Facing perhaps the toughest retail environment in decades, multi-channel retailers in the United States turned to paid search in the run up to the holiday shopping season in an effort to boost sales.

SearchIgnite, a search management provider, today reported that US multi-channel retailers increased their spending on paid search by 12% in Q4 2008 as compared to Q4 2007.

According to SearchIgnite's report (PDF), most of the increased spend took place leading up to Black Friday. After Black Friday, however, spend decreased from the same period in 2007.

All told, paid search spend, year over year, was up 15% in October and 43% in November but down 14% in December.

SearchIgnite found that consumers are still opening their wallets but are taking out less money:

"On average, consumers continue to purchase online at a steady rate (i.e. Conversion Rate), although they are spending 10% less on average per transaction (Average Order Value)."

This is not exactly great news for retailers. While conversion rates are important, increased spend producing lower total dollar sales logically means many retailers likely faced tighter margins this holiday season, especially given the hefty discounts many offered in an effort to lure shoppers and the increased competition that may have resulted from more retailers upping their spend.

When Amazon reported its "best ever" holiday season last month, some noted that Amazon was mum on key metrics such as average order value and profit margins. Yet these are the true measures of success.

SearchIgnite's report does provide a bit of welcome news for companies in the business of paid search, as the increased spend during the holiday season does seem to provide some validation that paid search is more appealing in tough times. Many have predicted that search marketing will do quite well in this economy.

But there are limits. The decreased spending in December is a reminder that a sinking tide lowers all ships and the increased spend on paid search before 2008's difficult Black Friday is likely something we'll see less of from retailers going forward until consumers start spending like they used to.

Patricio Robles

Published 7 January, 2009 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

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