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Search engine marketing (SEM) spending is taking budget share from other marketing efforts – not only offline but also online – according to preliminary findings from the 2007 State of the Market survey by the Search Engine Marketing Professional Organization (SEMPO).

Essentially, SEM is following consumers as they increasingly rely on search engines to conduct pre-purchase research, according to SEMPO.

The findings, released this week at the Search Engine Strategies conference, found that SEM spending exceeded projections in 2007 and, according to marketers and agencies surveyed, will continue to grow.

Among the key findings issued:

  • 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:

sempo-sem-budget-share-shift-from-marketing-efforts-to-search-2007.jpg

  • Paid placement captures 87.4% of 2007 spending; organic SEO, 10.5%; paid inclusion, 0.07%, and technology investment, 1.4%.
  • Google AdWords remains the most popular search advertising program, but both Google and Yahoo sponsored search spending has decreased from a year ago.

Regarding paid placement:

  • Fewer advertiser respondents in 2007 reported an increase in paid placement prices than the previous year – two-thirds compared with 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.
  • Also 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.

The drivers behind the anticipated growth, according to respondents, are advertiser demand, rising costs of keywords and pay-per-click campaigns, an increase in the number of small-to-midsize businesses using SEM, greater consumer participation in search, and increased interest in targeting, such as behavioral and demographic targeting of searchers.

“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,” said Jeffrey Pruitt, SEMPO president, and EVP of corporate partnerships at iCrossing.

“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 of Enquiro Search Solutions, Inc.

Note: Chart via Search Engine Watch blog.

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

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