Search Spend Seems Healthy Despite Slowing Economy

Despite an increasingly gloomy economic forecast, spending on search engine marketing continues to grow beyond expectations. Preliminary results of the 2007 State of the Market Survey were released today at Search Engine Strategies New York by SEMPO, the Search Engine Marketing Professional Organization.

According to the survey, search engine marketing spending exceeded projections in 2007, and marketers say they will continue to increase their spend on search, which would lead to continued healthy growth. One caveat: if there’s no inventory to buy as a result of a recession or economic downturn, it won’t matter what marketers say they want to do.

While some of the increasing spending is new ad dollars, some of it is the result of shifting marketing dollars from other offline and online marketing endeavors, with offline ads the biggest losers.

SEMPO 2007 State of the Market Survey

Search is taking spending away from things like magazines, direct mail and newspapers moreso than TV, which is a bit puzzling, says Kevin Lee, executive chairman of Didit and co-chair of SEMPO’s research committee.

“I’m surprised we’re not seeing as big a shift from TV. Search is getting more budget from offline media that are usually used to narrow-cast, instead of TV and radio, which are broadcast media,” Lee said. “It doesn’t make a lot of sense, but maybe it’s because it’s being moved from something niche-y to something else that’s niche-y? As search becomes more recognized as something that brand advertisers can use, I’d expect to see more TV and radio dollars shift as well.”

Respondents are expecting to increase their search spend this year, due to factors like advertiser demand; rising costs of keywords and pay-per-click campaigns; an increase in the number of small-to-midsized businesses using search engine marketing; and greater consumer participation in search and increased interest in targeting, such as behavioral and demographic targeting of searchers.

Key preliminary findings include:


    • The North American SEM industry grew from $9.4 billion in 2006 to $12.2 billion in 2007, exceeding earlier projections of $11.5 billion for 2007


    • North American SEM spending is now projected to grow to $25.2 billion in 2011, up significantly from the $18.6 billion forecast a year ago.


    • Marketers are finding more search dollars by poaching budget from print magazine spending, web site development, direct mail and other marketing programs.


    • Paid placement captures 87.4% of 2007 spending; organic SEO, 10.5%; paid inclusion, .07%, and technology investment, 1.4%.


  • Google AdWords remains the most popular search advertising program, but both Google and Yahoo sponsored search spending has decreased from a year ago.

SEMPO will present more detailed findings from the study on Thursday at the SES New York conference.

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