SEM increases as spending continues against gloomy economy

From Digital Dealer
Volume 3, Issue 13
March 27, 2008

Search engine marketing (SEM) spending exceeded projections in 2007 and, based on survey responses by marketers and agencies, the search marketing industry will exhibit continued growth, according to preliminary findings of the 2007 State of the Market survey by the Search Engine Marketing Professional Organization (SEMPO) released at the Search Engine Strategies conference.

While the numbers appear strong and reflect a desire for marketers to continue to spend on search, the survey can’t estimate the result of a shortage of searches caused by a major economic downturn. However, a critical finding is that search marketing spending is increasing at the expense of print magazine advertising, Web site development and other marketing functions, as marketers shift the portions of their spending pie, following consumers as they increasingly rely on search engines to conduct pre-purchase research.

The online survey by Radar Research was completed by 867 search engine advertisers and SEM agencies and administered via IntelliSurvey Inc.

Key Findings:

  • 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 from the $18.6 billion forecast a year ago.
  • Marketers are finding more search dollars by taking budget monies from print magazine spending, Web site development, direct mail and other marketing programs.
  • Paid placement captures 87.4 percent of 2007 spending; organic SEO, 10.5 percent; paid inclusion, .07 percent, and technology investment, 1.4 percent.

“The spending statistics show search engine marketing continues to prove its worth in the larger marketing arena. However, in light of the concerns about the overall economy, it’s important to note some of this spending is the result of shifting marketing dollars from other offline and online marketing endeavors,” says Jeffrey Pruitt, SEMPO president and executive vice president, corporate partnerships, iCrossing.


The 2007 survey showed an increase in North American SEM spending projections from $18.6 billion to $25.2 billion. According to respondents, the drivers behind this higher estimate are advertiser demand, rising costs of keywords and pay-per-click campaigns, an increase in the number of small- to mid-sized businesses using SEM, greater consumer participation in search and increased interest in targeting, such as behavioral and demographic targeting of searchers.

Fewer advertiser respondents in 2007 reported an increase in paid placement prices than the previous year – two-thirds compared to almost three-quarters in 2006. However, a key finding is that as with last year, approximately 75 percent said they could tolerate further rises in paid placement prices, and as last year within that 75 percent the respondents are approaching a spending ceiling – more than half want those expected price increases to be 30 percent or less.

“While CPC price inflation has slowed, marketers are finally beginning to recognize the value of search, and we expect search prices will hold and may even continue to move upward based on survey data,” says Gordon Hotchkiss, SEMPO chairman and president, Enquiro Search Solutions Inc.,b4TSprpk

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