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The North American search engine marketing (SEM) industry will reach a value of nearly $23B by the end of 2012, an increase of almost 19% from $19.3B in 2011, according to [download page] a September 2012 report from Econsultancy, in association with SEMPO. This valuation includes spending on paid search marketing and search engine optimization (natural search), and on search engine marketing technology. It excludes social media marketing spending (but does include pay-per-click or PPC ads on social networks).

Majority to Increase SEO Budgets

55% of company respondents to the report indicate that they will increase their SEO spending this year as compared to last, although this is relatively unchanged from 2011 (54%) and 2010 (52%). One-third said they will spend about the same this year as last, with the remaining 12% to spend less. A few respondents will be significantly increasing their budgets: 5% each will spend twice as much, or more than twice as much.

Agency expectations for their clients are quite different. Just 18% expect their client’s SEO spending in 2012 to remain the same: 8% expect it to be less, and 74% expect it to be more.

These spending plans underscore how much marketers value SEO. Indeed, SEO is the digital marketing channel with the biggest impact on lead generation for both business-to-business (B2B) and business-to-consumer (B2C) companies, according to an August 2012 report by Webmarketing123. 59% of B2B marketers said SEO has the biggest impact on their lead generation goals, with social media (21%) and pay-per-click (PPC ”“ 20%) trailing distantly. B2Cs also named SEO (49%) first for impact on lead generation, followed by PPC (26%) and social media (25%). Compared to 2011, 20% more B2Cs now identify SEO as the channel with the most impact.

Paid Search Budgets Also to Grow

Further details from the “State of Search Marketing Report 2012” indicate that 1 in 4 companies will maintain their level of paid search spending this year, down significantly from 33% in 2011. Overall, company respondents are more than 3 times as likely to say they will spend more on paid search this year than less (58% vs. 17%). These figures are not drastically different from 2010, when 34% of companies planned to spend the same as in 2009, 16% planned to spend less and 60% expected to spend more. Even so, the proportion this year planning to decrease their paid search budgets is up 7% points from last year (17% vs. 10%).

Here too, the agency picture is somewhat different. 18% of agencies report that their clients will spend the same on search in 2012 as in 2011. 12% expect their clients to spend less and 70%, more. These numbers lean toward lower spending compared to 2010 figures, when 19% of clients planned to maintain their spending, 8% expected to spend less and 73% to spend more.

But, the proportion of agencies who said their clients will increase their paid search budgets by more than 50% this year is up from 5% last year to 11% this year.

About The Data: The SEMPO State of Search Marketing Report 2012 is based on a global online survey of nearly 900 companies and agencies. This year’s SEMPO study (now in its eighth year) is an aggregation of information provided by organizations from 36 different countries, and from marketers across a range of business sectors and types of agencies. 77% of company respondents and 71% of agency respondents are based in North America.

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