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Search Budgets to See Double-Digit Growth

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Search marketing budgets are expected to grow by double-digit percentages next year, mainly in anticipation of higher prices, according to the latest Search Marketing Benchmark Survey from MarketingSherpa.

Many marketers say they plan to increase their PPC budgets by at least 11 percent next year. For average search spenders, 33 percent plan to do so on Google AdWords; 23 percent plan to do so on other top-tier PPC engines (defined as Yahoo, MSN/Live Search, Ask.com and AOL); and 10 percent plan to boost their budgets on second-tier PPC networks (including Miva, Kanoodle, and Business.com).

The report is based on data collected from more than 2,400 marketers who conduct or supervise search marketing in-house, as well as more than 700 agency executives.

Most of the budgets are expanding in anticipation of rising keyword prices, rather than a desire to increase reach, according to Stefan Tornquist, research director at MarketingSherpa. "The concerns over rising prices has been ongoing, but it's reached a new high," Tornquist told SEW. "But it's not impacting spending plans, especially for heavy spenders. Those who spend more tend to have a better grasp on ROI, and they don't see that waning."

Even more "Big Spenders," those advertisers who spend at least $25,000 a month on search, planned double-digit percentage increases. Among those advertisers, 45 percent plan to increase their PPC budgets on Google; 38 percent plan to do so on top-tier search engines; and 24 percent plan to do so on second-tier PPC networks.

Marketing Sherpa chart

Rising PPC prices have also led many marketers to focus on improving conversion of their landing pages, to better capitalize on traffic they are paying to get from search engines, Tornquist said. "There's more attention being paid to site-side conversions, with an emphasis on analytics, landing page design and optimization," he said.

In the study, 35 percent of respondents say they plan to increase their search engine optimization (SEO) budget by at least 11 percent in 2008, while 43 percent of Big Spenders plan to do so.

Despite the rising costs, respondents said that search still provides the second-best return on investment (ROI) among all online and offline marketing tactics. House e-mail marketing outperformed other tactics, with 25 percent of marketers saying it was their most effective tactic, and another 39 percent saying it provides good ROI.

SEO was ranked as second-most effective, with 18 percent calling it the strongest tactic, and 36 percent rating it as good ROI. Next was search advertising, which was tops for 16 percent of respondents, and rated as good by 35 percent. Public relations and direct mail followed, with 12 percent calling each of those tactics their strongest, 28 percent saying PR provided good ROI, and 27 percent saying DM did so.

Other online ads, including banners, and print ads trailed the pack, and were seen by 43 percent and 35 percent of respondents, respectively, as low-value tactics.

Despite its high marks for ROI, SEO also came in third for "hard to gauge" ROI. Public relations was tops in that category, with 30 percent of respondents finding its ROI hard to measure, along with 29 percent of respondents saying the same for print ads. SEO came next, with 21 percent of respondents saying it was hard to measure its ROI. Paid search fared better in that category, with just 9 percent saying it was hard to gauge its ROI.

"More than a fifth of our survey respondents are not sure how effective SEO really is," Tornquist wrote in the report. "With the number of inexpensive and effective analytics tools readily available, we really don't think that needs to be the case."

An increasing number are looking to bring more of their search efforts in-house, though most are contracting out parts of their campaigns. Those looking for in-house help are not having an easy go of it, though. The results of that special report, along with a full report from the Benchmark Survey discussed above, are available in the 2008 Search Marketing Benchmark Guide.

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