Knowledge is the Foundation To Success  

The latest confirmation of consumers tightening spending arrived with news from comScore that online holiday sales registered the first-ever year-over-year decline since tracking holiday e-commerce sales began in 2001. The firm said online spending for the first 49 days of the critical November-December gift-buying period fell 1% to $24.03 billion compared to $24.15 billion over the same period last year. This decline is a bit alarming and may be indicative of an overall slow down in holiday sales this season.

The National Retail Federation (NRF), the industry’s largest trade group, still estimates that total holiday sales will grow 2.2% this year, which may prove optimistic and would still represent the weakest gain in six years. However, several other retail experts expect a worse performance, and are even forecasting the first-ever decline in overall retail sales. Since online sales are down, I personally fear overall sales will follow suit this holiday season. Here at JumpFly, we are hearing clients citing economic concerns with increasing regularity.

Following a strong week for online sales after Cyber Monday, driven by large discounts on consumer electronics products, comScore said sales slowed significantly in recent weeks. The softest categories included music, movies and videos (down 24%); office supplies (down 19%); jewelry and watches (down 17%); and home, garden and furniture (down 16%). Some bright spots included sport and fitness (up 31%); books and magazines (up 18%); and video games, consoles and accessories (up 17%).

A recent NPD survey conducted earlier in December indicated that 31% of consumers said they were concerned about their job security and had cut back on their spending. Fear is a powerful motivation to curb spending, as witnessed by this year’s dismal holiday sales season. Let’s hope that 2009 brings better times for our struggling economy.

Happy Holidays to all. May 2009 bring you all great health, wealth & happiness.

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About JumpFly:

JumpFly professionally develops, implements and manages Google AdWords, Yahoo! Search Marketing and Microsoft adCenter Pay Per Click (PPC) Advertising accounts, JumpFly is a Google AdWords Qualified Company, Yahoo! Search Marketing Ambassador and Microsoft adExcellence Member. JumpFly was recently named the #1 PPC Company in the country by TopSEOs.com.

Yahoo to Partner with Microsoft on Search? 

According to regulatory filings, Billionaire investor Carl Icahn increased his position in Yahoo by 6.78 million shares between November 24-26 (at about $10 per share), raising his total to 75.58 million shares (about 5.5% of the company). I saw a recent presentation he made where he stated that he continues to believe Yahoo shares are undervalued, but admits that he also thought they were undervalued when he was last purchasing shares near $25 per share. So far, he is down about $1 billion on his investment. Ouch! He is still looking for some type of partnership with Microsoft on their search efforts which he believes could help save Yahoo a great deal of money. While there are no alleged talks going on at this time, I suspect these two will eventually work out some type of agreement. With Yang stepping down and both Icahn and Microsoft’s Steve Ballmer expressing interest in a search deal getting done, I think something will eventually develop. I would also like to mention that I very much hope that Carl Icahn is a better investor than speaker because quite honestly, listening to him speak was a little painful. Sorry Carl, but it’s the truth.

Black Friday & Cyber Monday Both Posted Impressive Increases Year Over Year

Sales during Black Friday, the day after Thanksgiving, saw an increase of 3% over the prior year. Last year’s sales of $10.3 billion on Black Friday increased to $10.6 billion spent this year. Though this gain appears promising for the economy, many fear that the increase in sales was at the expense of profitability. And though spending was up on this day, it may still be down for the Holiday season. One Gallup Inc. poll suggests that spending on gifts will be down 29% from a year earlier. We’ll soon know for sure.  

Online shopping saw a more dramatic increase in sales. According to data released by ComScore Inc., online sales for Cyber Monday, the Internet’s equivalent to Black Friday, jumped 15% from a year ago as Internet sites lured millions of consumers with offers of free shipping and dramatically reduced prices. Online sales increased from $733 million on Cyber Monday in 2007 to $846 million this year. Forrester Research expects 12% year-over-year growth for online holiday sales, or $44 billion in this November and December.

The US Economy Searches For Stability 

The US Economy continues to look a bit frightening and unstable. However, some good things are also taking shape. Gasoline prices are the lowest they have been in years, with prices at about $1.70 per gallon here in Illinois. That’s a far cry from the $4+ getting charged just 6 months ago. Additionally, mortgage rates are dropping and refinancing is rapidly picking up, enabling homeowners to lock in lower rates and lower monthly payments. Though we are clearly not out of the woods yet, there does seem to be shared hope that the economy will stabilize and business will pick up by the end of 2009. I suspect it’s going to be an interesting year.

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Has the faltering economy finally caught up with Google and their lucrative AdWords platform?

Perhaps in the short-term, according to Merriman Curhan Ford analyst Richard Fetyko. Yesterday, Fetyko issued a release via Barrons stating, “Based on our checks, the decline in consumer and business purchasing is having a dampening effect on search-engine marketing (SEM) — keyword prices are down 5%-30% from the third-quarter of 2008, traffic to ecommerce sites is also down year-over-year and quarter-over-quarter, and click-through-rates on ad listings are declining as well. SEM is expected to be among the last places to see cuts, and we are there now. Advertisers are adjusting their keyword buys to protect their margins and returns on investment, which are under pressure as sales-conversion rates and average order value dropped, based on our checks. Google’s paid-click volume is also under pressure. Since consumers and businesses have reined in their spending, they are searching for fewer commercial items and are clicking on fewer ads (click-through rates dropped), which translates into slower growth in paid-clicks volume (key revenue driver). Weakness has also spread overseas. Domestic growth has decelerated in 2008, and we expect international regions to slow in the fourth-quarter of 2008 and 2009 as well. U.K. ad revenue was flat for the last three quarters, and the rest of Europe and Asia are seeing cutbacks in ad budgets as well.”

Not surprisingly, various research agencies are reducing their projections for online advertising growth going forward. Just last week, marketing research firm eMarketer reduced estimates for U.S. Internet advertising to $25.7 billion for next year, about $2.7 billion less than a forecast from just three months ago, but still a 9% increase over this year. EMarketer predicts U.S. search ads will generate $12.3 billion next year and that “display ads” will rise nearly 7% next year to $4.9 billion (less than the 14% growth previously suggested). Considering we’re in the midst of the worst financial crisis since the 1930s, I would say that any growth at all is pretty good! The reason for continued growth in PPC advertising despite this crisis is because it works.

While “decelerating growth” may be a sobering reality for Google, it will not bring them to their knees. In the near term, Google may have to make some adjustments, but they appear incredibly well positioned to potentially dominate multiple marketplaces going forward, including organic search, sponsored search advertising, online video & the wireless market. Organic search, PPC advertising and online video (via YouTube) are already in the bag, at least for now, and Google’s wireless Android platform is new but already creating a lot of buzz. Actually, I personally think that what Google has already accomplished is amazing and I look forward to witnessing their future innovations. They always seem to be one step ahead of the competition.

Holiday Reminder- The busiest shopping day of the year, Black Friday (this Friday) is followed by the biggest online shopping day of the year, Cyber Monday (next Monday). Happy Thanksgiving.

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