Don’t Worry About That Economic Slowdown

The Search Ad marketplace “sky” won’t fall when our economy slows or possibly kicks into a recession this year.

Lately, we have all heard confirmations about the downturn. Jim Zarroli reported “hiring is down, real estate is in a coma and banks have suddenly become a lot more skittish” on NPR. Some 42% of surveyed economists (WSJ, paid access) believe there’s a chance of recession, and the Fed’s talking about lowering interest rates to stave it off.

Are search ads in some protective cocoon? Let’s leave aside the well-worn argument that these ads are the safest due to ROI tracking and accountability. I think it’s more important to consider other influences that could protect them from this downturn.

* Search Ads As Smaller Line Item — Even if a company wants to cut ad dollars, search isn’t where they would save the most. While each industry’s mix varies, these ads typically represent 2% of all advertising revenues — simply not a substantial savings.

* Search Ads Could Increase — According to Kevin Lee, “If a mere 10 percent were reallocated from the top three media line items to SEM, most search budgets would double.” Should marketers decide to cut their ad dollars, then they might consider shifting some of those savings into more productive search ads.

* Financial Industry Still Spending — While “bell-weather” financial services are clearly getting challenged, they continue spending online. At Efficient Frontier, Leann Prescott says they’ve experienced substantial sector growth this year. Ongoing clients (more than one year old) even increased spends by 35% between November 2007 and 2006.

*Search Ad Prospects Look Good — According to Forrester projections, search ad revenues are forecast to grow from $4.5 billion (2007) to $10.1 billion (2012). It would take a lot for the Google juggernaut to switch gears as well.

So there’s no need to be Chicken Little. Recession or not, the search marketplace might shift around but seems pretty stable. You won’t see any search ad retrenchment this year.

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