• by Mark Simon , July 2, 2007

In honor of July, I thought I'd gloat.

For most of advertising, the future looks bleak. But for those of us in search, tomorrow is a summer's day. I'll explain why below -- but first, some forecasts that came out last week, reported, among other places, in The New York Times.

Robert Coen, Universal McCann's senior vice president-director of forecasting, predicts that U.S. advertising will have grown by only 3.1% by close of 2007, totaling $290.3 billion in yearly spend. That's a measly growth rate, but the outlook from PricewaterhouseCoopers is even more grim: the brokerage house reports that overall ad spending grew only 5% last year, and it expects ad growth for '07 to plummet to 2.9%. As McCann's Coen puts it: "Things are pretty bad."

But if you're in search advertising, things are pretty good. Brian Weiser, vice president-director of industry analysis at Magna Global (like McCann, an Interpublic company), predicts that the search industry will grow 29% this year -- to $8.8 billion. Weiser further predicts that search will become an $11 billion industry next year.

And part of the success for search will be a piggyback off the rise of the Internet. Last Monday, Edison Media Research announced its findings that 33% of American consumers see the Internet as their "most essential medium" -- placing the Internet just shy of TV's 36% foothold, and way ahead of radio's 17%. The Internet, not radio, is the new No. 2. As the gateway to the Internet, search will inevitably grow as well.

Of course, search is still an incredibly small part of the whole marketing picture. Again, Weiser predicts that search will become an $8.8 billion industry this year. That's a lot, but compared to Coen's total prediction for U.S. ad spending of $290.3 billion, that puts search at just slightly higher than a drop in the bucket. It will be a while before search budgets look anything like TV budgets.

But even so, I'd still say that my exuberance about the search business it entirely rational. Three forces in particular are continuing to push search ahead -- and are the reasons why search budgets of 10 years from now will look like TV ad budgets of today:

1. Search isn't just advertising. For most of advertising, the ad and the advertiser live in separate universes. There's little connection between most TV, radio, or print spots and the actual businesses those ads represent. But things are different in search. Search drives traffic directly to your online doorstep. It also provides metrics that allow you to tie a conversion back to the ad inventory that drives it. Search's tight link between conversions and ads create a whole new level of connection between ads and businesses -- so much so that search straddles the line between advertising and CRM. That similarity to CRM will only deepen through Google's recent partnership with CRM leader Salesforce.com. And so as search budgets steal from other advertising channels, expect it to steal spend from CRM budgets as well.

2. They really like us. One of the key reasons that advertising is doing poorly is that consumers don't like ads-just ask the creators of TiVo. But, as anyone in our industry can tell you, search ads are different. While most ads are essentially disruptive, search ads provide information that searchers have said that they want to see.

As the engines make their ad listings more relevant -- from Quality Score to Panama -- searchers will like search ads even more. That's because search ads will do a better job of helping searchers find whatever it is that they're looking for. As search ads become more helpful to searchers, they'll become more popular with searchers -- and with advertisers.

3. Nowhere to go but up. As far back as 2005, the Pew Internet and American Life Project found that search is second only to e-mail as America's most popular online activity. That's a promising piece of information.

If search is the Internet's second-most popular activity, and, as I said above, the Internet is America's second-most important media channel, then it doesn't make sense that search should only capture an $8 billion sliver of the total advertising pie. Inevitably, advertisers will have to wake up to that realization as well -- and they'll reallocate search spend accordingly.

These are just a few of my thoughts on why it's good to be a search marketer at this particular point in history. We're in the midst of an industry that's made incredible strides over the past 10 years -- but that, incredibly, is still in its infancy. Come next July 4th, it will be amazing to check back again to see how far we've come.

I feel bad for all those ad execs who will be worrying about their industry over this holiday weekend. But that doesn't change the fact that, for those of us in search, it's Christmas in July year-round.