In their print version, November 29th-December 5th issue – page 65, The Economist ran an article on online advertising. The article predicts that online ads “will be relatively unscathed in the downturn”. We have seen this theme echoed elsewhere recently. Although we were glad to read it from such an esteemed source, as search marketers this prediction was not really a surprise to us.
In the article, the writer pointed out good reasoning for their prediction, and we found one observation in particular worth our follow up. Midway through their article, they wrote:
“All this makes spending on advertising much less speculative, so that it starts to be treated as a cost of sales.”
Thinking there would be some grist for the mill here, we asked an accountant about the implications of this statement. As it sounds to us, the writer’s description applies to business strategy, a bottom line accountant’s way of thinking about search advertising, rather than which general ledger code to use for it.
The Difference in Branding and Direct Response Search Advertising
As an example, sponsorship of a golf tournament is nearly impossible to tie to incremental sales of a car company’s product or service. During a predicted cash shortage, sponsorships and branding attempts are more likely to get nixed. Conversely, the results of search advertising for a website can be highly targeted, both geographically and by topic. For smaller businesses, there are levels of effectiveness within direct response efforts. Unlike a year-long contract in a printed phone directory with declining use, search ads tend to be more flexible and can be customized in ways that respond to business situations as they change. As we have seen lately with gasoline prices, financial issues, and bailouts of epic proportions, business circumstances certainly can change quickly.
Click based actions on a web page can be designated as a “conversion” and measured, giving online ads an advantage during a weak economy. This measurement occurs in close to real time. For ecommerce, the return on investment (ROI) can be tracked to the keyword level. Additionally, any online conversion can be traced back to the keyword that triggered the conversion. For local businesses (or any business that relies on incoming telephone calls) we can layer in the tracking of incoming calls by source. For complex sales or business leads, the ROI from all conversions is usually one or more steps removed from the original click, but still can be quantified.
During a downturn, some businesses go away and the survivors gain market share. Those who have enough cash flow to use smarter tools, such as measurable ways to gain new customers, will survive and thrive. At TopSide Media, we talk about these attributes daily around the water cooler and with clients. It is good to see them written about in layman’s terms, and we tip our Stetsons to The Economist for the well written article.
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