The research was based on a survey of more than 1,000 companies around the world, though the majority were based in the US (45%) or UK (33%). Some key findings include:

• Just under half (46%) of companies say they are planning to increase their overall marketing budget, and a further 42% say they are planning to keep this budget the same as it was in 2009. Only 13% say they are planning to decrease overall marketing budget.
• 64% plan to increase budgets for search engine optimization, and 51% plan to increase budgets for paid search marketing.
• 70% are planning to increase their budgets for off-site social media such as Facebook and Twitter, despite admitting to being “poor” at measuring social media ROI.
• Budget shifts will hurt traditional media spending. Just 17% say they are increasing their print media budgets, compared to 41% who are decreasing spending.

According to the survey, the biggest barrier to digital marketing investment is restricted budget for all types of marketing, cited as a factor by 40% of company respondents.

The full report, Marketing Budgets 2010: Effectiveness, Measurement and Allocation is available for $249, but you can download a free sample (pdf) featuring key highlights.

That is, unless you are a paid-for web analytics provider residing at the SMB end of the market. In fact, even those at the top end are facing challenging times with the possibility of further consolidation following Adobe’s recent purchase of Omniture, which has emerged as a 42% market share holder (estimations were used where it was impossible to get official figures). The outlook for the industry on the whole is very good however.

The market

The positive picture found by Econsultancy seems reflective of the current ascendancy of web analytics in the UK. By Econsultancy’s estimation the UK web analytics market is up 9% in 2009, from £78m in 2008 to £85m in 2009. Although this was down slightly on the 12% growth recorded in 2008, it still represents a good growth rate in a year where recession has hit many related markets. Interestingly, the user experience and usability market, increasingly a close cousin of web analytics, grew only by 5%.

The reason for this growth? Well, the recession may have been both a help and a hindrance:

“While the economic climate has compelled companies to take measurement and understanding of return on investment from digital activities even more seriously, there has been an inevitable slowdown as some companies have either delayed investment or cut budgets for technology and analysts.”

There is a general sense here that marketers and business owners are only starting to realize the potential impact their website data can have on their bottom line. We also believe that marketers have had more time on their hands to finally get to grips with their website data in 2009, a side effect of a return to the tried-and-tested in their marketing efforts.

Good news for web analysts

Even better news for web analysts is the finding that companies increasingly focused their investments on internal web analysts rather than the technology itself. The share of expenditure on staff to analyse website data grew from 36% to 42% while the share of expenditure on web analytics technology fell from 45% to 38%. 1% share in spend also went from the technology platform to professional consulting services.

Econsultancy sees this as a positive shift for the industry and that decision makers are taking note of what thought leaders are saying:

“…web analytics experts stress that the interpretation of the data and use of information to drive business decisions is of key importance, rather than the data itself.”

However, the same report found that 46% of companies still don’t have a dedicated web analyst. Meaning there is still huge potential for growth in this area. As Avinash Kaushik puts it: “you need a person with a planet-sized brain” to avoid becoming “data rich and information poor.” There is a feeling in the market that finding the right staff is difficult:

“It is arguable that companies are not investing in staff, simply because there is a shortage of people with the right skills in the industry. Web analytics requires a unique combination of skills that includes an understanding of statistics, business acumen and deep knowledge of digital and interactive marketing.”

Google vs. everyone else

80% of companies surveyed for the Econsultancy 2009 Online Measurement and Strategy Report use Google Analytics. We’ve yet to see full launch of Yahoo Analytics in the UK and it remains difficult to even obtain an account (my YSM! rep told me recently that they are kept completely in the dark regarding all of this). However when it does launch it can only pile more pressure on the paid-for solutions. To my mind, two questions remain about the future of the free web analytics solutions:

1. Can Google Analytics bridge the gap to the upper echelons of the paid-for solutions? (and do they want to?)
2. Can paid-for solutions targeting SMB markets remain profitable in the face of this free competition?

The first question can be further divided by asking whether this “gap” exists at all or if it is just a perception that there is a gap. From the Econsultancy vendor matrix, it seems that there is near convergence at a grass-roots level purely in terms of the features offered by each company. On paper there are few features not provided by Google Analytics which the others can boast, particularly after a busy 2009 on Google’s part. In practice however there may still be a gap in flexibility in some areas.

