Advertisers Will Spend $4 Billion Dollars in 2004 on
Search Engine Marketing According to the Search Engine Marketing
Professional Organization (SEMPO)
Advertisers Expected to Spend on Average an Additional 39%
in 2005 on Their Combined Search Engine Marketing Programs Compared to 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
"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 30 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
- 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
© Copyright 2001, Peter DeLegge Consulting/Marketing
Today. All rights reserved
to Marketing Today Newsletter FREE!
Be alerted when new content is published, get exclusive newsletter-only articles
and job listings. Join a virtual who's who of marketers from
do not rent or share our email list.
- Harvard Business School (Working Knowledge)
- Northwestern University, Medill School
Noted Marketing Pros
"I love the site!"
Seth Godin, author, Permission Marketing
As one of the "best business links on the web."
- Business 2.0 Magazine's Web Guide
"Websites worth watching."
- Folio Magazine
Most importantly, our