Marketing budgets may have declined overall--but search budgets this year have increased about 6% compared with the first quarter in the prior year, according to Peter Hershberg, managing partner of Reprise Media.

Hershberg, along with Kevin Lee, CEO of Didit, whose company manages about $160 million annually in search marketing campaigns, set expectations for the state of search engine marketing (SEM) and search advertising trends in 2009, during the JP Morgan investors' call Friday hosted by Imran Khan, JP Morgan Internet and entertainment analyst.

Both Lee and Hershberg agreed that conversion rates have held up, as more companies continue to focus on honing conversion strategies. Brands are looking more closely at the drivers leading potential consumers from Google, Yahoo and Microsoft search engines to pages on the brand's Web site. They want to know the nuances that lead consumers through ads, copy, videos and other media to complete the sale.

This year, brand executives continue to move money more rapidly from one campaign to another to closely follow the media providing the highest return on investment (ROI). The budgets are changing monthly by about 30%, according to Lee.

While Lee admits that many of Didit's clients are investing more in SEM projects, he also said some clients that focus on retail are spending less, while a few are spending more. Lee said some of Didit's retail clients, the top few, are spending 5% less. The remainder continue to invest either the same as last year or between 1% and 2% more.

Google continues to take about 70% of the search market share; Yahoo, 20%; and Microsoft, the remaining, according to Lee and Hershberg.

When Khan asked whether Yahoo's search retargeting tool--a new feature designed to tailor ads based on user behavior--will help the company gain market share, Lee said it has potential, but there are challenges. "It requires you to be a Yahoo advertiser with more than $25,000 monthly in insertion orders," he said. "It's not the way I had hoped they build it. They could have captured more opportunity if it was a tab in Panama where search marketers could simply opt-in and set a number on how recent they want the search behavior, and bid on it either by CPC or CPM."

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