Tuesday, October 23, 2012

What is going on in advertising land?

A few days since Google shares dipped after its core advertising business slowed, in the UK, a big fall in print advertising is reported.

Print Week writes today that  according to the latest quarterly Expenditure Report published by the Advertising Authority and WARC "print adspend shrunk by 11.7% year-on-year in Q2 2012" with the biggest hit taken by the B-2-B magazine sector with a massive 21.5% fall. Although this is not surprising news to marketers in the B-2-B area, the scale of the decline certainly puts big numbers against what has otherwise been supposition. That many businesses are cutting back on display advertising is no surprise either, based on feedback from advertising managers. The static, or falling value of advertising space is also having an impact on agencies who see commission falling too and thus have little motivation to drive prices down via more aggressive negotiation. "Advertising" is typically the big ticket item in the b-2-b marcomms budget, so what is happening? Well the obvious assumption is the advertising pounds are being spent online.

But Reuters filed a report on Friday that' "Google Inc's quarterly results fell well short of Wall Street's expectations after its core advertising business slowed, stunning investors accustomed to consistently rapid growth from the Internet giant and wiping more than 9 percent off its market value." "For the fourth consecutive quarter, the company reported a decline in average cost-per-click (CPC), a critical metric that denotes the price advertisers pay Google. Average CPC declined 15 percent from a year ago and 3 per cent from the second quarter of this year." One culprit is mobile devices as "advertisers pay far less for ads on smartphones and tablets than for similar ads on desktop computers."

There is another implication for Google in that some people might be by passing search engines and heading straight for already known destination sites and using those sites' own, more specific search facility. Interestingly we have been seeing evidence of this for some time now. Some research we conducted a couple of years ago for a client suggested a majority of b-2-b customers had long since identified the most important sites for the products and services they wanted to buy and went straight to them. Only a minority, about a quarter of customers, searched on generic terms using Google. So in this case 3 out of 4 wouldn't see the Google Ads anyway.

Perhaps it is no wonder some b-2-b marketers are sitting on their budgets or buying strategically when a good deal comes up and more often buying not just display advertising space but a package that includes editorial, online publication and email delivery. The notion that advertising pounds will simply migrate to the Internet may be too simplistic. Quality publications will continue to attract advertising revenue and online media may have to work harder too.

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