Is Volatility from Panda Driving Advertising Spend?

Markets really don’t like uncertainty. When there is too much volatility in a market, buyers will invest elsewhere. In this article we raise the question: Is volatility from Panda driving advertising spend? Who in the advertising world stands to benefit the most from this instability?

Consider the plight of the small to medium sized company owner. They hear about a new marketing tool called Search Engine Optimisation (SEO). This technique allows a skilled consultant and in many cases the business owner themselves to influence Google’s organic search results by following and occasionally bending the ‘rules’ that Google has laid out for those listed in its search engine pages

The payoff from this relatively low investment in SEO is in many cases significant. With relatively little cash outlay the SME proprietor has a marketing advantage that can position them ahead of their Luddite competitors

Then, overnight Google decides they are not happy with the way some SEO consultants are working around their rules and with a broad sweep of their Panda sword, simply changes these rules

Overnight the SME owner’s business is thrown into disarray. What starts of as a seemingly quiet day of sales grows into another day of the same, then a week and beyond

Turning to the same search engine that has abruptly short circuited their plans for a tropical island holiday, their online research reveals others like them are experiencing the same issue. The cause is identified as a Google algorithm update

The ‘Panda’ update is not the last. In fact it is one of many. Some updates are described as more ‘surgical’ strikes than others. Google seeks to continuously refine its algorithm making it harder and harder to bypass the intention of their algorithm.

Eventually as Google begins to ‘level the playing field’ in an almost random fashion, brands who have spent hundreds of hours developing their organic search position find themselves ranking behind competitors who literally don’t know what SEO stands for

Next, regular updates are made in the name of correcting an overzealous impact of a previous update.
The frequency of change, and the necessary lack of algorithm transparency associated with it serves to create great uncertainty in the SEO market. Businesses who have invested solely in SEO begin to look elsewhere for strategic marketing in a desperate bid to return to the prosperous online sales heyday that now seems just a distant memory

One of the first places many of those businesses shunning SEO will turn to is advertising on Google Adwords

Paid advertising on Adwords is a remarkably close proxy to organic search engine marketing. While Adwords lacks the credibility of organic rankings, it makes up for by providing more positioning control as well the ability to emphasise specific keywords

What this means is that one of the primary financial beneficiaries of Google’s algorithm updates is Google itself

The more frequent the algorithm update (whether Penguin or Panda), the less organic search positioning can be relied on. The less reliable a marketing or advertising medium is, the less likely firms are to want to use it

Knowing this was the result, and if you had shares in the search engine, how often would you want a Panda update made?