Home » Internet Business » Canary in Search Coal Mine?

Canary in Search Coal Mine?

FTD (flower company) preannounced poor Q4 revenues today and blamed increased search marketing costs for the shortfall.  Although it would be silly to extrapolate the experience of a single retailer in a single vertical to the whole of e-commerce, such a data point could potentially signal impending trouble for Google, Yahoo!, and the rest of the search industry.

From the FTD release:

During the Christmas season, certain online search engine costs increased significantly over the prior year, and as such, we made the decision not to pursue the resulting high-cost order volume. As a result…we have begun making additional investments in our marketing staff to help build a more diversified marketing portfolio.

In other words, in the floral segment at least, keyword prices have increased to the point where one leading retailer has decided that they are no longer economical to buy–and will be moving some marketing dollars offline as a result.  In the short term, this might be good news for Google, Yahoo!, et al (another big quarter).  In the long-term, however, it’s potentially a big negative.

One of the major drivers of search revenue growth over the past few years has been steady increases in keyword pricing–increases justified by the demonstrable fact that ROIs were better in search than for other another marketing spending.  Evidence that keyword prices in at least one vertical have now hit a ceiling suggests that the life-cycle of this growth driver, at least, might be nearing an end.  For the search giants, such an event would be akin to a 747 losing an engine: The plane can still climb, but not as quickly or reliably as before, and passengers must begin to clutch armrests and pray that another engine doesn’t give out.

Share on
Share on facebook
Share on google
Share on twitter
Share on pinterest
Share on linkedin

Leave a Comment

Tech News Trust Today

Contact Us

1408 Blocks Valley, Sydney, 
NSW 2060, Australia

(+61) 555-1408
[email protected]