Online Mortgage Company and Finance Ads Send a Message to Search Engine Sites
- Feb 29, 2008
The recent Fed cuts increased business at mortgage companies like LendingTree.com–and decreased their need for advertising.
The day after the last rate cut, LendingTree.com had a record amount
of traffic. As a result, its marketing team immediately reduced its
search engine ad campaigns, according to The New York Times.
That may be good news for LendingTree.com, but it’s certainly not
good news for the search engine ad sector, which has reaped
considerable profits from financial services clients over the years.
The Decline Goes Online
Although the housing slump began in 2007, its effects on online advertising are just beginning to surface.
- Financial ad spending usually rises by 30 to 50 percent each
year; this year it is equal or down for some companies, according to
Efficient Frontier, one of the largest buyers of paid search listings
- From January 2006 to January 2007,
credit and mortgage ad spending increased by 24 percent; this year, spending is up just 3 percent from last year.
The financial services sector spends up to $2.7 billion each year
on online ads in the U.S.–one-third of that is mortgage-related, according to Oppenheimer.
No one is sure how the reduced spending will affect Google, Yahoo or other search engines (both of which did not comment in the Times
story)–but it is likely the effect will be felt. Losing a financial
services client means more to a search engine site than losing, say, a
retail client because the financial client pays higher rates for its
listings (an average cost-per-click price of $2.70, versus around $.36
for retailers, according to Efficient Frontier).
And Google’s stock price dropped by about 8 percent this week
because of concern that people weren’t focusing as much on its search
engine ads, according to the Times.
A Solution for Search Engines?
It’s entirely possible another sector will suddenly increase
advertising, softening the blow. After a moratorium against drug ads
was lifted in 1985, pharmaceutical consumer magazine ad spending
increased 77.4 percent to $123.5 million in 1993, according to Folio–providing an unexpected boost to magazine ad revenue that year.
Or search engines may just need to refocus their attention to
actively find that new ad source. Print newspapers have been damaged by
the housing decline–particularly in their classified sections. The
McClatchy Co. newspaper chain just reported a 14.4 percent decline in January revenue this week.
But a recent Editor & Publisher
article about how many small community newspapers last year
thrived–some even had their best year ever–suggested cultivating
smaller advertisers in the community and focusing on highly-targeted
local news coverage can help offset hurdles like the housing decline.
It’s helped smaller papers survive.
It would seem, then, that part of staying on top of the ad game–for
companies and for publications–involves really watching and reacting
to the local market. For newspapers, that market is a community. For
companies like LendingTree.com, it’s an industry.
And for search engines, that means the economy. What client (or
potential client) could be Google’s financial ad revenue replacement?
We’ll be watching to see if the company figures it out before its
profit takes a hit …