Over Half Of Online Retailers Decreasing Search Spend

    May 11, 2009
    WebProNews Staff

The weak economy is driving online retailers to shift their marketing budgets and cut back on search marketing, according to a study by Forrester Research on behalf of Shop.org.

The study surveyed 117 online retailers in the throes of a relatively abysmal first quarter about how they planned to allocate their online marketing budget. While a third will be spending less over all, over half of them (56%) said they would be scaling back search marketing specifically, indicating a plan to reallocate funds toward other venues like email and social media.

Email seems an especially popular option, with 88 percent listing email as a high priority, the majority of them focusing on segmented emails to customers based on stated preferences or purchase data. Others will be highlighting new products and featuring online promotions via email.

That indicates customer retention as the primary goal and not so much gaining new customers.  "Online retailers are trying to weather this economic storm by doing more with less, making smart spending decisions, and leveraging effective, affordable tactics like email to grow their businesses." said Scott Silverman, executive director of Shop.org.

However, the idea that recession is the best time increase the marketing budget isn’t a foreign one—when there’s less money to go around, it makes sense to be more aggressive, not less. The other (slightly less than) half of that group have no plans to cut back original budgets and will be forging ahead as planned.

A quarter of them will take advantage of others’ decreased search spending by increasing their own budget for search and across the board. Of that minority, 80 percent will increase search, 65 percent will increase email, and 60 percent will increase social marketing.

The increase in social media spending is interesting. For many this arena will be a testing ground, and for others it will be a strategy in lieu of the rising cost of search marketing. However, the numbers to support such a drastic switch aren’t quite there yet, according to Hitwise. Search still drives over 30 percent of traffic to retail sites; shopping and classifieds drives 25 percent; and email drives over 10 percent.

Hitwise US: Retail 500 Websites

But social networks still account for less than five percent of traffic and are negative in terms of year-over-year percentage change in upstream visits to Hitwise’s Retail 500 Index.

Social media certainly has been under the spotlight of public attention lately with sudden mainstreaming making social media a very attractive target. But social media’s day may not have fully come yet.