• by Laurie Sullivan  @lauriesullivan, January 3, 2011

An 18% rise in global paid-search query volume should help revenue grow by 20% in 2011, compared with 18% year-on-year revenue growth in fiscal 2010, according to a report released Monday from J.P. Morgan. The analyst firm believes opportunities for paid search in the international market will become more significant than in the U.S.

The market in the United Kingdom remains at par or ahead of the U.S. market, but the development of the overall international paid-search market is still more than two years behind the United States. While J.P. Morgan analysts expect the U.S. to experience 12% year-on-year query growth in 2011, international markets will see a 19% lift. The firm's estimates put paid-search revenue growth at 25% to $25.7 billion.

Search continues to see solid growth, with wider market adoption overseas. Baidu still maintains dominance, because others such as Soso and Sogou are still unlikely to gain meaningful market share, according to the report. In China, search ads continue to grow more rapidly than brand ads. J.P. Morgan estimates that search ads will contribute about 61% to the total online ad market in China in 2011, compared with 70% in the U.S.

China's Internet user base should grow around 20% CAGR between 2009 and 2011, reaching a penetration rate of 39% by the end of the year -- up from the current penetration rate of 31%. Drivers include lower-priced computers, more affordable telecom connection fees, government support of Internet use, and low-cost entertainment alternatives.

The report -- Nothing But Net: 2011 Internet Investment Guide -- looks at drivers of the total advertising market, and then breaks it into sections that study issues relating to search, display, video and mobile advertising.

Advertisers likely will explore new search avenues and show interest in social media search, mobile search and local search in 2011. Search engine use will rise on computers, tablets and mobile devices as price-mindful consumers continue to comparison-shop. The report suggests that improvements in ad-budget monetization will likely result in more bidding for keywords, and personalized search and vertical search will attract both advertisers and consumers to engines.

Efforts are being made to innovate in search, J.P. Morgan Analyst Imran Khan wrote in the report. After years of the same format for search results, ad executives can expect to see multimedia search results, increased personalization, and dynamic results that will make real-time information the standard.

Similar to reports by eMarketer, J.P. Morgan suggests growth in U.S. display advertising will match search spending this year. The movement made by brand advertisers late to explore online advertising will push display advertising revenue higher. Social networks also have had an impact on "viewership trends" that will lead advertisers to follow eyeballs. It will push display advertising to experience 13% year-on-year growth, in line with J.P. Morgan search advertising growth estimates.

It might not happen, however, without the display advertising industry stepping up to do a better job of educating advertisers. Khan believes that executives need to aid the industry in interactive brand sponsorships, which yield better content integration; fold in purchase data for better targeting of branded ads; and create better integration of real-time consumer intent data. Companies also need to create ad formats with real-time updating for better targeting, and time-based ads that leverage user engagement.

Expect that more brands will start to integrate search and display ad campaigns. The J.P. Morgan report points to a third-party study conducted by Microsoft's Atlas Solutions suggesting that display and search ads work hand-in-hand. In the study, participants were split into three groups: those who clicked only on search advertisements, those who clicked only on display advertisements, and those who clicked on a search advertisement and also viewed or clicked a display advertisement. Using the display-click-only group's conversion rate as a baseline, Atlas found that search click-only users convert more than three times higher. Users exposed to both search and display convert at 22% better than search alone and 400% better than display only, according to the report.

Business models will also evolve. As devices and wireless connections improve, the report suggests some capacity for search distribution deals, similar to existing toolbar deals between PC manufacturers and search engines.