• by Laurie Sullivan  @lauriesullivan, March 13, 2009

The Search Engine Marketing Professional Organization (SEMPO) estimates search engine marketing (SEM) will reach $14.7 billion in 2009, down from last year's estimates of $18.8 billion.

Forecasts put investments at $19.8 billion in 2011, down originally from $25.2 million, according to SEMPO's yearly State of the Search Engine Marketing study conducted by Radar Research.

Despite the $4.1 billion decline in the revised 2009 estimate for North America, the industry will continue to experience slow growth. SEMPO estimates that North American SEM was a $13.5 billion industry in 2008, down from last year's forecast of $15.7 billion, and will reach $26.1 billion in 2013.

Kevin Lee, chairman and CEO at Didit, and SEMPO chair, the Search Engine Marketing Professional Organization, attributes the drop in real estate, luxury travel and other searches to global economic weakness. That's when both disposable income and consumer confidence drop, so people are less likely to buy things.

"If consumers are less likely to make purchases, they are less likely to do searches related to commercial products," he said. "If the pay-per-click-search market results in less queries, marketers typically won't raise bid prices to try and get the same slice out of a smaller pie. If everyone did that, the only winner would be the search engine."

When the pie shrinks, the budget shrinks, Lee said. Many marketing organizations make investments in search as a percentage of future sales. But if estimates are down, marketers will cut search and media budgets. Part of decline is supply-driven--less clicks to buy. The other part is demand-driven--budgets dropping, Lee said.

When asked if the rise and fall of stock prices and volumes have an effect on search advertising forecasts, Lee said no--other than the fact that "it might indirectly influence consumer confidence." He said if anything, "it's an indirect influence, rather than influence."