• by Shankar Gupta , January 9, 2006

Marketers in the United States and Canada spent a total of $5.75 billion on search engine marketing and optimization last year--marking a 44 percent increase over 2004 spending, according to a new report by The Search Engine Marketing Professionals Organization. The group also forecast that spending will reach $11 billion by 2010.

"Paid search spending continues to be very strong," said Kevin Lee, chairman of the organization. "It shows no sign of abating, and the respondents seem willing to go a little higher on price."

The report--based on a survey of 553 companies and conducted by Radar Research LLC and IntelliSurvey--found that the majority of search engine marketing spending was focused on auction-based pay-per-click ads. Such keyword ads claimed 83 percent of the total search engine marketing spending, while optimization accounted for 11 percent. But despite its relatively low share, four out of five advertisers reported engaging in organic search engine optimization.

Paid inclusion, on the other hand, is losing share, Lee said. The survey found that paid inclusion--paying a search company to crawl a site for possible inclusion in the organic results--accounted for only 4 percent of ad budgets. Yahoo! is the most prominent search company to offer paid inclusion--and, Lee said, because Yahoo! has just a minority share of the search marketplace, the use of paid inclusion is dwindling. "It's becoming sort of a less mission-critical aspect," Lee said.