Is the End of Online Ad Growth Near?

July 1, 2009

Last month a Microsoft executive made a prediction. “From a Microsoft view, we don’t believe budgets will go up any time soon, and I’m talking the next three years,” said John Mangelaars, vice president, EMEA, consumer and online, Microsoft. In deliberating this possibility, Bruce, Susan and Virginia agree that ad budgets are still in flux, however, they’re not convinced that online ad spend will drop over the long term. Giving Mangelaars the benefit of the doubt, the hosts concede his prediction may be possible if he’s speaking about one particular online channel. To gauge the direction of online ad budgets, they take a look at a report of expected ad budgets in the next year.

Colby Atwood, president of the media research company Borrell Associates, talks to Virginia about his organization’s findings the subject. Earlier this year, Colby wrote that local online ad spending is expected to “level off and then start declining.” But it’s not because businesses are abandoning in the medium. Marketers are still very interested in the online space, but advertising isn’t the only way to reach consumers. An ad can act like an initial introduction, so once both parties know each other, introductions aren’t needed. Relationship building and keeping customers happy remain the long-term areas of focus. Another report they review is Economics of Search Advertising, which examines how the search ad sales model can be improved. pie chart from Economics of Search Marketing report
From the Economics of Search Marketing

In all of this, it’s important to look at a metric that helps search marketers make informed decisions about ad spend: a customer’s lifetime value. Bruce Clay, Inc. SEM analyst Jim Stratton talks to Susan and Virginia about analyzing the lifetime value of pay per click (PPC) customers — a metric that can help a marketer optimize their search ad budget. If you know your average customer’s lifetime value for your business, you’ll know how much you can spend on an ad that caters to him. If a customer comes to your site from a search ad and leaves happy, there’s a good chance he’ll be back in the future.