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Issue #146: Economic Stimulus

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             "Understanding Internet Search Technology"
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Moderator:                                          Published by:
Detlev Johnson                                       SearchReturn
               http://www.searchreturn.com
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January 31, 2008                          SearchReturn Issue #146
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                   .....IN THIS DIGEST.....

// -- NEW DISCUSSION -- //

             "Economic Stimulus"
                         ~ SearchReturn

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// -- NEW DISCUSSION -- //

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==> Economic Stimulus

As I write this, the US Senate is contemplating a stimulus
package brought forth by the Administration that already has US
Congressional approval.  The government wants to allay fear and
is trying to counter the US economy as it slips into recession
territory from the sub-prime loan and housing market crash.

These times remind me of another time from the distant past
where there was trouble in the US economy once the online
'bubble' burst and people lost much or everything of what they
owned on in the Stock Market, particularly from losses in the
Tech heavy NASDAQ.  Search marketing survived it all.

Search marketing is robust and resilient, words the US President
typically reserves for describing the entire American economy.
With the numbers reported by indexes that track search spending
continuing to rise faster than ever, is it any wonder that those
involved with search are probably going to continue to thrive?

From my own personal experience and research, I've concluded
that an application such as search has so many things going for
it that there is no reason for us to worry about a recession as
much as other categories of business.  Historic reasons for my
own hopes include what occurred before, during and after
'irrational exuberance' faded a few years ago.

Companies long have a record of spending on marketing.  When
times are good, there is reason and resources for them to do so.
With bad times, those companies that have a rainy day fund tend
to use it for marketing to stimulate sales and climb out of the
hole they're in.  In other words, companies engage marketing in
either case, when times are good and when times are bad.

Companies have been known to spend their last dime on marketing.
Consider Apple and the Super Bowl ad from 1984.  In one expensive
ad, they got the word out about their newest product: the Apple
Macintosh computer.  The Mac was an instant hit.  The only time
a company doesn't spend on marketing during tough times is when
they don't have a rainy day fund.  An economic downturn tends to
sort the wheat from the chaff in that respect.

There is no better illustration of what I'm thinking than a quote
by analyst Colin Gillis that "Search is starting to become a
brand game at this point, and it's going to be very difficult to
turn that around."  His conclusion is that Yahoo! is "more at
risk in a recessionary environment."  Search represents about one
fourth of Yahoo!'s revenue which may just be the fraction that
can remain stable throughout a recession.

Yahoo! page views and profits have declined in the face of
increasing search market share going to Google.  According to
Nielsen Online, the share of queries Google serves is up to 56%
last December compared with 54% the three months before.  In
response, Yahoo! has made plans to lay off 1,000 employees, which
represents approximately 7% of its total workforce.

Google's singular focus on search means it's bet is sure to pay
off under the circumstances.  They have more than three times the
cash flow from operations as Yahoo! has ($1.63 billion compared
with $457 million).  Meanwhile, Yahoo! has slipped from 20% of
search market share to 18%, effectively losing 2% to Google in
December.  Search is the killer application.

If the United States slips into a recession and the strife
spreads worldwide, people involved in search marketing can be
better suited to weather the storm by providing solid results
assisting those companies that can survive by providing the
means to succeed in order to weather the storm themselves.

I used to worry about how a downturn in the US economy would
affect online spending.  With my experience through the turbulent
times before and after the bubble, as the bubble spending first
powered then seemed to take away from online marketers, through
it all search marketing quietly thrived and even innovated.
Search eventually gained in fame and ultimately was seen as a
harbinger of what became today's healthy online marketing spend.

With the advent of Google and the wildly successful AdWords
platform, search marketing is no longer anywhere near as 'quiet'
an application as it was back then.  I expect that no matter what
happens with the US economy, search will continue to thrive and
innovate bringing success to those that embrace it courageously.

Stay tuned,
SearchReturn

 


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