In the last few weeks we have seen financial results from Google, where it maintained its core revenue momentum, and from Yahoo, which has shown weakening display revenue. The NY Times said "Yahoo was hurting long before the financial crisis got everyone worried about a global recession. Now its pain has become more acute. "
The pay per click model popularised by Google, with its AdWords system, is compellingly attractive to marketers, and this has driven its growth, and will become even more attractive during the forthcoming recession. And although the web has historically been seen as the 'cheap communication channel' it is now suffering/benefiting from price inflation.
There is nothing wrong with price inflation if this is accompanied by 'performance inflation'. However, the problem we have is that much of the other paid for mediums on the web have actually been declining in their performance. Average banner clickthrough rates are now less than 0.2%, which means less than 2 in every thousand people click on a banner. It doesn't have to be this way.
A unified theory of advertising holds that you use search to fulfill demand, and other digital media to create demand. Creating demand requires you offer something above and beyond traditional advertising messages. You need to engage the audience to create this demand. This engagement can come through banner advertising, micro-sites, social media, and other tools. Quantifying and monetising the value of this layer of communication has been problematic due to marketer risk aversion. They believe in what I call a connection gap - a disbelief in the power of digital to connect with large audiences and enhance or build the brand.
Search dominates digital budgets as it is results focused, and quantifiable. Most marketers could spend 100% of their budgets on search to quench the infinite thirst of the Google algorithm. The same marketer who confidently invests in search, will prefer to create demand through offline media, such as TV, direct mail, and press. There are many digital ways to create demand, and many have metrics and data to show their performance, but showing they are as effective is the real challenge. Providing an alternative digital way of creating demand and monetising the other web - the web away from Google (if you exclude Doubleclick) - will be the key focus for digital marketers over the next few months.