February 9th, 2007

Search Marketing Grows 62% to Nearly $10 billion

Wow! Search marketing remains very healthy and hot. The Search Engine Marketing Professionals Organization (SEMPO) just released a study that found advertisers in North America spent close to $10 billion on search engine marketing in 2006. That was a 62% spending increase versus 2005, according to SEMPO. SEMPO’s survey of search agencies and advertisers found spending in the medium will almost double by 2011, reaching $18.5 billion.

Microsoft is gaining on Google and Yahoo, with 68 percent of respondents using MSN last year, up dramatically from the 29 percent of respondents doing so in 2005. Google AdWords continues to dominate, and is used by 96 percent of respondents. Yahoo was the second most popular search advertising program, with 86 percent of respondents participating.

MSN surged despite its low usage because the search engine’s ad environment is less cluttered, and it tends to deliver the right ads to users, according to an ADWEEK article. “The ROI on MSN is extremely strong,” said Kevin Lee, co-founder of Did-it.com and chair of the SEMPO research committee. “And there is not anywhere near the competition, as it’s a less mature marketplace.”

Out of the total 2006 spend, $8 billion, or 86 percent of that went to paid search, and $1.1 billion, or 12 percent of overall spending to search engine optimization (SEO). Spending on SEM technologies, including leasing, agency solutions and in-house development, accounts for 1.3 percent of overall spending, or $122 million; and paid inclusion accounted for 1.0 percent of spending, or $94 million.

Since SEMPO began conducting this report in 2004, a large number of search marketers have said that both branding and direct response (DR) were goals, with branding usually topping DR slightly. This year, DR caught up, and even beat out branding as the top objective, albeit slightly. Respondents could pick multiple responses to describe their spending motivation, and direct sales was the top choice, at 58 percent, followed by brand awareness at 57 percent.

The the study also found that search marketing is now poaching budget from offline marketing channels. Hardest hit was print magazine advertising, with 20 percent of respondents reporting a shift; followed by direct mail at 16 percent; TV advertising at 13 percent; and print newspaper advertising at 13 percent.

The industry-wide survey of 587 respondents was conducted by Radar Research and Intellisurvey in November and December 2006. Another report on the search industry, currently being conducted by JupiterResearch and the ClickZ Network, will probably be available soon.