How to Survive Covid-19 in Search: In-depth Analysis of Search Demand Trends

Naturally, there are a series of environmental factors at play here. It’s not just that people are getting sick and reacting to a virus; global interdependence is also meaningfully impacted by people’s inability to work during the pandemic. With the coronavirus starting in China, and all of the planet’s supply chain routing through the Celestial Empire, we are also witnessing a supply chain reaction.

While the effects are, of course, international, my personal context is the United States -- New York City to be exact. Like much of the world, we are heavily dependent on Chinese imports. From Wine & Liquor on the low end to Computers and communication equipment on the high, according to the US Census Bureau, the US of A imported over $446 billion in goods from China in 2019. Many of these goods are not final products, rather the materials and machinery required to create goods that are made available around the world.

With COVID-19 quickly reaching a literal fever pitch, China went on lockdown at the end of January 2020. So, before COVID-19 became China’s major export, the world was already poised to experience delays in the availability of goods and services of all kinds.

This is a global issue because China is also the world’s largest exporter, so the impacts on goods and services would have a global impact even if the outbreak was limited to China. With the majority of the world in quarantine, it is difficult to fulfill many physical goods, especially at the speed that we’d grown accustomed to.

According to a Digital Commerce 360 study, most retailers are expecting shortages and delays. Consumer behavior is changing in reaction to scarcity, both in stores and of stores.

As an NYC resident, I wanted to purchase a printer to work on this article (don’t ask) and Amazon said it would take five days to arrive. I’m used to receiving things the next day.  My other options were stores that I couldn’t be sure were open. As a consumer, I am confused and unsure if I can trust retailers at this time.
Shifts in Supply and Demand

Supply and Demand is, of course, the core market driver outside of consumer confidence. However, it’s generally a more subtle force that rears its head over time. In the case of COVID-19, we’re instead seeing drastic and dramatic swings in real-time.

Consider the airline industry. According to the IATA, passenger demand was projected to grow by 4.1% in 2020.

Instead, with multi-national companies curtailing business travel for their employees since early March, and the shelter in place mandates coming on line late March, demand made a crash landing. First flight prices were sent into a tailspin, shortly thereafter supply took a nosedive in accommodation as airlines could no longer justify keeping so many empty planes in the air. IATA’s monthly statistics data illustrates just how far that demand has fallen.

Unfortunately, the airlines continued to be grounded by bad news and have struggled to identify a new supply and demand equilibrium. As a result, many large airlines have had to furlough or otherwise layoff thousands of employees. Typically, this type of dramatic change in demand takes multiple quarters to identify. Companies have changed management solutions to react slowly in measured ways to recover. In the face of a pandemic, it’s proven to be impossible.

In other instances, N95 Masks, hand sanitizer, and toilet paper demand has skyrocketed. As China’s supply chains have slowly come back online, D2C companies have sprouted up with Shopify stores in their wake. You can find them in ads on your Facebook timeline with slightly different creative and random company names as seen below.

Thes companies tend to be small, agile and utterly expendable. They find a supplier that can dropship and they throw up a site, some compelling ad creative and capitalize on Facebook’s low CPAs. This is an example of high demand meeting low supply.

What we’re experiencing is unprecedented in the Information Age. There are a lot of comparisons to the 2008 financial crisis, but this isn’t that. Nearly all businesses are closed. Supply chains are disrupted. People are effectively on a suggested house arrest and there is no definitive end suggested prior to a vaccine that may appear in 2021.

Based on Morgan Stanley’s model, it’s unrealistic to expect the economy will achieve a new equilibrium until 1-3 years from now.
Producer/Company Behavior

If you do Marketing of any kind right now, you are feeling the direct effects of companies pulling budgets. In times of uncertainty, any type of company needs to enforce financial discipline and be more conservative in its spending. CFOs are dialing into Zoom calls everyday to do their fiduciary duty of trimming the fat and tightening the purse strings.

How is that playing out so far?

Well, according to a survey run by IAB, 98% of agency respondents have indicated that ad spending has been cut for Q2 2020 as a result of COVID-19. Q3 and Q4 are still on the chopping block but have been less impacted thus far. This suggests that many companies are in a “wait and see” pattern.

Companies are seeing less value in branding channels like Display and Paid Social. However, interestingly enough, agencies are indicating that Paid Search campaigns are net zero. This makes sense that brands may want to pull back spend here and focus on more direct acquisition opportunities.

What’s most interesting is that the LinearTV campaigns are taking a hit as well which suggests that COVID-19 may be inducing a shift from traditional media to digital and Search is benefiting most because brands have a direct ability to be reactive to intent.

That said, everpresent yet anonymous analysts are projecting  that Search spending (both Paid and Organic) will be down between 8.7 and 14.8% after several years of growth.

Let’s dig in a bit further to determine why Search has unique opportunities and spending less on it may be a mistake.
Economic Downturns Favor the Bold

I warned you that I might go full Marty Kaan at some point.

Markets are inherently irrational, and an economic downturn is always an opportunity. A market collapse due to a global shut down is rational, but these are the moments when fortunes are made and it is the companies that continue to strategically invest that make out stronger on the other side. Those companies that become overly conservative during market uncertainty are the ones that lose brand awareness, market share and ultimately fall behind competitors that fill in the share of voice that other companies vacated.

A Bain & Co. study indicated that those that remained in a measured growth mode through the 2008 recession, saw a 14% profit advantage after the economy recovered over those that turned more conservative.

That study, found in Bain’s Beyond the Downturn: Recession Strategies to Take the Lead article presented it in an especially compelling way:

"Companies that ranked among the eventual winners, by contrast, moved deliberately to capture opportunities before the recession. While they focused intensively on cost transformation, they also looked beyond cost. Think of a recession as a sharp curve on an auto racetrack—the best place to pass competitors, but requiring more skill than straightaways. The best drivers apply the brakes just ahead of the curve (they take out excess costs), turn hard toward the apex of the curve (identify the short list of projects that will form the next business model), and accelerate hard out of the curve (spend and hire before markets have rebounded)."

Brands are pulling over on the autobahn to be passed at high speed by those that stay pushing in web traffic. In other words, you should put Search on that shortlist.

From a digital marketing perspective, the opportunity is clear. CPMs for Facebook and Instagram are down and while I cannot find aggregated data on CPCs for Google Ads, discussions with Paid Media specialists indicate the same is true of the channel previously known as Adwords.

It makes sense, after all, these advertising platforms function as auctions. If there is less competition in the auction, winning is cheaper. If winning is cheaper, you have more opportunity to be seen and more opportunities to convert users into buyers.

Every marketing dollar will go further than it did last month. If you’re considering cutting your budgets, perhaps Search isn’t the right place.

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