Financial Crisis and Internet Marketing

The widely followed Dow Jones Industrials slid another 508 points yesterday, closing at 9,447. Yikes, 19 more days like that and the stock market will be gone! For the sake of our economy and everyone in this country, things will improve, and the sooner the better. I fear the potential fall-out from what has already happened in the stock market is just beginning to be realized and further far-reaching consequences are likely to develop. Already, the financial crisis here at home has spread overseas as international banks Financial Crisis and Internet Marketingand markets are now in a state of crisis as well. In fact, global markets lost $8.1 trillion in value over the past 3 months. Based on these unsettling facts, the question for today is, how will this financial crisis impact Internet marketing, and more specifically pay-per-click (PPC) advertising? For the sake of this article, I’m going to assume the stock market does not remain on its current path to zero. If it does, we’ll all have much more serious things to worry about than Internet advertising.

Per a previous PPC advertising news review I wrote back in July, the PPC Economy still appears stable, at least for now. Recent surveys suggest that U.S. online advertising is still slated to grow 22.7% in 2008, though this is less than the 32.7% growth previously anticipated. I also referenced Henry Blodget, co-founder of Silicon Alley Insider and someone whose opinion I greatly respect. He stated that, “new or developing media–those that still are growing more quickly than advertising expenditures as a whole–exhibit fewer recessionary effects than traditional media. More specifically, advertising spending on “new media” does not decline before, during, or after recessions, it simply grows less quickly than during normal years. This trend was clearly visible in the growth of television advertising during the recessions of the 1950s and 1960s, and in the growth of cable advertising during the 1990s.” In fact, Hal Varian, Google’s chief economist, agreed, telling analysts that, “During periods of slow economic growth, the last thing an advertiser wants to cut is spending on search-based advertising.”

However, right now, no companies seem to be safe. Just this week, Internet giant eBay  shed 10% of its workforce, meaning 1,600 more people are now seeking employment. They’re far from alone as job loss continues at an alarming rate. Earlier this month, the U.S. Labor Department reported the economy lost another 159,000 jobs in September, far more than the 100,000 lost jobs economists were expecting. The economy has now lost 760,000 jobs since January. These numbers cast a harsh reality on the tragic state of our economy.

To examine if PPC advertising is suffering, let’s take a closer look at Google’s last quarterly earnings release. Google earns the vast majority of their revenue from their Google AdWords search-marketing program:

Google reported revenues of $5.37 billion for the last quarter, an increase of 39% compared to the same quarter a year earlier. This indicates that advertisers are still willing to shell out money to Google, though at a slower growth rate than the year prior.

Here at JumpFly, where all we do is setup and manage PPC accounts, we have fortunately not yet witnessed any recognizable slow down in new or existing clients as a result of current economic conditions. From our eyes, it appears that the search engine marketing industry remains strong – increasingly competitive, but strong. As I watch the economy crumbling around me, I occasionally ponder the demise of PPC advertising, but I just don’t think it’s going to happen. PPC advertising is an incredibly powerful, proven and cost-effective medium for reaching targeted customers. Advertisers still need to reach their targeted audience and there is likely no more cost effective way to do so. 

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