Did Consumers Use Payday Loans to Finance Christmas?

Lorna Rose Gill Posted by Lorna Rose Gill

Last year, it was predicted that £35bn would be spent online in December alone. Although the official figures aren’t in yet, did this estimate give payday lenders the motivation to endow extravagant expenses?

Before Christmas, YouGov predicted that the British intended to spend an average of £821 per person on festive shopping last year. This number might make it look like we’re splashing out, but this estimation actually represents a slight decrease year-over-year.

On a related note, the report concludes that any increase in total festive spending is due to the corresponding increase in the adult population, rather than to a growing purchasing power or readiness to spend.

Still, the Christmas shopping spree is a serious challenge for many household budgets. With numerous reports claiming that the British regularly overspend their monthly incomes, short-term loans – specifically, payday loans – are gaining in popularity. Is Christmas the heyday for payday lenders? And what do they do to attract and retain customers?

Payday Paradigm

Although it might come at a hefty price, payday loans offer a reliable liferaft to many people struggling to make ends meet.

Media criticism has suggested that payday loans are widely used to cover non-essential and irregular expenses related to spending on Christmas food and gifts, summer vacations, repair works, outstanding bills, medical care, unexpected bills, or just to manage a shortfall between paydays.

A report by the Institute for Public Policy Research, however, refutes this notion, stating that a mere 22% of payday borrowers use such short-term loans to cover festive spending, while everyone else uses the loans to cover everyday expenses like water and heating bills.

For their success, those taking out payday loans owe a lot to their flexibility and easy access. These factors, along with the relatively lower penalty fees, generally reasonable APR, the promise of no credit check, and other benefits have brought payday lenders a steady stream loyal clientele.

And, as the Financial Conduct Authority confirms, the introduction of a price cap seemingly has payday operators on the up and up.

The growing popularity of payday loans goes hand in hand with an increasingly efficient customer identification system and an increasingly precise method of filtering out ineligible applicants and fraudsters. Thе ease of spotting potential fraud also explains why payday lenders are moving towards online operation.

This paradigm shift has serious marketing ramifications for payday lenders. For example, their awareness and advertising campaigns are now predominantly run all year round, not just during the period leading right up to Christmas.

Moreover, given their exclusive online status, lenders can employ advertising channels like paid search, which allows them to reach their audience by location, language, demographics, time spent online, and other metrics.

Let’s see how major payday companies have employed paid search over the last year, as well as in preparation for a lavish Christmas shopping season.

Organic Share of Voice

[lightbox rel=”group1″ width=”860″ href=”https://www.adthena.com/wp-content/uploads/2015/01/Paydayloansorganic.png” title=”Payday lenders organic share of voice, Adthena data” src=”https://www.adthena.com/wp-content/uploads/2015/01/Paydayloansorganic.png”][/lightbox]

Wonga.com entered some tough times in March, when a series of fraudulent loans once again brought the brand into the headlines. As you might expect, this bad press led its organic traffic to fall below 60% of the total organic share of voice (SOV) by June.

This dip, however, actually constituted a part of a larger, steady decrease in Wonga’s huge organic traffic over the past year: for the period between November 2013 and November 2014, its organic SOV dropped by some 30% in favour of a huge leap upwards by QuickQuid.co.uk.

That said, this “huge leap” is relative, as QuickQuid’s organic SOV accounted for an average of merely 17% of the total organic SOV over the same one-year timeframe.

Share of Spend and Paid SOV

[lightbox rel=”group1″ width=”860″ href=”https://www.adthena.com/wp-content/uploads/2015/01/Paydayloansshareofspend.png” title=”Payday lenders share of spend, Adthena data” src=”https://www.adthena.com/wp-content/uploads/2015/01/Paydayloansshareofspend.png”][/lightbox]

[lightbox rel=”group1″ width=”860″ href=”https://www.adthena.com/wp-content/uploads/2015/01/Paydayloanspaid.png” title=”Payday lenders share of voice, Adthena data” src=”https://www.adthena.com/wp-content/uploads/2015/01/Paydayloanspaid.png”][/lightbox]

As you might have read in previous posts on payday lenders, QuickQuid typically manages its pre-Christmas PPC campaigns with marked efficiency. An analysis of the annual trend, however, shows that, although not entirely flawed, the digital lender’s paid search campaigns are not as effective as they could be.

While its budget amounted to three-quarters of the sum total of all competitors’ budgets, it only managed to attain a relatively disappointing average of 62.5% paid SOV.

WageDayAdvance and PaydayUK rank second and third, respectively, in terms of share of spend. It’s worth noting that WageDayAdvance spends twice as much as Wonga, but seizes just 6% more of the total paid SOV than the latter does, which might be partially due to its far too extensive keyword portfolio (nearly matching QuickQuid’s in size).

Three companies among the top competitors see some potential in the Christmas season.

Although the renewed interest in PPC might not be entirely related to the holiday, QuickQuid, WageDayAdvance, and PayDayExpress did start to invest heavily directly in advance of the golden quarter in hopes of reaching out to a wider audience, including those more inclined to splurge for Christmas.

As Adthena’s analysis tool shows, QuickQuid’s paid SOV soared over 70% in November, while WageDayAdvance overperformed in accruing more than 20% and PayDayExpress followed up with a relatively impressive 10% – twice as much as its previous high in June.

With no organic traffic at all and only a small fraction of QuickQuid’s budget, the latter has nothing to lose in its struggle for a bite of the Christmas pie.

With thousands of external backlinks, growing brand popularity, and an enormous organic search term pool, Wonga easily grabs the lion’s share of paid voice in organic search, although its paid SOV places it at the bottom among equal competitors.

Being one of the largest operators in the country and enjoying more than half of the organic SOV, Wonga can sit and watch the Christmas game from the bench. And that’s exactly what it does, its paid traffic plummeting to the ground right before Christmas.

(Main image credit: PublicDomainPictures/Pixabay)

About the author

Lorna Rose Gill
Lorna Rose Gill
Lorna is responsible for acquisition marketing at Adthena, communicating their award-winning product and generating demand. She has developed her career in fast-paced, start-up environments, including two tech track 100 companies. She is curious and passionate and likes to find stories in data and technology.