Google’s privacy terms and conditions could also be a thorn in their side; 17 out of 19 of the other solutions provide some form of personal information or form data capture.

Google’s inability to provide personal information about users is possibly most relevant at a small business level where every lead counts, and due to the smaller volumes concerned can actually be chased up. It is also relevant for larger organizations wishing to tailor direct marketing for user groups based on personal data.

I was involved in a case recently where Google Analytics was removed from the tender list of a multinational publishing group after it became clear it could not be used for ABCe audits (independent verification of media performance), another symptom of their cagey safety stance. In the end, this may provide an answer for question 2—in exploiting these and similar potential weaknesses Google’s direct competitors could find their own defendable niches; otherwise, the future for lower-tier analytics tool providers looks bleak.

A shift in focus?

Econsultancy asked 20 web analytics providers to plot their current positions (where we are now) and in the future (where we are going) to get a sense of where each product fits in the marketplace and what their plans for evolution are. The chart below shows them all plotted in the “where we are now” position. Already the upper right space is looking cluttered. Tellingly, 12 of the “where we are going” labels moved into or further into the upper right quadrant, a sign that these companies see differentiation and revenue growth through higher levels of customization and the providing of a service to complement their product’s revenues. Even more tellingly Google and Coremetrics continue to hold their cards to their chests and didn’t release this information.

At the top end, paid-for solutions are bolstering their offerings with new features galore to keep increasingly sophisticated users happy. This often means going beyond what is traditionally considered web analytics with features like usability studies, PPC management modules and merchandising bolt-ons. This is also a response to the threat of commoditization. For example, 14 solutions out of the 20 showcased provide email marketing campaign management modules. Likewise 14 support pay-per-click campaign management (in addition to analysis). The lines are blurring, and as Andrew Hood, Managing Director of Lynchpin Analytics points out, soon a study of this kind increasingly becomes more a question of “what exactly is the defined market for web analytics” than “how fast is it growing?”

It’s clear from Econsultancy’s report that industry leaders see this as a dynamic period for web analytics with focus shifting towards the tracking of multiple marketing channels and then using test data to make measurable improvements to websites. As Brewster Barclay, Managing Director of Clickstream Technologies puts it, we are “moving from web analytics to customer analytics.” Meanwhile, Dennis Mortenson of Yahoo suggests automation and predictive modelling are the future:

“We’ll be seeing a lot more predictive analytics. After that, automation will sneak into the tools as well. That’s where we’re headed—there’ll be a whole different level of intelligence applied to it.”

Whichever direction web analytics takes, it seems clear that it is only going to become a greater part of everyday life for digital marketers around the world.

The company said CTRs on “Bing [are] over 75% higher than those who come from Google.” However, AOL users show the greatest CTRs at 2.5 percent.

An important caveat to all this is that Google’s search volumes are much higher than Bing’s or AOL’s so the ratio of clicks to impressions is necessarily going to be lower. The same number of clicks against a greater number of impressions will produce a lower CTR. The real question is whether the same Bing/Ask/AOL CTRs would be sustained at higher traffic volumes.

Earlier studies have also shown lower “conversion rates” for Google vs. other engines. Previously, comScore data have shown different and higher CTRs for the various engines.

Postscript: It was suggested to me in an email that the reason that Google’s competitors see these higher clicks is because they put ads more often in the top-center of the page.

“With the economy in the longest recession of decades, it’s heartening for our annual in-house salary survey to substantiate that search engine marketing is the employment bright spot in sales and marketing,” said SEMPO President Sara Holoubek.

SEMPO, the Search Engine Marketing Professional’s Organization, surveyed more than 600 in-house SEO professionals during the second quarter of this year. Among the key findings:

2009 yearly salaries for an individual contributor with 1-3 years relevant experience range from $40,000 to $80,000; senior manager salaries range $70,000 to $120,000; and vice presidents with responsibilities for large SEM campaigns or a team of specialists earn from $160,000 to $250,000.

In-house SEM budgets are mostly below $50K or above $250K with few in the in-between area.

The majority of respondents are working to maintain or increase the ROI from search engine optimization (SEO) and pay-per-click (PPC) advertising campaigns with flat or restrained budgets for the remainder of 2009.

Practitioners also are responsible for a broadening spectrum of online marketing activities including: organic SEO and SEM programs, social media campaigns, email marketing, graphical ad campaigns, paid inclusion programs, vertical search engine targeting, affiliate marketing programs, and shopping engines.

