A Gloomy Searchonomic Forecast

Seasons change, time passes, but search carries on, even in the darkest of times. Monday saw European markets taking a 7 percent dip while American markets were closed for a national holiday. The panicky Fed (U.S. Federal Reserve) dropped rates by .75 percent before the market opened Tuesday, hoping to avoid panic by instilling panic.

And so it goes ladies and gentlemen. Recession looms (or is already in progress, depending on who you ask) while the online advertising business wonders if it will make it through an economic downturn. Meanwhile, back on the search front, another report negatively positioning Yahoo has quite a few people feeling a bit uppity.

The sun is still shining on the business even if it seems to rain everywhere I go. After two weeks in Europe talking to search marketers from Paris to Amsterdam to Hamburg, finding some commonality in the challenges we all face hasn’t been easy. It’s certainly there, not to mention worth discussing, before we all panic again.

Yahoo’s Outsourced Search

Admit you’ve lost, give up, and focus on micro applications. Rumors about Yahoo’s demise have been floating around since Google and Yahoo parted ways four years ago, almost to the date.

In retrospect, maybe Yahoo’s decision to purchase Inktomi wasn’t the brightest move in the world, but we digress.

This year’s latest rumor includes Yahoo once again dropping search (or some search components) to focus on display advertising and smaller, more focused application-based platforms like mobile devices.

Last weekend, rumors began circulating about massive layoffs at Yahoo (later manifested in a blog post that apparently got a zero or two mixed up) had Silicon Valley insiders drooling at the potential search carcass. On Tuesday, a Wall Street Journal article corrected the error with a statement from sources close to Yahoo indicating that hundreds (not thousands) of layoffs were possible.

Will Yahoo lay off hundreds? Maybe. Will Yahoo throw in the search towel? If it does, Yahoo may as well pack it up and go home, and here’s why.

Who’s Down for Some Cheap Ads?

When the economy goes down for a dirt nap, so do ad dollars. This we know. The only thing our Internet ad-driven environment doesn’t know is which media investments will go first. In the old days, fluffy creative budgets would get nailed and overstaffed marketing groups would feel the pinch with a layoff or two. Not so today.

Even in lackluster economic growth conditions, our numbers are up. Hitwise reported that visits to its retail index were up 17 percent in the 2007 holiday season and spending online is at an all-time high.

Sapient released survey results yesterday that shed a little light on most favored online advertising formats. About half of Sapient’s survey respondents indicated they were either “highly confident” or “confident” they could track across multiple channels.

I like to take pot shots at survey data on a fairly consistent basis due to the inherent ambiguity of answers like “somewhat confident,” but in this instance I’ll make an exception. The timing of this information is absolutely impeccable.

Favorable Formats

Sapient’s survey results regarding most favorable ad formats is pretty enlightening, particularly when compared to answers about formats in which they plan to increase spending. Thirty-five percent said they were least confident in their ability to track social networking performance (in real-time) while 11 percent said they were least confident in their ability to track search in the same way.

While I await clarification on what “real-time” means to the 120 surveyed advertising decision makers and influencers, 28 percent of respondents indicated they planned to increase spending on search “most” in the next 6 to 12 months. Then again, most digital formats indicated double digit increases (14 to 19 percent) and only 2 percent indicated that non-digital formats were going to get the most money.

Is this a bad time for Yahoo to bail on search? Most definitely, but it seems the big winners will be providers offering combined analytics platforms. Most plan to spend more on specific trackable formats. Comparing 2007 to 2008 survey numbers, only 12 percent of respondents tracked social media in 2007 but nearly half (48 percent) said they would invest in tracking social media this year.

Search continues to grow and social components must be accountable, thereby holding online advertising to higher standard than traditional media and ensuring its safety net in a recession. We hope.

Insert Food, Chew, and Then Swallow

When the pressure’s on, uneasy feelings can turn to panic faster than an Obama/Hillary debate goes dirty. Logic and reason rarely prevail when the media is in control of headlines and stories. Then again, breaking a story with a blog is (all too often) a distant second to fact checking.

Maybe the German air is getting to me, maybe my weak dollar is making me crazy, but I think it’s high time we all take a step back and look at what we’re facing. If recession is an inevitability, so be it. If that’s what it takes to correct an upside-down economic situation, then we should take a step back before we move forward again.

A step back shouldn’t equate to repeating past mistakes. Much in the same way our weak dollar and inevitable recession can’t be remedied by short-term tax rebates and cutting interest rates, Yahoo can’t get fixed by cutting off its arm to spite its face. Long-term thinking is not necessarily the norm in the world today, but maybe it should be.

Join us for SES London February 19-21 and for training classes on February 22.

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