Forecast paints gloomy outlook for search advertising as result of coronavirus
U.S. search ad spend is expected to fall by as much as 15 percent during the first half of this year, or between $6 billion and $8 billion, eMarketer stated Thursday in an updated forecast.
"We believe travel advertisers will decrease search spending most sharply, and media and entertainment industry search budgets will be severely trimmed as well," eMarketer stated. "Search is a lower-funnel ad channel that’s typically geared toward driving conversions, including in-store, and many of those conversions can’t happen right now because of quarantines, inventory shortfalls and related problems."
Unlike in other channels, prices will also likely remain relatively stable, despite the demand drop. Industries outside of travel, media and entertainment are also expected to trim search spending, but "keyword bidding means there likely won’t be as large a drop in pricing for search ads as there will be for display," eMarketer states.
Search ad spend for the second quarter will see an even steeper decline between 20 percent and 29 percent on a year-over-year basis, according to the forecast.
Search is by far digital advertising's biggest money maker, with Google representing 75 percent market share in the U.S., according to eMarketer. For the first half of 2019, search advertising generated $26 billion, or about 47 percent of ad spend across all digital channels.
Supply issues prompt cutbacks
Retailers are among the biggest spenders in search, but supply issues are causing companies like Amazon to pause ad spend on search "likely because it doesn’t want to drive additional demand when it’s already running close to capacity,” eMarketer states.
Amazon's pause in ad spend was noticed digital search agency Merkle, which specializes in search advertising. “It’s the first time we have seen Amazon turn off its Google text ads,” Mark Ballard, VP of research at Merkle, says. “We began seeing Amazon pull back on its Google search ads beginning in late January and Amazon ultimately appeared to shutter its ads entirely the week of March 9.”
Kevin Lee, chairman and co-founder of Didit, a digital agency that specializes in search, says about 4 percent of his clients have scaled back their search ad spend due to similar reasons. “Clients are selectively pulling back on search spending even before they run out of product,” Lee says. “They’re having supply issues and know they’ll sell out of their remaining inventory without Google."
Lee adds that the drop in ad spend is also the result of fewer — and different — search queries being made by consumers. “Consumers started searching less,” Lee says. “And then they started searching for things they usually don’t search for.”
“People are wondering if they’re going to have a job next week so they’re postponing things,” Lee says. “Appliances, luxury items — a lot of those things are being placed on hold.”