Advertisers May Flock to Web In Economic Downturn

When the going gets tough, do the tough go online?

Last year, according to the Interactive Advertising Bureau, Online advertising in the US grew 25% (17% not including search) during Q1-Q3 of last year over 2006. Currently the web accounts for less than 10% of all advertising spend but nearly a quarter of the time Americans spend consuming media (higher in some surveys.) Those numbers are full of potential growth for online, possibly accelerated by a softening economy. 26% of households are using DVRs, like TiVo, to skip television advertising, up from just 19% only a year ago. At the same time, 35% of households actively use portable media players, avoiding radio advertising, while 52% of households are using broadband internet at home during typical television viewing hours, according to Forester.

If we enter an economic downturn, advertisers will want to look at measurable returns and strong ROI – and web marketing, seo (such as link building) and paid search advertising with testing can be tracked far better than most other types if done well. Even if the number of advertisers goes down or advertisers spend less, they are not going to reduce their online spends much… or possibly increase them as they shift money from TV and newspaper ads.

“In rich countries the internet is claiming a growing share of advertising—at the expense of traditional media, such as TV and print. There is still a gap between the time people spend online as a fraction of their media consumption (about a fifth) and the fraction of marketing budgets spent on the internet (about 7.5%). Many companies are trying to narrow the gap, which will sustain internet advertising during a downturn. Search advertising, the most effective kind of all, should be safest.” The chart to the right shows a terrific correlation between GDP and advertising.

Recently I did a survey of a client’s paid search campaigns and found that on a monthly basis, every 1% in improvement in conversion equaled $5000 in leads. The smart money for them would be on paying for continued development of high quality content, testing, and smart tactical adjustments and build those numbers as high as possible. But it’s scary – not knowing. I try to get analytics in place and teach the basics, but it’s hard to punk down $20 large on a campaign when you’re not sure what’s going to happen. Then again, you could guess. Or you could watch competitors take a bite. It may be smart to pull back but I find that unlikely.