Search Will Party On

Posted on by Chief Marketer Staff

If the three prominent topics at this year’s Ad:Tech San Francisco meeting really are “search, spyware and behavioral ads,” as one attendee put it, then Piper Jaffray senior analyst Safa Rashtchy arrived bearing vital news. According to his estimates, the search segment of the Internet is slated to undergo even better growth than it has already seen.

“Search has obviously been a great party, and we’ve all enjoyed it,” Rashtchy told his audience at Tuesday’s “Search in the Interactive World” panel session. But the party’s going to get better thanks to several factors, he said.

For one thing, the expansion of search marketing to more and more offline companies—a trend that began last year—will fuel the continued growth of the search industry. Rashtchy also expects that direct marketers will allot more of their DM budgets to search marketing. Currently, only about $5 billion of the $100 billion a year spent on direct marketing goes to search advertising, but that will change in the near (although indeterminate) future.

Rashtchy also sees a growing role for search beyond direct-response marketing as companies seek to enhance their branding online. “Search has become such an efficient tool both for marketers and consumers that we are seeing the advertising markets think about it as more than just a direct marketing tool,” he said. “Last week Google senior officers said in their conference call that they’re seeing a branding interest in search. I think this will grow.”

Finally, Rashtchy said the recent explosion in local search, both among the major engine and the second- or third-tier specialists, makes it the “next big category” in search, and a major driver on its own of growth and revenue. “I have no doubt that companies like Google are looking at conquering the offline world, now that they are established online,” he said. “They want to do for the world outside what they’ve already done for the Web—make it comprehensible and easy to search.”

Putting it into bald numbers, Rashtchy said Piper Jaffray expects that the global search industry can see revenues of $22 billion by 2010. and that number does not take in potential revenue from the new and still developing local search sector. “Including local search could actually about double that revenue figure, I have no doubt,” he said.

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