Amidst all the financial gloom of the past few weeks comes the notion that search is better positioned in this recessionary period than other media. While this may be true the future of search revenues thrive on something which may be in short supply soon, competition. At any given time an auction is occurring for search real estate against a given keyword. There are in essence two bidding models in effect. First is that of advertiser vs. engine to qualify for participation in the second auction, that of advertiser v advertiser. Let’s ignore the first auction because that is not soon to dissipate, unless Google truly intends to live up to their recent statements about not controlling market prices.
Instead let’s focus on the second auction the one between advertisers. These are bleak times for entire market sectors. In addition to the financial segment the retail and travel industries are going to get hit hard. Many category experts are projecting several major retailers to endure a last Holiday season before going bankrupt or consolidating with other retailers. GM is attempting a merger of some sort with Chrysler and anyone who travels needs to only look at the deeply depressed airline industry to see further consolidation. So, why does this matter in search?
Well, if an auction that once held 5-10 major bidders is suddenly between 2-3 the competition and pricing is sure to decrease overall. And while this is good for the advertisers it is not a good thing for the vendors in the space. So, whether or not search is recession proof remains to be seen but many lines of business are not and with that may come further pain for the Search industry.
@Chris
Nice post!
The auction model is the heart of search advertising campaigns of course. But the days where the auction is leading are gone.
The price you pay per click is more and more determined by the quality of the ads, which has nothing to do with the auction.
So in my opinion focussing on the quality of your search advertising campaigns is more important than ever.
Chris,
My line of thinking would be that if the search space sees a serious decline in advertising, the effects would be most felt by Ask and MSN first, then Yahoo on their advertising revenue,. It seems to makes sense to run just Google if you are going to keep any search campaign alive. A sort of tiered “canary in the coal mine” theory. No?
Matt