More Money, More DM Intent for ’06 Search Marketing: SEMPO

Search engine marketing was a $9.4 billion budget item for North American companies last year, according to the latest edition of a report issued annually by the Search Engine Marketing Professional Organization.

The figure represents a 62% increase over search spending in 2005, according to findings in “The State of Search Engine Marketing 2006”. About 86% of that amount, or $8 billion, went into paid search last year. Optimizing Web sites for natural search rankings accounted for $1.1 billion, or 12% of total spending.

Spending on paid inclusion continued its decline, dropping from $246 million and 4% of spending in 2005 to only $94 million or 1% of the total search budget last year. Search technology platforms comprised the remaining 1.3% or $122 million.

SEMPO forecasts that total search spending in North America will grow to $18.6 billion by 2011.

The survey polled 587 search marketers in both agency and in-house posts to compile its data and was conducted in November and December 2006 by Radar Research LLC and Intellisurvey.

Respondents were asked to list the multiple objectives for their search marketing efforts, and for the first time direct sales outpolled brand awareness by 58% to 57%.

“It’s a healthy trend that direct sales is becoming a primary reason for [search engine marketing] spending,” said SEMPO research committee co-chair Gordon Hotchkiss in a release accompanying the report. “The SEM industry is under pressure to show [return on investment], and linking spending to direct sales will prove that SEM can contribute effectively to a company’s profit picture.”

In terms of search channels used, Google AdWords continued to dominate, with 96% of respondents saying they paced ads there. Eighty-six percent of those polled said they used Yahoo!’s PPC platform. MSN saw a hefty increase in usage, from 29% of respondents in 2005 to 68% in 2006.

And while 75% of advertisers said they could withstand a moderate hike in costs per search marketing lead, 25% reported that they would be unable to afford any further price increases in SEM.