How Has the Current Economic Environment Impacted Paid Media? Part 2: The Industry Perspective

In the first first blog of our series, Knucklepuck examined the impact that inflation, recession fears, etc. had on our Paid Media department, as well as its impact on our 2023 planning.

• In short, we’ve seen macroeconomic concerns affect our business in 2022. Despite this, we’re preparing for higher investment in Paid Media in 2023.

Over the past few weeks, we also researched economic sentiment for the PPC industry as a whole. This included a survey on our website, analyzing responses to a PPC Chat discussion in September, and general anecdotes from others in the community.

So, with everything that has happened with the economy in 2022, what’s the impact been on the PPC industry? And how do people feel moving into 2023?

Survey Overview

First, a high-level overview of our survey:

• Although we received a number of responses, these findings may not be statistically significant.
• All respondents were agency marketers in roles with a PPC focus.
  • This includes titles such as Digital Marketing & Retail Media Consultant and Paid Media Manager.
• Respondents currently work in B2C, B2B, and ecommerce across a variety of industries, including higher education, recruitment, automotive, healthcare, software/tech, and cybersecurity.

We’d also like to give individual shoutouts to Anders Hjorth and Jeremy Krantz for contributing and allowing us to highlight some of their quotes/responses. Thank you both!

Now let’s get to the results…

The Current Impact

Knucklepuck gauged the impact of the current economic environment by asking and researching two main questions:

1. Have you lost any clients over the past 3-6 months due to their concerns over a recession, inflation, or other economic factors?
2. Have you seen any shifts in Paid Media investment over the past 3-6 months? If so, what have those trends been?

For the first question, all respondents in our survey answered no – they have not lost any clients recently due to economic concerns. This was a somewhat surprising result to us, as it differs from Knucklepuck’s experience.

However, although clients may not be leaving their agencies altogether, there have clearly been shifts in Paid Media investment. This includes:

More Intentional Budget Allocation

• In a recent AMA for the Paid Search Association, Aaron Levy highlighted that clients across all industries appear to be more cautious about where their money is going and how much is being spent on each channel.
• On PPC Chat, people noted that they have had more conversations recently about opportunities and refinements. The outcome has usually been a heavier focus on top-performing channels, as well as retaining and upselling existing customers.
• Knucklepuck has also experienced this first hand. A number of our clients have prioritized certain keywords, audiences, etc. more intentionally than previous years.

Lower Ad Spend 

• A number of PPC Chat responses mentioned that their clients’ budgets are tightening, something KP has seen as well. In addition to companies reducing their overall ad spend, this includes not expanding into new campaigns or platforms.
• Jeremy Krantz and Anders Hjorth also noted that they’re spending less on social and Amazon, respectively. This is partly due to issues out of their control, like some of the politics on social media and clients taking a heavy-handed approach to the situation by cutting all advertising expenses.

Industry-Specific Trends

• One survey respondent noted that they’re seeing increased investment in higher education, which is likely due to a drop in enrollments during the pandemic and a need to prepare for upcoming demographic shifts.
• Several PPC Chat participants expressed concern for clients that have high price points. These products/services are often viewed as a luxury during tough times.
• PPC Chatters also noted that industries for vices (like gambling, alcohol) or common everyday items (like pet supplies) are more likely to see stable or increased ad spend. This is because people’s habits and responses to stress don’t tend to drastically change.

In short: the 2022 economy influenced where people put their money

Broader thoughts about the economy’s impact on PPC include competition trends, lower demand on the consumer side, and concerns over high CPCs and CPMs.

