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New Report Shows Decline for PPC Advertising in Q1

By Peter Young

The first part of 2009 has been interesting, very interesting. The global recession shows no current signs of recovery in the short term, and much of this has been reflected in advertising budgets worldwide. In particular, the retail sector has been one of the hardest hit, and this has been reflected in Rimm-Kaufman’s early first quarter 2009 PPC data.

The report took data from around 40 of their largest retail clients, and compares the first part of Q1 against performance data from the preceding 7 months or so. For summary purposes, we have included a number of the key points below

  • Sales from search ads have declined by around 20% since week 27 2008 (around July last year)
  • Around a 20% reduction in costs from search ads for the same period
  • Whilst AOV remained fairly constant until the holiday season, these have subsequently declined by around 10% since last year despite conversion rates being fairly similar to the early part of 2008.

In the report, a number of potential reasons for decline were explored, many of which could be reflective of current trends, namely

  1. Decline in sales per click – If it is taking more people to convert, this could potentially result in a higher CPA (depending on acquisition costs), which is likely to impact considerably on ROI – which ultimately is a factor when undertaking channel evaluation.
  2. Competitive pressures – Are competitors bidding more (or are you bidding less), which may result in lower visibility. Are competitors creatives and promotions more compelling than yours – certainly in the current climate this appears to more important than ever.
  3. Fewer searches – Are few searches taking place, certainly this is one key metric that is going to be interesting to keep an eye on.

Following further analysis, the Rimm-Kaufmann report concluded that much of the poor performance particularly in Q1 could be attributed to:

This suggests to us that the main cause of decline is simply fewer people shopping. The people who are shopping are spending less, but the biggest dent has come from traffic.

Such a conclusion has been based on the evolution of brand traffic. Not a bad metric to use, however in my opinion perhaps not wholly reflective of searcher behaviour in a market where price is increasingly a  dominant factor (which given the full search life cycle could have a knock on effect on brand related traffic).

That said however, 2009 is offering a challenge search marketeers have never experienced before, and it is likely to be the year where advertisers are going to scrutinise advertising budgets like never before. As a result, it may also be the year, where we see search take a bigger share of the marketing budgets than ever before.

About Peter Young

Peter Young is the SEO Manager for MVi in Manchester, and a regular blogger on the Holistic Search Marketing blog

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  • http://www.officialonlinebusinessreviews.com/make-money-online/opinion-outpost-a-top-paying-online-survey-company/ Brian P

    I can see the prices are going down because it reflects on my advertising revenue when it comes to CPM. But I do have to say this. This is the opportunity for someone to take over the market since less companies are using PPC so the price per click will go down. Take over may consumers and then when the economy picks up again your business will be a couple steps a head of the game.

    Brian P’s last blog post..By:   Building Top KeyWords to boost your SEO rankings by Work From Home

  • http://www.nrev.com John Murray

    Most companies just keep cutting back. Although everyone these days is looking for a deal, and seem to be fixated with finding it online. I would think the high holiday sales from Amazon would mean that more efforts would be made in online advertising for the larger companies.

  • http://www.velvetblues.com Shirley

    Well this isn’t surprising. Everyone is reducing costs wherever they can, especially if advertising is less and less effective. They probably focus on other more effective types of advertising.

    Shirley’s last blog post..Is Video The Future Of Blogging?

  • http://seonik.com/new-generation-of-internet-payment.html PerfectMOney

    I agree with you ,this is challenging year for marketer thus for ecommerce owner and SEO experts it is time to decide stay back on hold or expansion target,perhaps it is time for both of them to try different target market and expansion payment system.the idea is ,not only American has power of buy ,people who live outside of it certainly has also power to do so.but sometimes only plastic method make them eager to buy

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  • Mike Miller

    My CPC from adsense alone has been cut by as much as 2/3 i’ve went from a high of around $300 a day to now a daily average over the last 7 days of $75 this is revenue from accross 30 or so active domains. I don’t know what to make of it. I think half of this is the economy the other half is google taking a larger share for the sake of their stock holders. The other cpc and cpm ad providers have held steady. Take over a market if you can, but im just trying to hang in here. I have mouths to feed. :)

  • http://www.earringsforever.com EarRings

    Ummm, this is only natural as the economy goes down, budget for advertising also goes down. No surprises here.

  • John Carter

    Adding a managed placement in Google Adwords lets you set a specific bid for that placement. You set higher bids for placements where you’d like more traffic, and lower bids for placements that aren’t meeting your performance goals. You only know that if you have the appropriate conversion tracking in place, and that means getting down into programming, etc. I’m no good at that, so when I need help with my PPC I just call Simon at 219-733-4687.