Why PPC is about to skyrocket – and then CRASH

Times are tough.

But one area that is ready to soar is pay-per-click search marketing (PPC). That most measurable and controllable of digital marketing opportunities, PPC looks like a no-brainer in this economy.

Have you called a newspaper lately and asked them if they’ll charge you per phone call generated? Even with ad sales down 14% year over year, they won’t do it. 

Thus, with the holiday season approaching and a flinty consumer base not exactly killing themselves to buy the latest electronics or must-have toy (it’s Foreclosure Elmo), PPC looks like a no-lose proposition for retailers and e-tailers.

PPC – The Rich are Going to Get Richer

With PPC spend already up 52% in Q1 2008 versus 2007, the number of PPC advertisers and the money they’re going to throw at clicks is about to get insane. The competition for clicks, leads and sales in the 4th Quarter is going to be fierce, and I suspect there will be some “make us #1 no matter what” money in the game as casual PPC advertisers pull money from TV and print. 

It’s going to require exceptionally smart bidding (think day-parting) and a serious commitment to landing page testing to succeed. 

The problem is, this huge thirst for clicks is going to drive average cost per click through the ceiling. Google is already substantially most expensive on a per click basis than is Yahoo or MSN. Further, according to Efficient Frontier and their excellent Q2 search engine report (PDF) Google is getting $1.10 of each new dollar of PPC spend (Yahoo is minus 9 cents, and Microsoft is minus 1 cent). 

PPC – The Rich Are Then Going to Get Poor

The price of a click on Google is going to go WAAAY up over the holidays. So much so that ROI on those clicks will inevitably diminish, especially with consumers in “I think I’ll go to the Hickory Farms store in the mall and have 11 free samples and call it lunch” mode. 

At the end of January, hundreds of thousands of PPC advertisers will look at their reports (especially Google) and say “this isn’t worth it anymore.” 

February 1 will be the day the music died for PPC, and a long period of very modest growth will ensue as newcomers adopt a “we tried that back in 2008 and it almost broke us” mentality. 

Get yourself a killer test plan, a shot of Jim Beam (hat tip to Jason Falls) and manage client (and your own) PPC expectations. It’s going to be quite a ride. 




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