I ran across this article recently and was intrigued by the numbers and the finding that ad dollars from traditional media such as print and television are being siphoned toward online advertising. It seems while overall advertising budgets didn’t grow, online advertising did. One of the factors that I think drives this movement is the availability of good metrics which can show ROI.

Early findings of 2007 SEMPO State of the Market Survey shows marketers even more committed to search spending as they shift dollars from print advertising and other sources

SEARCH ENGINE STRATEGIES, NEW YORK CITY, March 17, 2008 – Search engine marketing spending exceeded projections in 2007 and, based on survey responses by marketers and agencies, the search marketing industry will exhibit continued healthy growth, according to preliminary findings of the 2007 State of the Market survey by the Search Engine Marketing Professional Organization (SEMPO), www.sempo.org, released today at the Search Engine Strategies conference. While the numbers appear robust and reflect a desire for marketers to continue to spend on search, the survey cannot estimate the result of a shortage of search inventory (searches) caused by a major economic downturn. However, a critical finding is that search marketing spending is increasing at the expense of print magazine advertising, website development and other marketing functions, as marketers essentially shift the portions of their spending pie, following consumers as they increasingly rely on search engines to conduct pre-purchase research.

The detailed online survey by Radar Research was completed by 867 search engine advertisers and SEM agencies and administered via IntelliSurvey, Inc.

Here are key findings:

• The North American SEM industry grew from $9.4 billion in 2006 to $12.2 billion in 2007, exceeding earlier projections of $11.5 billion for 2007.
• North American SEM spending is now projected to grow to $25.2 billion in 2011, up significantly from the $18.6 billion forecast a year ago.
• Marketers are finding more search dollars by poaching budget from print magazine spending, website development, direct mail and other marketing programs.
• Paid placement captures 87.4% of 2007 spending; organic SEO, 10.5%; paid inclusion, .07%, and technology investment, 1.4%.

Search Engine Advertisers and SEM agency survey

“The spending statistics show search engine marketing continues to prove its worth in the larger marketing arena. However, in light of the concerns about the overall economy, it’s important to note some of this spending is the result of shifting marketing dollars from other offline and online marketing endeavors,” says Jeffrey Pruitt, SEMPO president and executive vice president, corporate partnerships, iCrossing.

SPENDING DRIVERS

The 2007 survey showed a significant increase in North American SEM spending projections from $18.6 billion to $25.2 billion. According to respondents, the drivers behind this higher estimate are advertiser demand, rising costs of keywords and pay-per-click campaigns, an increase in the number of small-to-midsized businesses using search engine marketing, greater consumer participation in search and increased interest in targeting, such as behavioral and demographic targeting of searchers.

Fewer advertiser respondents in 2007 reported an increase in paid placement prices than the previous year – two-thirds compared to almost three-quarters in 2006. However, a key finding is that as with last year, approximately 75% said they could tolerate further rises in paid placement prices, and as last year within that 75% the respondents are approaching a spending ceiling – more than half want those expected price increases to be 30% or less.

“While CPC price inflation has slowed, marketers are finally beginning to recognize the value of search, and we expect search prices will hold and may even continue to move upward based on survey data,” says Gordon Hotchkiss, SEMPO chairman and president, Enquiro Search Solutions, Inc.