It’s probably no surprise to anyone working as a search marketer, but the industry is chugging along at double-digit growth rates, even as budgets for other forms of marketing and advertising continue to be slashed. According to SEMPO’s sixth annual State of Search Engine Marketing Report, the North American search engine marketing industry will grow 14% this year from $14.6 billion in 2009 to $16.6 billion by the end of 2010.
The report, based on a global online survey of nearly 1,500 client-side marketers and agency respondents, also found that measuring the return on investment (ROI) is the biggest challenge facing marketers this year in all three key search tactics covered in the survey—search engine optimization, paid search and social media marketing.
Another unsurprising finding: Google dominates. 97% of companies responding to the survey said they advertise on Google, with 71% paying to advertise on the Google search network, and 56% distributing ads via the Google content network. By contrast, 50% use Yahoo! Search, and 44% use Bing, compared to 54% who said they used Microsoft Live (MSN) search in 2009.
Many search marketers have experienced keyword inflation on Google. 56% of advertisers and 62% of agencies said that Google keywords have become more expensive over the last year, but these increases appear to be mostly limited to Google, with only 32% reporting higher costs on Yahoo and 29% on Bing.
Another key trend relates to the impact of personalized search results, with 31% reporting that personalization is having a “highly significant” impact on search marketing efforts, with a further 44% calling it a “significant” trend.
Let’s get social
Despite all the attention social media is getting, social media marketing budgets are still virtually insignificant compared to those for search engine optimization and paid search. 73% of companies had a budget of less than $25,000 for social media marketing in 2009, including 23% who said their budget for Facebook, Twitter and other social media darlings was zero.
But budgets are expanding to match the interest in social media. 59% said budgets for social media marketing will increase this year, with 37% saying budgets for social media marketing will be the same. Just 4% said they will reduce their social media spend in 2010.
Despite the apparent lack of spending on social media, three quarters of companies said they are using Facebook (74%) and Twitter (73%) to promote their brands or companies.
Interestingly, agencies are significantly more likely to say that the rise of social media has had a major impact on their search engine marketing (74%) compared with just half of company respondents (52%).
Winners and losers
The number of companies who engage in search engine optimization (90%) has remained steady since 2007, while the proportion of companies carrying out paid search marketing (now 81%) has increased from 78% in 2009 and 70% in 2008.
The trend toward in-house search marketing seemed to pick up slightly during the past year, with agencies doing SEO for clients declining to 88% compared to 89% in 2009. With paid search, the percentage decreased more dramatically, dropping a full ten percentage points from 86% to 76%.
And despite the growing complexity of managing sophisticated campaigns, the majority of companies (53%) carrying out search engine marketing are not using a third party bid management technology for paid search marketing, relying instead on search engine tools and Excel, down slightly from 57% last year.
On average, companies expect to spend 43% more on SEO and 37% more on paid search in 2010 than they did in 2009. Where is the budget coming from? About 49% are reallocating budgets to search engine marketing, moving spend from print advertising. 36% are shifting money from direct mail, and almost a quarter are moving budgets from conferences and exhibitions and web display advertising.
SEMPO has done a remarkably good job at forecasting industry growth since it first started conducting these annual surveys, even in the face of recent economic disruption. For example, looking back at the The State of Search Engine Marketing 2006 report, SEMPO estimated that spend would grow to $18.6 billion by 2011, in trend with this year’s current estimate.
The executive summary of the State of Search Engine Marketing Report 2010 can be downloaded here.