With 2008 behind us, we're reviewing results and planning for 2009 with our clients. Here are some aggregate charts of our clients' results in the fourth quarter of 2008 vs. 2007. For this analysis, we considered clients who we've served for over a year, who are online retailers (eg omitting lead-gen clients, omitting CPO clients), and who have significant online spends.
Chart one shows the change in PPC-driven sales and cost, 4th quarter 2008 versus 2007.
The plot shows a great deal of variability in year-on-year Q4 sales.
35% of our clients showed positive PPC-driven sales growth in the 4th quarter of 2008 vs. 2007. George Michie points out that some clients showing sales gains did so via significant discounting. 65% experienced a decrease in PPC-driven sales.
On the advertising cost side, 25% of our clients increased their PPC spend 2008 Q4 vs. 2007, while 75% pulled back PPC spend.
The regression line has a slope of 0.59, indicating that on average clients opted to run their campaigns to a lower economic efficiency, instructing us to spend a greater fraction of resulting sales on advertising.
Chart two shows the same data with each point scaled to client revenue. This chart shows that larger clients stayed closer to the origin. Smaller clients were more likely to make larger percentage changes in their advertising strategy, up or down.
We believe it is essential for all online advertisers to segment their online paid search programs by brand vs. non-brand keywords. (More on why and how in a coming post.) We believe that the non-brand term portfolio provides the truest sense of incremental PPC-driven sales.
Charts three and four below present the same information as charts one and two above, but this time only considering non-branded paid search spend and resulting sales.
The regression line is a bit steeper, but is still less than one, indicating again clients choosing to run their campaigns to a lower economic efficiency, spending more to drive each revenue dollar.
Chart five asks this question: "Did competitive (nonbrand) PPC-driven sales fall off more or less than non-PPC sales?" The y-axis presents change in non-brand PPC-driven sales, 2008 Q4 vs. 2007, just as in charts three and four. The x-axis plots total client web sales, excluding sales driven by paid search.
The slope is less than one, indicating that for most clients sales from competitive search were down more than the rest of their site. We believe this is a function of increased competitiveness in PPC, making it harder to stay on the page efficiently. For some clients, heavy use of affiliate coupons this year also pulled orders from PPC.