eMarketer Revises Search Forecast: Can Search Evolve Toward A New Performance Model?
The percentage of the search spending will decline between 8.7% and 14.8% during the first half of 2020 as a result of COVID-19, according to eMarketer data released Thursday.
Estimates put the dollar amount between $6 billion and $8 billion — less than originally expected as a result of spending changes related to the COVID-19 pandemic.
eMarketer’s previous forecast of U.S. digital ad spend from March 6, 2020 called for a 14.4% increase in search ad spending for 2020.
While search — known as performance marketing — is often viewed as relatively safe in a recession, there are at least two major downward pressures during the current crisis, according to Nicole Perrin, senior analyst at eMarketer.
Search is a lower-funnel ad channel typically geared toward driving conversions, for example, from online into physical stores. With quarantines and lockdowns in place that won’t happen. Adding to the complexity, many businesses are closed, causing inventory shortages and logistical problems.
“You could run a search ad on an engine where you direct it to a landing page on your website,” Perrin said. “The page might have a message like ‘we’re not really selling shoes right now, but here’s some other great content. I’m not sure if it’s worth the investment’.”
Perrin acknowledges that she has had conversations with others on ways to use performance-based advertising.
“You might need to rethink the customer journey,” she said. “Typically the customer journey would result in a sale, but now you might think of a journey that results in consuming some sort of brand message.”
Search ad spending came in flat during the first quarter, thanks to a continuing solid performance at the beginning of 2020. The analysis states that first-quarter ad investments came in somewhere between a year-over-year spending increase of 2.8% and a decline of 0.2%.
Modeling shows that major decreases in spending began in March and will continue through the second quarter.
Search ad spending in the second quarter will experience a steeper decline of between 20.2% and 29.4% on a year-over-year basis.
Perrin believes that travel advertisers will decrease search spending most sharply, and media and entertainment industry search budgets will be dramatically trimmed as well.
Another challenge is that search budgets are not committed in advance and can be paused or pulled at any time.
Ecommerce activity typically drives a significant share of search ad spend, but tight supply chains and logistical restrictions have halted on-time deliveries.
Advertisers in other industries will also pull back spending — but keyword bidding means there most likely will not be as big a decline in pricing for search ads, similar to display advertising.
“We think prices will come down in search less uniformly than display,” she said. “In display when you’re doing audience targeting everyone’s going after the same audiences. If you have some audiences pull out completely, like travel, it will drive down prices in the display market across the board. If they disappear from the search market it won’t. You might be left in a situation where some type of performance display becomes more attractive because of cost.”
Not all sectors of the search ad market will experience the same degree of decline during the first half of 2020, eMarketer estimates.
The numbers are based on an analysis of quantitative and qualitative data from research firms, government agencies, media firms and public companies, plus interviews with top executives at publishers, ad buyers and agencies.