Great Expectations For 2009?

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Yearly predictions for search engine marketing usually focus on technology and industry trends. This year, to quote a famous phrase, “It’s the economy, stupid.”

Lower Cost Per Click— Many analysts predict that SEM will be unaffected by the economy in 2009, since marketers will slash other advertising before touching their search marketing budgets. Perhaps, but for many small businesses, search engine marketing is their only advertising. In sectors dominated by small business, we could see big changes in pay-per-click prices.

Since click prices on Google AdWords and Yahoo! Search Marketing are determined by competitive bid, and since we can expect some bidders to exit the market, those who stay will see less competition and lower cost-per-click. Having seen bid prices for some clients increase by 30% over the last three years, this price deflation is a good thing indeed. For Google and Yahoo! on the other hand, bid price deflation is not good news at all.

Google Pumps Up Revenues, No Matter What — Google missed its profit expectations in two quarters of 2008, and the company’s stock price is down more than 50% from its 2007 high. As a result, expect Google to do all it can to grow revenue this year. The company has already relaxed its long-standing rule against alcohol advertising.

More insidiously, the company has tended to introduce AdWords features that pump up Google’s earnings at the expense of advertisers. Witness “Automatic Matching,” an awful idea in which Google decided to help advertisers spend any excess in their daily budget by automatically expanding their keyword sets. Expect Google to implement similar measures anywhere advertisers have given their implied consent for Google to burn their money.

The easiest avenue for this is through Google’s Quality Score, an opaque system that rewards or punishes advertisers based on performance. Advertisers will need to stay on top of their ad quality to counter waste of their ad dollars.

Android On The March — 2009 could be the make-or-break year for Android, Google’s cell phone operating system. Smartphones have finally made mobile computing a reality for the masses, and the battle between Android, iPhone, and Windows Mobile will be the most important tech fight of 2009. Expect Android phones from Samsung, Motorola, and possibly Sony Ericsson before the end of the year. T-Mobile’s G1 is already on the market.

There are too many variables here to predict a winner. For marketers, the key is that mobile ads will become a viable part of their advertising mix for the first time in 2009.

Whither Yahoo!? — Finally, what about Yahoo!? The company is suffering through the same economic trends as Google, but is in a much weaker position, with a smaller share of the search market and more of their revenue coming from display ads.

2008 was a disastrous year for Yahoo!. After escaping a shotgun wedding with Microsoft, the company was left at the altar by Google. With Jerry Yang giving up the CEO post, Yahoo! faces an uncertain future indeed. Expect all options to be on the table in 2009.

Some analysts predict that Yahoo! will sell its search business as a separate business unit. But behavioral ad targeting is a critical part of Yahoo!’s overall strategy, and behavioral targeting requires Yahoo! to know a visitor’s search history. Any sale of the company might have to be an all-or-nothing affair.

Then again, if Yahoo!’s board believed that Microsoft’s $31 a share offer undervalued the company, they certainly won’t be excited about selling at today’s stock price. Unless sliding revenue forces the company’s hand, Yahoo! may simply muddle through 2009 hoping for brighter days and a better stock market.

Whatever happens, 2009 is likely to go down as a year in which great expectations were put aside and the major players struggled to find ways to deal with the ongoing effects of the financial traumas of 2008.

About the Author

Tom Dahm is the President of BridgePose Search Engine Marketing and past founder of NetMechanic. He has been optimizing websites since 1996.

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