For the last several years, search engine marketing has been on a tear. While the big advertisers sat on the sidelines in the beginning, they have lately been ramping up their spend on pay-per-click advertising, primarily on search engines but also affiliate sites like those that run Google Adsense.
However, I am calling a top to this market now. Here are five reasons why a pay-per-click advertising recession looms. (If you depend on Adsense for the bulk of your revenue, this applies to you as well.)
1) Clutter
Have you shopped for a car lately? I have. And I did a lot of Google searches in the process but largely ignored the ads. The reason - clutter. Take a look at this search. Ads are stacked on top of each other. There are 10 ads in my browser. Advertising clutter is a known deterrent to advertising effectiveness. TV advertising suffers from clutter and there's no reason why search engines are immune. The New York Times touched on this today.
2) Declining Relevance of Traffic/Transition to Cost Per Action
OK, you have heard this from me twice in a week now so I won't spend a lot of time here. Traffic is becoming irrelevant unless it results in action. There will be some pain as search engine marketing moves to a cost per action model, rather than one based on sometimes irrelevant clicks. This will contribute to a search engine marketing slowdown.
3) Rising Costs
According to a five-year Forrester interactive marketing forecast published last week, costs per keyword rose an average 33% each month in Q1 2007 compared with the same period in 2006. As a result, some marketers are buying lots more Long Tail terms. Further, Forrester says that "many still spend with abandon." The reason is that search outperforms other advertising - but for how long? And again, how do you define perform (see point #2)? The madness will end as soon as the economy tightens.
4) Marketers Spread the Ball Around
Move over search, you're not the only game in town. Marketers are increasingly investing in behavioral targeting, webisodes as well as more social channels like blogs and soc nets studies say. These formats are becoming more targeted and effective too.
5) Search Ads Are Viewed as Untrustworthy
If there's anything that Enron, Bill Bellichick, Marion Jones, Worldcom and Barry Bonds taught us, it's this - trust is king. Google CEO Eric Schmidt knows this - note his comments this week to AdAge. However, according to a study published by Nielsen last week, search engine advertising suffers from low trust.
Now, before all the search consultants flame this post with comments, I believe strongly in the marketing firepower of search engines. It's a terrific venue and one that I regularly advise our clients to invest in.
However, it's impossible to deny that pain is coming. As SEM matures it will move to a new model just as spending on digital marketing overall rises and diversifies. This means the market will recede before it expands. In the long run, that's good for everyone. Just be prepared for what's coming.
