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Advertisers Will Spend $4 Billion Dollars in 2004 on Search Engine Marketing

December 14, 2004

Chicago, IL (PRWEB) December 14 2004 -- The Search Engine Marketing Professional Organization (SEMPO), a non-profit professional association working to increase awareness and promote the value of Search Engine Marketing (SEM) worldwide, today published a research paper, "The State of Search Engine Marketing 2004," which concludes that in the U.S. and Canadian market, advertisers will spend $4.087 billion dollars this year on search marketing programs. That figure comprises payments to search engines and search-related media companies, search engine marketing agencies as well as in-house expenditures in support of such programs, including "paid placement," "paid inclusion," "organic search engine optimization" and "search engine marketing technology platforms" (terms which all are further defined in the report).

�The data indicate that current size of the market for Search Engine Marketing services is the tip of the iceberg; we have the beginnings of a healthy industry,� said Kevin Lee, Board of Directors Member and Chair of the Research Committee of SEMPO. �The research also suggests that marketers are using a mix of internal and external solutions to deal with the high level of complexity of the search marketing space. SEMPO expects increasing competition among marketers to drive significant growth in Search Engine Marketing and related services over the next several years.�

�Our mandate is to promote and help grow the search engine marketing industry for our members and sponsors,� said Barbara Coll, Chairperson and President of SEMPO. �The logical first step is to measure how large the industry is today in order to set our objectives and directions to support future growth. We believe our 2004 advertising and marketing activities are having an effect already and these results will allow us to confirm these perceptions moving forward.�

The research, conducted by Executive Summary Consulting, Inc., is based on an extensive survey of 288 search engine advertisers and marketing agencies, executed via IntelliSurvey, Inc., as well as in-depth interviews with 31 leading industry experts. The final report breaks down advertiser spending for 2004 in several areas: $3.058 billion to search media companies; $618 million on SEM-related in-house expenses within advertising corporations; $380 million to search engine marketing agencies, and $30 million in SEM technology licensing fees. The report also estimated that marketers will spend (including both in-house and external media, service and licensing expenses) $3.342 billion on paid placement campaigns; $492 million on organic search engine optimization; $182 million on paid inclusion, and $72 million on SEM-related technology services.

�Most SEM market size reports to date have focused on paid search advertising and overlook search engine optimization work by companies and agencies, also ignoring the human resource costs incurred by companies for paid search marketing operations. This survey indicates that companies see SEO as an important part of the search marketing spend, while also staffing their marketing departments to manage paid search. Both areas have an opportunity for strong growth,� added Lee.

Notable findings in the study include the following:

- The return on investment of SEM paid placement advertising continues to stay ahead of price inflation: advertisers said on average they have witnessed bid prices rise 26% in the last 12 months for keywords they commonly buy but said they could stand on average another 33% increase in the price and still make a profitable transaction.

- Only 41% of advertisers reported that SEM budgets were newly created funds for this purpose; the rest said SEM budgets were coming in whole or in part from shifts away from traditional or Internet marketing programs. The biggest shift in terms of share of budget was transferred from paid listings on shopping directories, e-mail programs, web display advertising, and print magazine and newspaper ads.

- Brand awareness was overall the #1 objective advertisers set for search marketing programs, just beating out sales and lead generation initiatives.

- 50% of advertiser respondents said that their senior executive staff considered the company's search marketing initiatives a "high priority" (although that figure dropped to 32% of companies with staff sizes larger than 500).

- Advertisers expect to spend, on average, 39% more on all search marketing programs (organic SEO, paid placement, paid inclusion and SEM technology) in 2005 compared to 2004; smaller firms projected 32% more while larger firms (larger than 500 employees) projected a 43% year-over-year increase. Meanwhile, SEM agencies optimistically projected budget overall gross revenue increases for 2005 of 79% on average.

- Most advertisers plan to manage the majority of their search marketing spending in-house as opposed to via an agency: 52% of advertisers said they would manage 100% of their 2005 spending on both paid inclusion and organic SEO in-house; on average, advertises said they would outsource 28% of their spending on paid placement and 29% of their organic SEO through agencies. Large advertisers were likely to outsource more of those budgets, but still a minority of their spending for both organic SEO and paid placement.

A complete copy of the research is available to all SEMPO members and research participants. A summary copy is also publicly available on SEMPO's web site at http://www.sempo.org/research/sem-trends-2004.php

About the Search Engine Marketing Professional Organization (SEMPO)
SEMPO is a non-profit professional association working to increase awareness and promote the value of search engine marketing worldwide. The organization represents the common interests of more than 315 companies and consultants worldwide and provides them with a voice in the marketplace. For more information, or to join the organization, please visit www.SEMPO.org.

About Executive Summary Consulting
Executive Summary Consulting, run by long-time industry analyst Rick E. Bruner, specializes in market research and strategic consulting focused on Internet marketing and advertising. For more information, please visit www.ExecutiveSummary.com.

The source of this news release is PRWeb.


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