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Search Engine Marketing Is a Rocket: Spending Is Up 62%; Advertisers Spent a Total of $9.4 Billion in 2006, according to SEMPO Survey of SEM Industry

Direct Sales ROI and Expanding SMB Market Two Factors Driving Growth

Wakefield, MA, February 8, 2007 - North American advertisers spent $9.4 billion on search engine marketing (SEM) in 2006, a 62 percent increase over 2005 spending, according to an annual industry survey conducted by the Search Engine Marketing Professional Organization (SEMPO) www.sempo.org. SEMPO researchers also estimate SEM spending to double by 2011, at an aggregate spending total of $18.6 billion.

The report, "The State of Search Engine Marketing 2006," collected data on spending trends by agencies and in-house advertisers. The SEM programs surveyed include paid placement, paid inclusion, organic search engine optimization (SEO) and SEM technology platforms. The report is based on an industrywide survey of 587 respondents - both agency and in-house advertisers - conducted in November and December 2006 by Radar Research, LLC and Intellisurvey.

"These spending figures show that 2006 was a watershed year for the SEM industry. We have moved from the first wave of adoption of search-based marketing to the myriad of small and medium sized businesses, many of them startups, using SEM as a fundamental part of their business. In fact, many of these SMB companies have been founded on an e-business model and that is a huge implication for our general economy, going forward," says Kevin Lee, member of the Board of Directors of SEMPO and chair of its Research Committee.

"SEM is bringing results and is helping to fuel the Internet-based economy which in turn is driving SEM spending," he adds.

Spending Trends
SEMPO's survey found organic SEO (tactics for improving a website's non-advertising rank in search engines) is still the most popular form of SEM, with almost three-quarters of advertisers using this method, with paid placement a very close second at 71 percent. However, in dollars, paid placement accounted for 86 percent of total spending, or $8 billion. Organic SEO accounted for $1.1 billion in spending, or 12 percent. Paid inclusion continues its decline, accounting for one percent of total spending, or $94 million. SEM technology platforms account for the remainder, at 1.3 percent, or $122 million in spending.

One shift from previous years is that direct sales is now as compelling an objective for SEM spending as brand awareness. Respondents could give multiple responses to their spending motivation and in 2006, direct sales was the top choice, at 58 percent, followed by brand awareness as the next most prevalent objective, at 57 percent.

"It's a healthy trend that direct sales is becoming a primary reason for SEM spending. The SEM industry is under pressure to show ROI and linking spending to direct sales will prove that SEM can contribute effectively to a company's profit picture," says SEMPO Research Committee Co-chair, Gord Hotchkiss.

MSN Gaining on Competition
The SEMPO survey also found that MSN is gaining on Google and Yahoo!, now ranking third in paid placement SEM. In one year, MSN has made tremendous progress: in 2005 only 29 percent of respondents said they were using MSN; in 2006 that number rose to 68 percent.

Google AdWords continues its reign as most popular search advertising program, used by 96 percent of respondents. Yahoo registered 86 percent of respondents saying they used the program.

In other trends:

  • 75% of advertisers said they could afford a mild increase in paid placement; the remaining 25% say they have topped out in cost per lead spending
  • SEM continues to poach budget from other marketing channels, especially offline marketing programs
  • In-house marketing programs continue to grow, portending further consolidation on the agency side of the business

About Radar Research, LLC
Radar Research is a Los Angeles-based research and consulting firm aimed at the nexus of media, technology, culture and commerce. It was founded by two former Jupiter Research analysts, Marissa Gluck and Aram Sinnreich. Radar conducts research on behalf of both corporate clients and non-profit organizations, such as DoubleClick, Sony Pictures Entertainment, Nielsen//Netratings, the Online Publishers Association and The Norman Lear Center. For more information, please visit www.radarresearch.com

About IntelliSurvey, Inc.
IntelliSurvey helps organizations, including leading research firms and in-house researchers, make better business decisions by gathering intelligence from their customers, members, and prospects. For more information, please visit www.IntelliSurvey.com.

About the Search Engine Marketing Professional Organization (SEMPO)
SEMPO is a global non-profit organization serving the search engine marketing industry and marketing professionals engaged in it. Its purpose is to provide a foundation for industry growth through building stronger relationships, fostering awareness, providing education, promoting the industry, generating research, and creating a better understanding of search and its role in marketing. SEMPO represents the common interests of more than 450 companies and consultants worldwide and provides them with a voice in the marketplace. SEMPO's education and outreach initiatives are sponsored in part by Microsoft, Yahoo!, Google, Verizon Superpages.com, Atlas, and Search Engine Strategies.

 

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