Yes, Recession will Hurt Pay-Per-Click

Pay-per-click not immune to downturn.

I’ve written it many times, but now we’re starting to see the affects: pay-per-click is hurting.

I’m not talking regarding just domain name parking income. We’ve known for a while that payouts to domain owners have been in the dumps. I’m talking regarding how pay-per-click isn’t immune to downturns.

Many people argue that advertisers will move to pay-per-click during a downturn since it is more results oriented than TV advertising. The theory makes sense, but you’re assuming advertisers are rational. When a big firm slashes advertising 10%, its looks everywhere for cuts. Those TV ads it contracted for 6 months ago? It can’t cancel those without penalty.

Pay-per-click ads, on the other hand, can be stopped with the click of a button. Literally.

And if advertisers haven’t learned that PPC is more results oriented by now, don’t expect these advertisers to suddenly see the light.

We’re also seeing slackening on the demand side of pay-per-click ads. If fewer people are going to buy flat screen televisions this Christmas, then fewer people are doing research on Google and thus fewer people are clicking on these ads. (Conversely, there are a lot of people searching for “stop foreclosure” right now.)

That’s not to say pay-per-click revenue will decline. It’s just that growth rates will be slashed. Even affiliate marketing for certain categories will be hurt. If you market expensive electronics or cars as an affiliate, the demand for your services is reduced.

Don’t get me wrong — I’m bullish on the future of online advertising, in particular PPC and affiliate marketing. But let’s not be naive, either.