Credit crunch is the most over used phrase this century, but will it hit the digital industries, which appear to be booming at the moment? Richard Kelly of Dog Digital considers the cyber situation.
Yet whilst we sit and amuse ourselves imagining ever more irrelevant, banal things to blame on said crunch, there is no denying the situation is one that merits genuine concern for the wider economy. Fears of eventual recession and a massive rise in unemployment abound, and not a day goes by without fresh news of the deepening crisis. But how does this effect us as digital marketers?
Are my friends and I fiddling while Rome burns, happy in our blissful ignorance of wider market forces? Or is our complacency warranted? After all, the digital marketing sector has experienced tremendous growth despite clarion calls to the contrary. So, let’s look at some of the factors.
A recent survey by econsultancy suggests that retail markets are in trouble, with 65% of respondents saying they will reduce their spending, a quarter of whom saying they will do so by 25% or more. Further statistics from the Council of Mortgage Lenders reinforce this, with a 34% decline in the number of mortgages taken out in Scotland alone. Even our love of cheap plonk has been impacted, with French wine exports down 8.7% on last year.
But should we fear for the fate of the digital sector too? Despite seeming robust six months ago, even the biggest players seem to be affected: Google’s UK ad revenues suffered their first-ever sequential quarterly revenue decline, whilst online advertising network ValueClick cut its 2008 sales target by 10%.
Google CEO Eric Schmidt remains optimistic, commenting that Google was “very, very well-positioned in such a slowdown, especially if it gets worse”. Whilst the more cynical among you will no doubt add “because we can just flick a switch and increase everyone’s minimum bids again” to the end of that sentence, Schmidt definitely has good reason to remain positive. After all, the measurability and accountability that has been pivotal to the boom in online advertising (search in particular) is in no way affected. Indeed, search marketing should prove particularly well placed to weather the storm due to the fact that consumers have become more price sensitive, leading them to research purchases more thoroughly and spending more time searching to find the cheapest deals online.
Although this conventional wisdom is open to challenge, there is considerable evidence to support it: the econsultancy survey mentioned above showed 35% of people would continue to spend as they had before, with a further 56% claiming that they would continue to shop online as much as they are already. Hitwise data also concurs with this, with the web measurement firm reporting that traffic to comparison sites such as Pricerunner and Kelkoo is up 37% in the past 12 months. The Apparel sector is also fairing very well with traffic to this sector up 38% on last year, showing that our desire to look good hasn’t been hampered and that we’re prepared to put in the legwork to continue to do so.
Another interesting way to examine the crunch’s impact on consumer behaviour can be found by analysing the changes in volume on various search terms. There are many services which allow you to do so, but for a quick check the newly launched Google Insights (a more advanced version of Google Trends) is excellent. Allowing you to compare historical search volumes (in addition to other useful features such as regional interest and related searches) a user can quickly chart their popularity in relation to others. Worryingly, a comparison of the terms “credit crunch” vs “recession” shows a large spike in the latter, recently overtaking “credit crunch” by a massive degree. Nevertheless, regardless of the economy the tool is an invaluable litmus test for evaluating the success of your brand over time, allowing more tangible facts relating to brand perception.
But going back to the credit crunch, what does it mean for digital? Well, whilst the surveys and statistics show a definite impact on consumer behaviour, it is very encouraging that in such times the web becomes even more invaluable – we as digital marketers just have to recognise how we should respond to such behaviour. And here’s how we can.
Critical to everything is recognising any changes in your customer journey. Fortunately the tools available to map engagement with your brand are improving all the time, and you can now see the impact of one channel on another. This allows a clearer vision of your entire marketing mix and allows you to respond by investing more in the most influential channels. For example, the evidence above suggests that price comparison sites may be a much more effective sales driver for your business than they were 12 months ago.
Testing different paid search strategies is also a valuable tactic. If you aren’t doing so already, respond to the increasingly price sensitive consumer by trialling price led ad copy and measuring its effect on click-through and conversion rates. If the strategy proves successful, expand it into other channels such as display and affiliates and measure the effects there.
Now more than ever is the time to leverage your marketing investment by optimising your conversion rate. This can be achieved very quickly with a process called multivariate testing, which revolves multiple combinations of different page variations to determine which deliver the most effective conversion rate. Think of the outcome like tuning your car to be more fuel efficient.
Even simple tactics can be relied upon to help – evaluate demand for your product range by using search volumes and respond to hot trends with a well publicised sale.
Richard Kelly is digital marketing manager at Dog Digital, and would like to make it clear he is not responsible for the term “Cyber Crunch”
In general history repeats itself, but I think it is unlikely that a 2008/09 recession will be as easy on digital agencies as the post 9/11 recession of 2002. Many marketing departments have restructured their methods of tracking ROI on spend and on digital activity in particular.
One digital trade magazine reported last month that price comparison sites were increasing spend in response to increased traffic as a direct result of the economic climate making consumers more thrifty in their purchase decisions. According to Thomson Intermedia, MoneySupermarket’s spend has increased 52% year on year in the first six months of 2008. This is inline with Neilson Online’s reported traffic increase for Confused.com, Go Compare, Price Runner and others all showing 15- 40% increases in traffic.
That may only tell part of the story in my view. This time around, as the finance director will again take a more active roll in marketing meetings, it will again be a question of clearly identified evidence of returns on marketing investment that will enable our slice of the pie to hold stronger than other mediums.
In 2002 overall marketing spend on digital was tiny (£196.7 IAB) in comparison to 2007 (£2.8B IAB). Only last year did Digital overtake Outdoor in terms of spend.
In May the Guardian announced that next year UK online spend will outstrip TV for the first time at a figure of £3.6bn (£2.45bn paid search advertising) from a quote from Adam Smith at WPP’s Group M. This may well be the biggest test yet on our industries ability to package and present boardroom compatible data and success metrics.
This puts pressure on senior marketers to ensure that they are making the most of the wealth of data that their digital marketing and web analytics/site logs offer. ‘Hit counting’ or click through tracking is generally not enough to give the insight required to demonstrate the value of holding course on budgets when the seas feel rough.
We may indeed see digital marketing budgets increase in the PPC/SEO keyword markets that are not already saturated. Agencies should still sharpen their pencils to ensure the basics are being done well. High level account management and strategic planning are often cited by senior clients as lacking in digital agencies.
Whether a technical development led agency or creatively led web design or integrated agency, the coming 8-14 months will be a key time to look at processes that provide your client’s delivery expectations and hand holding (for the less technical) as a means of safeguarding adequate job profitability levels.
I don’t see digital spend drying up but clients will hold greater expectations from their external suppliers. We need to be pro-active and responsive to the need for diligence in handling their businesses spend next year.
Scott Howard, DigitalAim