To Advertise or Not to Advertise, That Is the Question

To Advertise or Not to Advertise, That Is the Question

Nachi Lolla

It’s official now that we are in a recession, one that has been particularly tough on the retail sector because consumer spending is the lowest it has been in years. However, these past few weeks we have seen a surprising uptick in traffic across the sites we track in our Nielsen Online Holiday Shopping Index. The numbers indicate we have had 10% growth in traffic vs. last year on both Black Friday and Cyber Monday. Most retailers, analysts, pundits and economists are pleasantly surprised, which made me wonder if the retailers’ advertising strategy had anything to do with their success in driving Web traffic.

Retailers in particular must have been in a tough spot when deciding how to advertise. Given the economy, they definitely want to be extremely prudent with their marketing dollars, even erring on the side of significantly cutting down on online advertising around the holiday season (as we can see from the chart below). To give you an idea, online advertising across the retailers we track in our Index was down quite a bit in the weeks leading to Black Friday and Cyber Monday on a week by week basis compared to 2007. For example, image-based impressions were down by 51% versus 2007 two weeks prior to Black Friday week. It seems the strategy retailers adopted was to hold back on advertising during the weeks leading to Black Friday, and invest in a “surge” just a couple of weeks prior to Thanksgiving/Black Friday, the most crucial weeks (a gain of 17% in ad impressions two weeks prior to Black Friday 2008 vs. that in 2007). I looked to see if retailers moved their ad dollars to sponsored links instead, but those impressions are also dramatically lower this year versus last. Overall, there is evidence that retailers have cut back on their ad investments, understandably so.

While this might seem contrary to the objective all retailers were after this year – to drive sales in a difficult economic climate, one plausible explanation for this phenomenon is that retailers focused on an aggressive cost containment strategy and invested in promotional tactics such as low-cost emails, discounts, rebates, etc., without the advertising muscle behind these promos. This strategy seems to have paid off in the short-term, resulting in the 10% traffic increase this year on important shopping days.