Online Advertisers Say "Good Riddance" to August from Hell

If correspondence from Traffick readers, clients, and colleagues is any indication, paid search advertisers are happy to see the end of August.

For me, it's been a strange month any way you measure it. The economic impact of the now-ended SARS scare lingered throughout the summer here in Toronto. Here, as in a huge swath of the eastern part of the continent from Ohio to New York, we had an unscheduled day-and-a-half off due to the power blackout, not counting the time it took to refill the fridge with edible food.

Combine that with the usual seasonal August slowdown for vacations, conference travel, and people finding ways of not working (try getting mobile phone reception in remote mountains and lakes, for example), and add to that weak overall economic demand, and you're inevitably going to see widespread sales slumps. In short, in spite of the wonders of Internet technology, people don't tend to make a lot of purchases when they're "driving aimlessly up the coast," or standing outside watching an air show (the non-lethal kind). They also don't buy as much when they're looking for work. And businesses don't spend as much when they're contracting as opposed to expanding.

Doug Updike's correspondence is typical of what we've heard over the past four weeks. His Priority Medical sells used ultrasound equipment, a niche business that has seen its paid keyword traffic increase while sales dropped significantly. "Clickthroughs have more than doubled," reports Updike, "and this all seems to coincide with Google's and Overture's content-related ads."

Adds Updike: "It's not only my business. Friends with niche businesses are seeing the same problem."

The overall economic malaise doesn't seem to be adequate justification for the fact that sales have slumped for many advertisers recently even where the number of advertising impressions (and clicks) has remained constant or even increased. Such patterns tend to shake advertisers' confidence in the veracity of reporting or at least in the quality of the traffic being generated by keyword ads. Using a third-party tool such as ConversionRuler to verify the results provided by your pay-per-click service is a must; then again, such tools won't necessarily prove anything in cases where the clicks are real but the buying doesn't take place (for whatever reason).

It might be necessary for advertisers to begin taking a deeper look at different forms of paid traffic and the types of patterns the users show after they've clicked (path analysis or analysis of on-site navigation patterns, not simply counting conversions). ClickTracks, for example, allows users to gain insight into the quality of traffic from Google Search as opposed to the quality of clicks from network partners. One of our clients uses HumanClick to connect live with site visitors. Built into this service is path analysis that also helps the site owner follow users as they navigate the site. A bit invasive, perhaps, but an effective way to determine if a visitor is real, and to draw conclusions about how targeted the traffic is from different sources.

Pay-per-click advertisers, then, have had even more to contend with than the average business of late. For one thing, the search advertising space continues to welcome eager newcomers who are causing bidding wars in categories that were once bargains. Another development this summer was the aggressive expansion of partner networks by the major PPC services, Google and Overture. Particular attention has been paid to the rapid expansion of "contextual" or content-targeted advertising. Google's AdSense program has taken this to the next logical step, expanding the network to smaller, niche sites. (Overture, FindWhat, and numerous others have always worked with some small partners, but Google's AdSense has been spreading like wildfire due to the ease of adoption and the general interest amongst webmasters in whatever Google is up to.) Another surprise was Overture releasing phrase matching options similar to what Google offers, allowing advertisers to use broad matches on Overture for the first time. Some might not be prepared for what happens.

Anecdotal evidence (and some hard data) were showing large spikes of traffic (or in some cases, simply steady increases) in August with sharp slowdowns in conversions. Not all of the poor performance can be traced to content targeting, unfortunately. Some have performed poorly this month with content targeting shut off.

Naturally, advertisers, consultants, and Google alike have been trying to explore multiple possible explanations for strange spikes in traffic in the midst of an aggressive ramp-up of the Adwords program, interface redesign, ongoing editorial and customer service hiring efforts, and a rapidly changing competitive landscape. There are arguably too many variables to keep track of at the moment, which may explain the careful, terse responses provided by Google when advertisers initially inquire about inexplicable spikes in impressions and clicks.

Advertisers face tough choices when their campaigns stop working. The natural tendency is to look for a single culprit, hopefully not one related to general business conditions, the competition, or one's own offer or website. The current reality doesn't favor the timid: every time an advertiser shuts down a campaign because it stops working, another advertiser is only too happy to see them leave the competitive keyword auction, and two new ones are waiting in the wings getting ready to launch a new campaign. Consistency has always been the key to success in advertising. Short of outright, demonstrable fraud, the best policy is usually to stay the course, even if it means bidding less or pausing the worst-performing ad groups.

Most online advertisers have so little to go on about past seasonal patterns that it's really been tough to say whether the August slump is normal for their business. And those who are doing little post-click tracking are on shaky ground when they guess about apparent drop-offs in conversion rates from various sources. Boring as it may sound, e-commerce is increasingly data-driven, and even small companies have no excuse for flying blind.

Those who don't have sophisticated tracking in place may simply decide to do what Doug Updike did. "For now," reports Updike, I'm shutting off traffic from content targeting, and am being very careful about the broad phrase matches on Overture."

We can only hope that September will offer more predictable patterns for online advertisers.

Andrew Goodman is Editor-at-Large of Traffick.com and Principal of Page Zero Media, a consultancy specializing in paid search marketing.