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US and Canadian Marketers to Spend $4 Billion on Search Engine Marketing
by Jack Loechner, Friday, December 17, 2004 12 AM
US and Canadian Marketers to Spend $4 Billion on Search Engine Marketing The Search Engine Marketing Professional Organization (SEMPO) published a research paper, "The State of Search
Engine Marketing 2004," which concludes that in the U.S. and Canadian market, advertisers will spend $4.087 billion dollars this year on search marketing programs. That figure comprises payments to
search engines and search-related media companies, search engine marketing agencies as well as in- house expenditures in support of such programs, including "paid placement," "paid inclusion,"
"organic search engine optimization" and "search engine marketing technology platforms" The final report breaks down advertiser spending for 2004 in several areas:
- $3.058 billion to
search media companies
- $618 million on SEM-related in-house expenses within advertising corporations
- $380 million to search engine marketing agencies
- $30 million 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 billion on paid
placement campaigns
- $492 million on organic search engine optimization
- $182 million on paid inclusion
- $72 million on SEM-related technology services
Notable findings in the
study include the following:
Advertisers said on average they have witnessed bid prices rise 26% in the last 12 months for keywords they commonly buy but said they could stand on average
another 33% increase in the price and still make a profitable transaction. 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. SEM agencies optimistically projected budget overall gross revenue increases for 2005 of 79% on average. 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. A
summary copy of the research is publicly available on SEMPO's web site.