There are two omi­nous trends devel­op­ing in Search Mar­ket­ing right now.

Trend 1: Prices Are Rising

On the one hand, there’s a longer term macro-trend where more dol­lars are flow­ing online which is push­ing up CPC prices. You can see this first in the growth of online ad spend­ing (from a recent Jupiter study):

And sec­ondly in the growth in CPC prices (from Jupiter):

Accord­ing to Jupiter, “Sixty-six per­cent of search mar­keters said high key­word prices were their biggest chal­lenge in paid search.” Among agen­cies, 84% say it’s their biggest challenge.

More dol­lars are flow­ing online and dri­ving up CPC prices. That’s the macro-trend.

Trend 2: Con­ver­sion Rates Are Dropping

On the other hand, there’s a shorter term micro-trend where con­sumers have less dis­pos­able income for pur­chases. As the eco­nomic down­turn con­tin­ues to crush the world­wide mar­kets, con­sumers are tail­ing back spend­ing. In other words, there are fewer con­ver­sions to be had.

Ris­ing CPC prices and lower con­ver­sion rates are a double-edged sword for the advertiser.

Sheath­ing the Double-Edged Sword

There’s no get­ting around the fact that this is a bad sit­u­a­tion for search mar­keters but there are prod­ucts and best prac­tices out there that can help. Get­ting back to the search mar­ket­ing basics of ad copy test­ing and using an auto­mated bid man­age­ment tool will help keep your CPCs down and auto­mat­i­cally lower bids on key­words that no longer convert.

On the con­ver­sion side, you can cap­ture a larger share of the shrink­ing num­ber of con­ver­sions to be had by using a land­ing page opti­miza­tion tool and run­ning large num­bers of A/B and mul­ti­vari­ate tests.

Omni­ture is also doing a multi-city tour both in Europe and across the U.S. to dis­cuss these issues in detail. We will be giv­ing spe­cific rec­om­men­da­tions on how to com­bat the double-edged sword of ris­ing click costs and decreased con­sumer spend­ing. Hope to see you there.
Good luck out there.