Marketers Turn to Search Ads to Boost Holiday Sales

Given the volatile economy, experts are bracing for an uncertain holiday shopping season—even on the Web. Yet advertisers are expected to continue investing heavily in search to capture whatever shoppers are out there, particularly on Cyber Monday.

Industry analyst firm eMarketer this week scaled back its growth estimate for e-commerce in 2008 to 7.2 percent, the first time the industry will have seen single-digit growth this decade, during which millions of Americans became regular online shoppers. Earlier this year, eMarketer had predicted a 14.3 percent e-commerce growth for 2008, but lowered its estimate based on anemic third quarter e-commerce figures recently released by the U.S. Department of Commerce.

As for this holiday shopping season, eMarketer forecasted $30.3 billion in online consumer spending on the Web in November and December, up just 4 percent from last year. 

comScore also released a report this week, which found that the first 23 days of e-commerce spending was down 4 percent compared to the same period last year. Overall spending for the Nov.-Dec. time period is forecasted to be flat versus 2007.

Despite the grim outlook, retail advertisers are pouring more money into search, according to a report issued by search ad technology firm SearchIgnite. The company found that among its retail clients—most of which are multichannel retailers that market both online and offline—search spending has surged 33 percent through the first half of the fourth quarter, compared to the same period last year.

SearchIgnite president Roger Barnette said that while October was a rough month, the first 15 days of November exhibited growth even as the economy struggled. “The quarter got better, not worse,” he said. “We’re seeing strength. Clients are placing an ever greater emphasis on search this year versus last year . . . Marketers vote with their dollar.”

Meanwhile, consumers are spending less per online purchase this year, which may eventually impact conversion rates for search ads, SearchIgnite found.

“All of this comes down to consumer behavior rather than what marketers do,” said Marc Barach, CMO of Marin Software, a company which supplies search marketers with a variety of campaign management tools. Barach said he is confident that advertisers have started pumping more dollars into search ads this holiday shopping season.

Cyber Monday—the Monday following Thanksgiving that has emerged as an online shopping equivalent to Black Friday—will be an interesting test. Advertisers are expected to dial up search activity that day to promote their sales. According to a survey conducted by Shopzilla, 83.7 percent of retailers will have a special promotion for Cyber Monday, up 72.2 percent from last year.