Search Engine Marketing

Advertisers spent $4 billion 
on search marketing programs, and are expected to spend 39% more on
such programs in 2005, according to the Search Engine Marketing
Professional Organization (SEMPO).

SEMPO breaks down advertiser spending for 2004 in several areas:
$3.058 bln to search media companies; $618 mln on SEM-related in-house
expenses within advertising corporations; $380 mln to search engine
marketing agencies, and $30 mln in SEM technology licensing fees. The
report also estimated that marketers will spend (including both
in-house and external media, service and licensing expenses) $3.342 bln
on paid placement campaigns; $492 mln on organic search engine
optimization; $182 mln on paid inclusion, and $72 mln on SEM-related
technology services.

Only 41% of advertisers reported that SEM budgets were newly created
funds for this purpose; the rest said SEM budgets were coming in whole
or in part from shifts away from traditional or Internet marketing
programs. The biggest shift in terms of share of budget was transferred
from paid listings on shopping directories, e-mail programs, web
display advertising, and print magazine and newspaper ads. Brand
awareness was overall the #1 objective advertisers set for search
marketing programs, just beating out sales and lead generation
initiatives. 50% of advertiser respondents said that their senior
executive staff considered the company's search marketing initiatives a
"high priority" (although that figure dropped to 32% of companies with
staff sizes larger than 500).

Advertisers expect to spend, on average, 39% more on all search
marketing programs (organic SEO, paid placement, paid inclusion and SEM
technology) in 2005 compared to 2004; smaller firms projected 32% more
while larger firms (larger than 500 employees) projected a 43%
year-over-year increase. Meanwhile, SEM agencies optimistically
projected budget overall gross revenue increases for 2005 of 79% on
average. Most advertisers plan to manage the majority of their search
marketing spending in-house as opposed to via an agency: 52% of
advertisers said they would manage 100% of their 2005 spending on both
paid inclusion and organic SEO in-house; on average, advertises said
they would outsource 28% of their spending on paid placement and 29% of
their organic SEO through agencies. Large advertisers were likely to
outsource more of those budgets, but still a minority of their spending
for both organic SEO and paid placement.