords in the Ad Group similar enough to effectively share the same creative while incorporating the search words into the titles and descriptions? If not, it’s time to break up your Ad Groups and write at least two versions of ad creative for the new groups. There may be some initial pain as Google or other engines charge you a bit more for clicks until your new Ad Group/creative combinations prove themselves to be highly relevant. After that, your investment pays dividends on an ongoing basis.

Prepare yourself for some short-term testing pain, and you’ll be able to weather any longer-term economic pain that may be headed your way.

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