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