Another interesting finding is that search marketing is now clearly perceived as a marketing function rather than as an IT/programming function:

For a summary of the in-house salary survey, visit the SEMPO learning center.

Search spending overall:

Efficient Frontier:

SearchIgnite:

Share of paid-search ad spend:

Efficient Frontier:

SearchIgnite:

Bing specifics:

Efficient Frontier offers some additional detail on Bing in particular:

Both firms said that overall search spending was up and that Bing showed growth in terms of both share of spend and clicks. In part because of these numbers, financial analysts expect Google to report strong results on Thursday this week.

The Marketing Sherpa 2009-10 Search Marketing Benchmark Report is 213 pages, and is divided into five major sections, including:

The business of search. There’s been a lot of talk about how search marketing budgets have been affected by the tumultuous economy, and this section of the report offers some interesting data on what’s really going on out there. Contrary to other areas of advertising and marketing that have seen budgets slashed, search marketing continues to grow, albeit at a slower pace. This section has great stats about how budgets have changed, how resources are being allocated, and for the first time, salary stats for various job categories in the industry compared with other traditional marketing positions.

Search benchmark data. This section offers invaluable competitive intelligence data, collected by surveying search marketers, agencies and advertisers. The stats here cover a wide range of cost-per-click data, clickthrough rates, an abundance of info on the types, quantities and prices of keywords used by both B2B and B2C marketers, volume and conversion rates, and a new section on searcher behavior.

Measurement and testing. Over the past few years, analytics has grown from something a few geeky search marketers played around with to a core pillar of most search marketing campaigns. This section looks at both the key metrics used by most marketers, as well as the most underused metrics that could, but largely aren’t, being exploited. Testing, ROI tracking and attribution modeling also get good coverage.

Tactical issues in search. This section offers a potpourri of data culled from search marketers, offering insights into everything from targeting tactics, key SEO factors, clickfraud rates and insights into dozens of other issues that search marketers grapple with on a daily basis.

Search engine usage. This section offers good stats covering market share, searcher preference and other data covering the top general and vertical search players. There’s also good info on secondary players as well as the international search engines, with an emphasis on the rapidly maturing Asian market.

Throughout, the emphasis is on data collected both by Marketing Sherpa and about a dozen or so partners who analyze the search marketing industry. For each topic, there’s both a chart or graph and written interpretation of the data. Most of the time this interpretation is helpful, but I found myself wishing for more detailed analysis for some topics. A few times, an analysis seemed superficial, as if the writers were rushing through a topic or didn’t understand it well enough to offer meaningful insight.

Most of the information in the report is useful and compelling, though occasionally the data gets too granular and seems more like fluff thrown in apparently to fill out the page count (e.g. detailed distributions of salary ranges for all job titles). Another drawback is that the graphics are occasionally difficult to interpret, with busy or confusing charts. I found myself wishing that Marketing Sherpa’s graphic designer would follow the guidelines laid out in Edward Tufte’s classic The Visual Display of Quantitative Information.

However, given the sheer scope and quality of the information presented in the report, these are comparatively minor quibbles.

While the insights in the report are valuable for anyone seeking a competitive edge in search marketing, the Marketing Sherpa 2009-10 Search Marketing Benchmark Report is probably most useful for anyone needing objective data to make a case for budgets or tactics in an SEM campaign. Many of the difficult questions asked by clients or internal executives have answers in the pages of the report, and even better, are backed by solid data.

Marketing Sherpa 2009-10 Search Marketing Benchmark Report
Sixth edition ISBN: 978-1-932353-96-9
Marketing Sherpa LLC, $447 (PDF Only: $397)

The report shows that overall ad spend during Q2 2009 was down 21% from a year ago, but that’s better than the 23% decline between Q1 2008 and Q1 2009. At the same time, Q2 spending was down only 3% from Q1 of this year. Efficient Frontier says that’s an expected seasonal drop, and a sign that search advertising, like the economic downturn, is stabilizing. But the recession has impacted smaller advertisers (those spending less than $50,000/month) the most: Their spending was down 41% from Q2 2008 to Q2 2009. Large advertisers (more than $200,000/month) dropped their spending by 22%, while mid-sized advertisers upped their spend by 5%.

