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According to a recent post from Heather Hopkins at Hitwise, the share of search traffic coming from paid listings is decreasing at the expense of organic traffic.

The stats highlight a 26% decline in the share of paid clicks, but is paid search really falling? Let’s take a closer look...

Hitwise’s claim was based upon tracking of branded terms such as 'Travelocity', 'orbitz' and 'walmart”'and finding that spending has fallen year-over-year for these.

But this approach perhaps oversimplifies things a little and ignores the way in which many search marketing campaigns are evolving.

Sure, brand bidding is important and some studies have shown there’s a 10-20% lift in response through buying your branded terms. But many marketers now choose to avoid buying their brand name, as their company is most likely already listed in the first, and more importantly, free spots in the organic listings.

Instead, it’s becoming increasingly common to squeeze out branded terms in favour of more effective long-tail search terms that will acquire search traffic that wouldn’t have been captured ‘naturally’. It’s part of being more efficient with your spend.

Perhaps the reason Hitwise found a lower share of paid clicks for the branded terms they tracked was because, when search budgets are cut, branded terms are deemed unnecessary and are often the first to go. They might look good on a spreadsheet of performance, but often they don’t always drive new business, since searchers were looking for the company anyway, and clearly already familiar with the brand.

Paid search spend may be going down as a share of overall search, but this is a result of two factors:

  1. Less competition in the paid search space, resulting in fewer overall sponsored clicks.
  2. A growing universe of searches. In actual fact, paid search is on the increase if one looks at it in absolute terms.

That said, taking a closer look at the first factor, certainly search faces some major challenges in the current economic climate. As Techcrunch showed, searches may be up, but there are fewer advertisers around to spend money on search, as retailers in particular feel the full force of the recession.

But this can provide an opportunity for the advertisers that remain. Basic economics tells us that more supply (searches conducted) over less demand (slower growth in advertisers) will drive down the actual cost per acquisition in search, leading to companies reaching their customers more efficiently. If advertisers and agencies are finding this isn’t the case, it’s clear they do not have the correct search marketing strategies in place.

So, while paid search may appear to be down in comparison to the overwhelming growth of the industry as a whole, spending is definitely still going up. If you’re still not convinced, then look to Google - the main measure of search spending.

Although performance has slowed slightly in Q2 2009, paid clicks were still 15% higher year-on-year.

What’s clear from all of this is that as search matures, it is becoming an increasingly complex category to manage, and the best way to manage this complexity is to arm yourself with the right tools and technology infrastructure, and take comfort in knowing that the next time this ever-changing marketplace throws you for a loop, you’ll be positioned to take the change in stride.

Ed Stevenson

Published 23 July, 2009 by Ed Stevenson

Ed Stevenson is Managing Director (Europe) of Marin Software, a paid search technology firm, and a contributor to Econsultancy. He also writes the Big Search blog. 

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Comments (3)

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Mike

While I don't disagree with your points about brand advertising shifts, or even some shifts to long tail... I can tell you that in several of my large retail clients traffic has been down during this economic slump. In fact, year over year comparisons of impression / click numbers for exact match high-traffic keywords almost seem to mimic the Dow's roller coaster ride since last September. Are we spending less? Maybe slightly, but we're making up for the loss in core buckets by going out there and buying fill-in, "reach" traffic and doing everything we can to increase our click through rates. Both of these are masking the true drop in core traffic.

I do disagree with one of your factors which is "less competition in the paid search space". I'm not sure where this is happening, but in every vertical we manage in our agency we have seen more and more competition in the last few years. in fact, I wouldn't be surprised to hear that the rate of people putting their money into Google has INCREASED during this recession since search has an easier time proving ROI than some more tradiditonal mediums.

As much as I would like to be with ya on this article, I'm afriad I'm still a bit skeptical about the trend in search spending. I would be curious to see a follow-up article from you with a year over year comparison of some of your client's experiences with their core traffic, and see if there just might be a drop in traffic and available inventory for those words.

over 7 years ago

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Mike

I guess I should clarify that "reach" traffic generally means I'm buying traffic that converts at a lower rate than my core words due to the fact that its either earlier in the buying cycle or is simply less qualified traffic. Often this is filler traffic that helps add revenue without large ROI contribution, but this filler is having to do more and more of the work.

over 7 years ago

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John

Always interesting to hear how others budgets are being effected, its certainly more insightful than reading about trends from hitwise.

However I would personally question the usefulness of looking at ‘paid search spend’ as a thing in its own right like you might the economy as a whole.

Paid search budgets (and any media budget for that matter) are intrinsically tied to the wider economic conditions of the market and this varies massively on a sector by sector basis.

For example and without looking too closely at the figures the paid search budgets we’re managing would probably look like this year on year:

Retail – spend down slightly

B2B – mostly consistent

Travel – down

Financial – up a bit

And obviously within each sector you really need to drill down into the particular sub-sets of each. So you can imagine within a sector such as finance there is a massive deviation between media spend on different financial products- the bottom has fallen out of certain markets like endowments to the point most of the main players have seized PPC altogether where as we’ve seen record trading in the stock market meaning spend and CPC in the share dealing market have increased significantly.

For these reasons I’d always take figures or trends which bundle all paid search activity together with a pinch of salt.

over 7 years ago

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