Unless you’ve been hiding under the bedcovers, a recession is looming or already here, with most economists pointing to the latter. Retailers reported that year-over-year January sales numbers were negative, consumer debt has increased (most likely to cover basic household needs), and restructuring at firms such as Macy’s, Home Depot and Ann Taylor have resulted in layoff. They are not alone; outplacement firm Challenger Gray & Christmas reported that layoffs increased 69% in January. The general consensus is that Americans need to get their basic household finances in order before we can expect them to spend discretionary income.
It is marketing legend that advertising is the first to go in a downturn, especially when consumers aren’t able to spend. This prompts firms to tighten their belts and focus on realizing efficiencies, rather than spending on television and print campaigns that look terribly expensive to the CFO. This was true in March 2001, the last documented peak following 10 years of expansion. At that time, the Internet was young, and the downturn not only took a toll on both advertising budgets and agency jobs, but sparked a skepticism of all things “Internet.”
What, if anything, will be different in 2008? Now that Internet access and search engines are considered basic utilities by many households, it is hard to imagine that consumers will be searching less. Knowing that search engine marketing actually grew and matured during the last downturn, can it be that the medium will serve as advertising’s recession special?
Multiple threads across the Web suggest that after budgets have been slashed, there will simply be a reallocation of funds towards the most efficient means of advertising. Not surprisingly, search engine optimization has starred in multiple threads across the Web. Lee Odden of TopRankBlog published a list of “Recession-proof search engine optimization tips,” pointing to the fact that even with slashed budgets, current resources can create and optimize content.
Paid search might also be on the recession special menu, as the engines react to their stock declines. Danny Sullivan of SearchEngineLand is diligently researching and documenting key indicators in a series of post, the first of which is titled, “Search Stocks & The Stock Crash: GOOG, YHOO & MSFT.” Rumors abound that if it gets too bad, the engines will tweak keyword pricing algorithms to remain attractive.
I’m not so sure if I buy into this last theory quite yet. Search is still the most efficient mechanism for driving online conversions, and price dropping is usually a last resort. Initially, I expect to see a reallocation of online funds with search taking up a larger portion. In discussing the online advertising campaign for a major product launch this spring, my client came to this same conclusion. As he drafted three spend tiers to present to management, search dollars remained the same. If the pockets are deeper than expected, the entire digital toolset will be employed, with search accounting for 25%. In the next tier down, search owns a greater percentage. Even in the direst of budget scenarios, search dominates the budget.