Online Marketing Spend on the Rise

A recent industry report from Econsultancy highlighted a positive trend for all online marketing agencies and search engines alike; companies are spending more on PPC and SEO since last year. It has typically been a time you might have expected companies to cut marketing spend with the pressures of the recession and other problems plaguing the economy this year like the volcanic ash cloud. Instead though companies are opting towards increasing their spend on a range of online channels due to rising prominence of these mediums, cheaper costs and better return on investment.

The rises in spend on paid search have been identified by the report in two areas, a 4% rise in the percentage of UK companies who are now spending more than 50k a year on their PPC and a similar decrease (9%) in the amount of companies who are spending less than 5k a year on the same channel. SEO spend is finding a similar pattern with around 8% more companies surveyed this year spending over 50k per year (total now at 22%).

Even more encouraging is that the same companies surveyed said they are planning even more of an increase on their spend this coming year. Whilst personally this is nothing surprising, as we have seen an uplift in spending on our clients across the board with a move to cut spending in other offline activities to support this, it is nice to see it confirmed as a trend across the market.

The report also details current usage of search engines for PPC campaigns. This is nothing surprising with Google dominating the graph. Whilst the report suggests that 36% of all companies doing PPC are using Yahoo, and 34% using Bing, I can only imagine that the proportion of their budget on these networks will be considerably lower than the usage rate. Even if there was a shift of the populations search queries moving to Yahoo and Bing, the amount companies would commit to these networks will not grow substantially until the control and admin side of managing a PPC campaign becomes even half as good as Google’s Adwords programme.

What does this mean for the companies using these networks?

The main drawback to a universal increase in spend on online marketing is that costs are going to rise to get the same back out of the channels as you are getting now. Everyone who has been running PPC campaigns over the last 5 years will know how quickly PPC costs have risen across the board. Optimising campaigns to achieve top quality scores in an effort to reduce down necessary bids as low as possible is not a minimum requirement rather than a luxury that you can do if you have the time and the means.

Eventually this will reach equilibrium as companies notice their ROI becoming unmanageable at the higher average cost per click level and start to pull out. This could be a long way off though as no one wants to pull out of the channel altogether in fear of losing potential revenue, however tight the margins are on it. It will certainly be interesting to see how quickly the search landscape will be affected by this rise in company spend.

With more and more people joining the effort to promote their website using this channel, costs are likely to rise to even higher levels. As an employee at a marketing agency, it is certainly encouraging that companies are spending more on their online marketing although in the same respect it will make our jobs a lot harder. As companies in the same markets both push their SEO and PPC budgets and consequently increase the amount of work being done on their websites, this will drive up the amount of work and therefore costs to achieve the same results.

For example with natural search as more people work on promoting the same terms the effort required to move clients up positions will naturally get harder with more and more companies actively working on the same terms. Whilst this can be avoided up to a point by diversifying into new keywords and building on other terms competitors have not considered, the bottom line will be an overall increase in costs.

Anything else in the report

There is lots actually and would be worth reading all the way through as there is more than it’s worth summarising.  One of the more salient points in the article is the look at the social media situation and how companies are still spending very little on this compared with other online media. Whilst it can be argued that this is often down to the problematic measurement of ROI from social media, the social networks are more than ever important for a company online image and this should be radically changing.

The report does indicate there are plans to boost spending in this area and for some companies this will be a large focus of their online spend which is more positive. Addressing the measurement of ROI for this channel will undoubtedly help encourage even more spends in this area and it is something more agencies and businesses need to focus on in the future.