• Auction Insights reports are an ever-changing space as companies adjust their ad budgets and competitors fight for market share. For marketers that still have a big budget to work with, competitors lowering their spend represents a big opportunity to expand your presence.
• People don’t spend as much when they have less discretionary income. With inflation eating into everyone’s pockets for the things that they need to survive (like food), there’s less demand for “wants”. This is especially important to note if you work in ecommerce.
• Average costs have been steadily rising on PPC platforms, which may be attributable to both inflation and the competition trends mentioned above. Another point from Anders Hjorth was the idea that the “inflation trend in CPCs and CPMs [is driven] by the big media [companies], not by the economy. Google earns more money but doesn’t have more searches or more users. Where did the money come from?”
  • Personally, it wouldn’t surprise me if something like this was a factor in higher costs. I don’t think it’s crazy to think that there is some self-serving happening under the guise of inflation, as Google has made some self-serving changes under the guise of consumer privacy in recent years.
  • For instance, after Google’s advertising revenue fell for the first time ever in Q2 2020, they then started promoting automated bidding and broad match keywords more aggressively. Simultaneously, they also limited insight into Search Terms Reports. They said this was due to “privacy”, but the timing seemed very convenient for them. When advertisers aren’t able to control irrelevant traffic as easily, their ads drive more clicks and Google makes more money.

What Do PPC Professionals Expect in 2023?

Next, we asked and researched the following questions to determine the impact that the 2022 economy has had on 2023 planning:

1. As it relates to your job and/or business, what is your biggest economic concern heading into 2023?
2. Are you expecting or preparing for Paid Media investment to change over the next 6-12 months?
3. How have economic concerns affected your planning for projects, budgets, etc. in 2023?

Based on our findings, PPC professionals are most concerned about a recession and staffing/employment as we move into next year. People are also very aware of the potential for lower investment in Paid Media services.

• Concerns about geopolitical conflicts and supply chain issues were also recorded in our survey, but the topics above were much more prevalent in the responses across all of our sources.

However, while lower investment may reflect some general anxiety, what people are actually expecting over the next 6-12 months is the opposite. 100% of survey respondents said that they’re preparing for higher Paid Media investment in 2023, and this seems to be the sentiment across the rest of the industry as well.

• Marketers with a diverse client portfolio aren’t as concerned, because when some clients slow down, others stay strong. Similarly, people indicated that they’re feeling less worried and more opportunistic.
• One survey respondent noted that they are hopeful for increased ad spend if the economy rebounds as well.
• Julie Bacchini raised the following point in PPC Chat:
  

  A1.1: I am also expecting the pendulum to start swinging back to consultants/outside people vs. in-house teams, as is does when the economy weakens.

  Execs start asking "why are we paying salaries & benefits when we could just pay for the work?".#PPCChat

  — Julie F Bacchini (@NeptuneMoon) September 6, 2022

It also appears that this year’s economic trends haven’t had a major effect on people’s planning for next year.

• In KP’s survey, several responses highlighted that the current environment had no impact on their planning whatsoever.
• This could be due to people like Anders Hjorth having built their strategies and tactics around being flexible and adaptable. That is an especially important lesson marketers should have learned from the pandemic.

That said, a number of people are preparing contingency plans for their clients. They are also closely monitoring specific metrics/trends, such as inventory. This will allow them to pivot quickly if anything drastic were to happen. Additionally, PPCers seem to be focusing more on granular changes and getting back to basics compared to previous years. For example:

• Making sure that tracking is as accurate as possible, and leaning into the use of first party data.
• Updating negative keywords and exclusions to refine irrelevant traffic, which helps soften the blow of CPC and CPM inflation.
• Adjusting budget allocations and reviewing campaign/keyword structures for opportunities to refine or expand.
• Updating ad messaging (like making affordability a key theme).

Summary

Knucklepuck saw economic concerns impact our business in 2022. The industry as a whole has seen that as well, particularly with shifts in ad spend and budget allocation.

But there is definitely a feeling of hope going into next year. Fears over inflation, recession, etc. haven’t had a major impact on 2023 planning, and marketers are preparing for higher investment in Paid Media services overall.

• Having a diverse client portfolio is especially important to insulate your business from fluctuations in the broader economy. Although some companies may pull back on budgets, this presents an opportunity for others.
• Getting back to basics will also be key in setting your clients up for success. Make sure your tracking is up to date, tighten up your campaign coverage with negatives/exclusions, focus in on top keywords/audiences, and have highly relevant messaging.

As always, please don’t hesitate to reach out on Twitter or LinkedIn if you have any questions or feedback!