Search spend is slowing, but paid search remains key to digital marketing strategy

Search spend is slowing by Paid Search remains crucial to digital marketingForrester recently released a forecast that people in the search industry may find a little disquieting. These gods of digital marketing research are predicting that year-on-year growth in paid search is set to slow to 19% in the current year. This is compared to 31% for last year and 24% between 2009 and 2010.

Unsettled by the findings, I decided to audit our own growth in paid search spend.

And the results neatly mirror Forrester’s: spend growth amongst Tug’s PPC clients, held from 2010 to 2012, slowed from 46% in 2010/11 down to 17% in 2011/12. So could this mark a nail in the coffin for paid search? Of course not. 

Although we are now in a climate where social media and mobile are the current darlings of digital marketing, paid search will always remain one of the most crucial elements of a digital marketing strategy and budget. So why is paid search spend experiencing a slowdown?

Sometimes, when analysing digital trends, we can’t see the wood for trees. We get bogged down with insider detail and miss the impact of what’s going on in the wider world. Arguably the largest contributor to this slowdown is the overall economic slowdown. Brands are making cutbacks due to the stop-start economic climate.

A more micro, industry-focused look at causal conditions suggests that this slowdown is due to an increase in cost-per-click (CPC) costs. Certainly, at Tug, we’ve seen a 9% increase in paid search CPC costs over the past year. But this is an issue that clients don’t seem to be particularly concerned about. And CPC cost increases are more likely due to progressive changes in strategy. Some clients, for example, are requesting a pause in ‘pure brand’ activity, the type of marketing that traditionally creates the cheapest CPCs.

To account for this slow in paid search spend growth, it has been suggested, even by Forrester themselves, that PPC budgets are being cannibalised by SEO budgets. And this seems to hold some element of truth. Amongst Tug’s clients, for whom we have run PPC and SEO for since 2010, we actually saw a small percentage decrease in PPC spends (15%) between 2011 and 2012, alongside a 13% increase in SEO spend. 

Another contributing factor is dilution of search budgets due to the increasing prevalence of social media and mobile. In a tough economy, like ours, budgets tend to, at best, remain the same but are often subject to decrease. Ironically, these economic conditions have hit us at a time when budgets need to increase in order to accommodate the expanding digital marketing landscape. The almost inevitable consequence is that search budgets are being skimmed to pay for newer channels.

Clearly, social media and mobile are an essential part of building online brand awareness and trust. But these newer – some might say ‘sexier’ – channels shouldn’t overshadow search because SEO and PPC are still integral to digital success. SEO, for example, is a key driver when it comes to sales and research. Similarly, PPC is crucial when it comes to the purchase ROI stage of the buying cycle; the part where ROI is often highest. And PPC, thanks to display networks’ improved quality and functionality, is now also becoming an important online branding tool.

Brands that perform best are those that combine the right mix across the entire digital marketing spectrum, integrating SEO, PPC, display, social media and mobile. Focussing too much on one area alone makes for a poor customer journey… and poor sales.

Agencies have a duty to educate client-side marketers about the importance of not decreasing budgets from one channel to pay for another. The most persuasive form of education, of course, is a demonstration of search’s power to consistently deliver ROI positive results. If the channel is making a decent and visible ROI, then cutting its budget would be illogical.

Ollie Vaughan is a PPC account director at search & social media agency, Tug.

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