Search Engine Marketing Shows Strength as Spending Continues on a Growth Track against Doom and Gloom Economic Background

Early findings of 2007 SEMPO State of the Market Survey shows marketers even more committed to search spending as they shift dollars from print advertising and other sources

New York City, March 17, 2008 – Search engine marketing spending exceeded projections in 2007 and, based on survey responses by marketers and agencies, the search marketing industry will exhibit continued healthy growth, according to preliminary findings of the 2007 State of the Market survey by the Search Engine Marketing Professional Organization (SEMPO), www.sempo.org, released today at the Search Engine Strategies conference. While the numbers appear robust and reflect a desire for marketers to continue to spend on search, the survey cannot estimate the result of a shortage of search inventory (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, website development and other marketing functions, as marketers essentially shift the portions of their spending pie, following consumers as they increasingly rely on search engines to conduct pre-purchase research.

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

Here are 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 significantly from the $18.6 billion forecast a year ago.
  
• Marketers are finding more search dollars by poaching budget from print magazine spending, website 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%.
  

"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.

SPENDING DRIVERS

The 2007 survey showed a significant 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-midsized businesses using search engine marketing, 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% said they could tolerate further rises in paid placement prices, and as last year within that 75% the respondents are approaching a spending ceiling – more than half want those expected price increases to be 30% 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.

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. Representing thousands in over 30 countries, SEMPO has over 720 members. It represents the common interests of 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, Superpages.com, SMX and Search Engine Strategies.

About Radar Research
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.