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Search: A $25 Billion per Year Industry?
Thursday, February 08, 2007

In November, we reported on SEMPO's Third Annual State of the Market Survey. Well the results are in and are quite interesting.

Here's some of the key findings. North American advertisers spent $9.4 billion on search engine marketing (SEM) in 2006, up 63 percent over the $5.75 billion spent on search during the prior year of 2005. This surpassed last year's estimate of $7.2 billion. Further, spending is projected to grow to $18.6 billion by 2011 in North America, driven by strong advertiser demand, rising keyword pricing and cost per click, a second wave of small-to-midsized businesses discovering the effectiveness of search and better search technology. I would suggest that this number could grow to as high as $25 billion by the end of 2011. That's a significant increase from last year's projection of $11.1 billion in 2010.

Here's where it gets really interesting. Out of the total 2006 spend, $8 billion, or 86 percent of that going to paid search, and $1.1 billion, or 12 percent of overall spending to search engine optimization (SEO). Only 12% for organic??? That stat amazes me. This number proves that SEO or organic search is still a tough sell to most organizations. A few months back I wrote a series of articles on Organic Search and What's in it for you.

Organic Search: What's In it For You Part I
Organic Search: What's In it For You Part II
Organic Search: What's In it For You Part III

The key points being that organic search can have longer lasting effects and is much more cost effective than paid search. (Of course a well rounded search marketing campaign should have a combination of both paid and organic search elements.)

The SEMPO report also went on to state that spending on SEM technologies, including leasing, agency solutions and in-house development, accounts for 1.3 percent of overall spending, or $122 million; and paid inclusion accounted for 1.0 percent of spending, or $94 million. While most companies are committed to engaging in SEO at some level, the fact that spend on SEO only accounts for 12% is a bit of a concern. In the study, it was communicated that more than 76 percent of respondents take part in organic SEO activities, and 71 percent do paid search. Participation in paid inclusion is waning, with less than 20 percent of respondents taking part, compared to 40 percent in 2005.

Why is it that companies tend to spend decidedly less on their SEO efforts? Why do you choose to allocate less funding towards organic SEO? Is it because you are already ranking well in the organic results of the SERPs? Or is it because usability and the on-site experience is not that much of a factor to you?

Search Stealing Market Share from Traditional Media?

There is some promising news for search ooverall when it comes to budgeting and resources. More than a third of advertisers (36 percent) report their funding for paid placement programs and organic SEO came from newly created budgets in 2006.

The good news for search marketers is that search marketing is now mooching budget from offline marketing media alternatives, instead of fighting for a share of the much smaller online budgets. Hardest hit was print magazine advertising, with 20 percent of respondents reporting a shift; followed by direct mail at 16 percent; TV advertising at 13 percent; and print newspaper advertising at 13 percent.

While search is still new when compared to the traditional media, offline marketers are starting to take notice. 2.6 million for a 30 second Superbowl spot vs. a $200,000 online search marketing campaign for an entire year. Where would you rather put your money?

For more information in the Search Engine Marketing Professional Organization please visit the SEMPO site.

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posted by Jody @ Thursday, February 08, 2007  
  • At 2:53 PM, Anonymous Industrial Search Engine Marketing said…

    86 percent of that going to paid search...

    This is I'm sure largely due to poorly managed campaigns. I'd wager that this figure would drop significantly if all campaign managers were informed. See the PPC Customer's Bill of Rights What do you think?

  • At 9:06 AM, Blogger Jody said…

    I agree entirely as a number of campaign managers need to be educated on the benefits of a total solution that includes both a paid and organic component. Organic = long term paid = short term.

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