• by David Berkowitz , January 4, 2005

December was a blazingly fast-paced month in the search engine marketing space, with deals, partnerships, and acquisitions announced so frequently that a reporter could barely finish editing one story before writing the next one.

It thus makes sense that some predictions for this year can be gleaned from what began at the end of 2004. Here are some clues to what's coming:

1) Natural search will be sexier. With the exception of market sizing by Search Engine Marketing Professional Organization (SEMPO), few revenue estimates and projections include natural search engine optimization. In 2005, this will start to change. Look for some marketers to engage in pay-for-performance optimization deals. This has been going on for years, but in 2005, it emerges from under the radar.

2) Everyone will be in the Desktop Search business. It turns out everyone already is in Desktop Search; the business implications will just be fleshed out. What's it worth to a search engine or technology company if five million users download its desktop tool? Few have convincing answers. Meanwhile, advertisers should question the relevance of their ads appearing next to a search for files on a user's computer. The one reason search engine marketing works is relevance, so be wary of any application that can dilute relevance. This isn't to refute the value of the tool; rather, more answers are needed before we sing its praises. Test as many of these tools as you can to see how your brand would be represented if it appears next to the search results.

3) Search engines' legal bills will skyrocket. The Geico vs. Google suit is just the beginning. This case and others like it will move to higher courts until authoritative precedents are established. The legal issues involve brands, which companies tend to take seriously, and the defendants have deep pockets. The Geico case isn't the trial of the century, but the next one may be.

4) The line between search engines and Internet Yellow Pages (IYP) will fade further. Expect more deals in the IYP space to give those sites broader distribution and in turn beef up search engines' resources for local search.

5) Keyword prices will keep climbing. Supply and demand economics continue, and the demand's still hot. This should be tempered by two factors: the rise in prominence of smaller-tier publishers, and an increasing complexity of search keyword phrases to boost inventory.

6) ROI measurements will include branding, latency, and offline actions. For a voluminous set of marketers, measuring immediate online sales alone demonstrates a powerful return on investment for search engine marketing. This is nothing short of mind-blowing, especially when comparing search to other media. Expect more marketers to raise the bar this year and find out what other benefits they reap from SEM. Help is on the way (see below).

7) More research will show the impact of SEM on branding, latency, and offline actions. A recent comScore study sponsored by Overture revealed that among consumers conducting a computer electronics or computer (CE/C) search at a top search engine in quarter one 2004, 25 percent later purchased a CE/C product, and 92 percent of these transactions happened offline. Research firms like Nielsen//NetRatings, Hitwise, Dynamic Logic, and comScore will likely better quantify such activity. Organizations such as SEMPO and the Interactive Advertising Bureau (IAB) will release more detailed SEM-themed research. To marketers spending in the millions on SEM and SEO, now is a great time to prove your industry leadership and get behind the research. You'll be much better served that way than by sitting on the sidelines and reading the press releases afterwards.

8) Expect more search-related technology acquisitions. How long until Blinkx, with its desktop and video search, is acquired? Yahoo! partnered with X1 last month, MSN acquired Lookout Software for improved e-mail search, and the feeding frenzy's only beginning. There are several technology companies up for grabs. Bon appetit.

9) Expect more search engine marketing firm acquisitions. UK-based Aegis Group's acquisition of iProspect surprised some, but it was a matter of time. Other firms are up for grabs, though consider an alternative scenario: what if an acquisition target (e.g., SEM player) is actually the one that does the acquiring? It could happen this year. Those that have been around a while may have the resources to do so.

10+) Some juicy remainders: Pay-per-call will be offered by a top-tier search engine (if not all of them). All eyes turn to international search, fueled by acquisitions (see above) and alliances. Publishers will be more rigorous in measuring the value of contextual advertising, especially as other potentially lucrative formats such as rich media jockey for space. SEM will benefit from tighter cross-media integration.

Enough with predictions; much of this is already unfolding. The only question that remains is: how will you take part in it?