I ran across an interesting post last night from Steve Rubel claiming that a pay-per-click recession is looming. Steve bases this claim on the following reasons:

1. Clutter - too many ads being displayed for search terms
2. Declining Relevance of Traffic/Transition to Cost Per Action - advertisers are going to want to pay for action, not clicks, in the future
3. Rising Costs - cost per click is getting too expensive
4. Marketers Spread the Ball Around - online marketers will move their ads to social media, behavioral targeted ads, etc.
5. Search Ads Are Viewed as Untrustworthy - people don’t trust search ads

Steve makes some interesting points, some I agree with but most I don’t. Here’s my comments on the topic:

1. Clutter - Steve points out that 10 ads are too many, I disagree. Ten ads is nothing new when it comes to competitive PPC terms and it doesn’t seem to stop people from clicking. As searchers become more savvy, they will realize that the paid ads are actually very useful when shopping online, while natural search is better for gathering information.
2. Declining Relevance of Traffic/Transition to Cost Per Action - a CPA model would be ideal, but in the mean time, companies like Google will do anything in their power to make PPC ads as relevant as possible. Once they get the relevancy just right, a CPA model will be an easy(er) transition financially for the search engine, but not before.
3. Rising Cost - Yes, costs are going up…and they have been for as long as I have been doing PPC. This is nothing new. There will be a point in most verticals where the little guys can’t afford top positions anymore (although there will always be a long tail), but the big guys will more than make up for it when they start spending branding money on paid search. Look at the insurance market, I doubt there is much profit coming from a $12 click on a term like “auto insurance” - it’s all about the brand and positioning, baby.
4. Marketers Spread the Ball Around - Money will go elsewhere, but as far as I’ve seen, behavioral targeting is a lot less cost effective than PPC. Same with most social marketing since it resembles more of a traditional marketing channel (make something you think is cool, hope people tell others, cross fingers, etc.) The PPC (or CPA) model will remain relatively cost effective for some time to come.
5. Search Ads Are Viewed As Untrustworthy - Possibly, but who trusts any other type of ad? The only real trusted resource is word of mouth, and if I could buy that at a good price I would (but success is certainly not guaranteed, making WOM expensive most of the time). So we are stuck with marketing through channels that suffer from low trust…big deal, that’s why good marketing is challenging.

So that’s my take. I can see where Steve is coming from, but I’m don’t think a recession will be coming any time soon. There will be change in the PPC space, but I know there are a lot of industries who are just getting their feet wet in search. Money will continue to pour in and people, like it or not, will keep clicking ads.

What do you think?