• by Wendy Davis  @wendyndavis, February 8, 2007

North American companies last year spent $9.45 billion on search engine marketing, according to a new report by the trade group Search Engine Marketing Professional Organization.

The vast majority of last year's spending--$8 billion or 86%--went to paid search ads, mainly pay-per-click ads, SEMPO reported in its "The State of Search Engine Marketing 2006." That figure appears slightly optimistic compared to the Interactive Advertising Bureau's estimate. The IAB recently reported that search accounted for 40% of online ad revenue (around $3.2 billion) for the first six months of last year.

Spending on organic search engine optimization--or configuring Web sites to make it more likely that they appear high in the results pages for certain terms--accounted for just $1.1 billion, or 12% of search marketing spending, according to SEMPO. Despite the lower spending levels on search engine optimization, 76% of advertisers said they used such techniques, compared to 71% who purchased search ads.

Where do marketers buy search ads? Virtually all (96%) use Google AdWords, while 86% have purchased pay-per-click ads on Yahoo and 68% bought search ads on MSN last year.

SEMPO also found that marketers who migrate budgets to search are shifting spending from traditional media. When SEMPO asked respondents who said they had shifted budget to search where that money came from, the top answers included print magazine ads (cited by 20%), direct mail (16%), Web site development (15%), TV ads (13%) and print newspaper ads (13%).