While ad spend overall was down, ROI was up pretty substantially year-over-year — to the tune of a 29% increase in Q2.

Sid Shah, Efficient Frontier’s Director of Business Analytics, points out that the ROI numbers are cost normalized; in other words, they’ve accounted for the fact that ROI naturally goes up when spending goes down. The report says Google offers the most efficiency of the three major search engines, with ROI up 43% Y-O-Y. Bing (and Live Search before it) showed a 24% increase in ROI from 2008 to 2009, while Yahoo dropped by 8%. “Yahoo!’s lower efficiency given stable click volume and lower CPCs indicates a likely decline in quality,” the report says.

Bing, in fact, gets special attention in the report. After Live Search lost ground in the previous two quarters, Bing gained click share and spend share as soon as it launched in early June and maintained those gains throughout the month.

As the top chart shows, Bing’s click share gains came at Yahoo’s expense; the bottom chart shows that Bing’s spend share gains came at Google’s expense. The report indicates that Bing’s paid click gains were most significant in the finance and travel sectors, with gains of 17% and 10%, respectively.

The complete Efficient Frontier Q2 2009 report can be downloaded at the company’s web site, www.efrontier.com.

Most helpful in making purchase decisions:

• 37 percent say that television ads are most helpful
• 17 percent say newspaper ads are most helpful
• 14 percent say search engine ads are helpful
• Radio ads (3 percent) and Internet banner ads (1 percent) are not considered helpful by many people
• 28 percent say that none of these types of advertisements are helpful to them in the purchase decision making process

Ad types that people ignore:

• 46 percent say they tend to ignore Internet banner ads
• 17 percent ignore search ads
• 13 percent ignore TV ads
• 9 percent ignore radio ads
• 6 percent ignore newspaper ads

One in ten Americans say they do not ignore any of these types of ads. Interestingly, younger survey respondents tended to find search ads less helpful than older users and ignored them more. That’s a bit counter-intuitive.

Here are the data segmented by age and geography:

The current US unemployment rate, according to the March 2009 U.S. Bureau of Labor Statistics data is about 9%. The search marketing industry is 2 points below that rate according to my small poll. What I found most interesting is that 25% of the respondents said they were self-employed while 65% said they worked for a company.

Again, this poll is far from having US backed data from the labor department, but it may be a good indication of the search marketing industry is weathering the recession.

The results of the Q1 research show that while search advertising spend is down slightly quarter-over-quarter (3.3 percent) from Q4 2008 to Q1 2009, ROI has improved by 10 percent in the same time period, revealing that advertisers are reducing spend in order to maintain a higher return. ROI improved significantly from January 2009 to February 2009 experiencing a 30 percent increase, while advertising spend improved 6 percent from February to March 2009.

The report’s executive summary identified these trends:

• SEM Spend and ROI Trends Show Advertisers Shift Towards Efficiency Strategy
• Impression Volume Surged Across all Search Engines, Especially in the Financial, Retail and Travel Sectors
• Consumer Search Trends Show Shift Towards Frugality and Comparison Shopping
• Google Continues to Dominate the Market by Spend, YOY Market Share Shows Minimal Change
• Google’s Content Network Continues to Refine as Advertisers Allocate Increased Budgets

I’ve pulled a few of the charts from the report. The following chart indicates monthly SEM spend compared with ROI:

Source: Efficient Frontier

The following chart compares CTR trends YoY at the major engines:

Source: Efficient Frontier

As marketers have tightened budgets CPC prices have come down:

Source: Efficient Frontier

The report provides comparable metrics and visibility in four verticals: finance, retail, travel and automotive. There is also a discussion of consumer behavior as it relates to each of those verticals (which is not identical). However, overall, Efficient Frontier said the following about consumer search patterns during the recession:

In the current economic environment, ROI will continue to be a priority as advertisers trend towards the efficiency model in an effort to reach a higher ROI as a buffer against economic uncertainty. The drop in CPCs indicates a deflation in the marketplace. Thus we find ourselves at an interesting cross-road. On the one hand, advertisers are cutting budgets resulting in cheaper clicks, on the other hand more users are searching online. This situation presents the ideal opportunity for large advertisers with deeper pockets to expand in this market, consolidate their market share, and get more valuable traffic at a discounted price point. Our research indicates that an increased number of users are more price conscious and less brand conscious.