SMBs May be Getting Squeezed out of Search Co-​op Funding

Last month, I highlighted WebVisible’s study on 2nd quarter paid search trends by small and medium sized businesses (SMBs). The report showed a 159% increase in spending over 2009. And back in March, the Search Engine Marketing Professional Organization (SEMPO)  reported that the paid search market will reach $16.6 billion by the end of this year.

But the metrics of paid search could be changing. Over half of agencies and advertisers remarked that Google is becoming more expensive. Yahoo and Bing, which command smaller parts of the market, had fewer complaints about rising costs but CPC (cost per click) can easily become a significant part of any advertiser's online marketing budget.

The higher rates may be particularly troublesome for SMBs.  Metrics released by PM Digital for July 2010 showed that advertisers were paying 10% more for CPC when compared to 2009. Suzy Sandberg, president at PM Digital, points out that larger companies can afford to pay more for CPC and essentially drive lower-​bidders placement to the less-​advantageous 2nd or 3rd page of results.

At the same time, SMBs may be having a harder time counting on a reliable source of traditional advertising help: co-​op. According to Sandberg, "[t]here's a lot of co-​op dollars starting to flow, which they [larger businesses] use to fund paid-​search campaigns. The ones that don't get the co-​op dollars are the direct-​to-​consumer retailers that can't compete at the same level."

To better compete, SMBs may be looking to excel in display advertising or to take advantage of the new features that search engines regularly introduce. Being the first to use new ad technology may give the smaller competitors an edge when they try to gain attention in the online marketplace.

[Sources: SEMPO State of Search Engine Marketing Report. SEMP​.org. 25 Mar. 2010. Web. 16 Aug. 2010; Rewind Paid Search Performance Index: July 2010. Web. 16 Aug. 2010; Sullivan Laurie. Rising Search CPCs Cutting Out SMBs. Online Media daily. 5 Aug. 2010. Web. 16 Aug. 2010] 
Kathy Crosett
Kathy is the Vice President of Research for SalesFuel. She holds a Masters in Business Administration from the University of Vermont and oversees a staff of researchers, writers and content providers for SalesFuel. Previously, she was co-​owner of several small businesses in the health care services sector.