Fallout: The Financial Crisis

Online shopping isn’t clicking either

Stacey Vanek Smith Nov 14, 2008
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A man considers a shirt as he shops for clothes. Patrick Lin/AFP/Getty Images
Fallout: The Financial Crisis

Online shopping isn’t clicking either

Stacey Vanek Smith Nov 14, 2008
A man considers a shirt as he shops for clothes. Patrick Lin/AFP/Getty Images
HTML EMBED:
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TEXT OF STORY

Kai Ryssdal: Here’s an economic indicator we all saw coming a mile away: Retail sales dropped off the edge last month, down 2.8 percent in October, according to the Commerce Department. That’s the biggest monthly drop ever. But bad as that sounds, it’s not just stores and car dealerships that are empty. We’re spending less time shopping online, too.

Marketplace’s Stacey Vanek-Smith reports that could have some big Internet companies searching for their profits.


Stacey Vanek-Smith: You know, all that time-wasting Internet window-shopping employees do around the holidays — may not be a problem this year. Consumers are so strapped, they’re not even browsing for gifts says industry analyst Rob Enderle. He says they’re avoiding online stores altogether.

Rob Enderle: We haven’t seen this sharp a reduction in search and click-through behavior. Folks are trying to curtail their spending and that means they’re curtailing their shopping as well.

A recent report from Majestic Research. found the number of Web sites Americans look at has fallen by about 6 percent since the spring. That’s could be bad news for companies like Google that rely on search-related advertising. Enderle points out, advertisers usually pay for search ads only when consumers click on them, and if they click less often, the price of those ads could drop.

Enderle: The reality is it isn’t the eyeballs these advertisers are paying for, it’s the pocketbooks. And as long as the pocketbooks remain empty, we’re going to continue to have a problem.

Search advertising is a $30 billion business. It accounts for roughly half of all online advertising. Any setback could be temporary. As the recession drags on and companies redirect their marketing budgets, the pay-per-click model could become more attractive says Daniel Taylor, an analyst with the Yankee Group.

Daniel Taylor: As times get tight, marketers shift their budgets away from television and print. And they tend to focus on more direct response media that are more measurable.

Taylor says because frugal shoppers will spend more time picking out exactly what they want, search will become even more important. So the price per click could actually go up, and workers will be back to wasting time on the Internet.

I’m Stacey Vanek-Smith for Marketplace.

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