$4 bln spent on search engine marketing in 2004

Advertisers will spend $4 bln in 2004 by year-end on search marketing programs, and are expected to spend 39% more on such programs in 2005, according to the Search Engine Marketing Professional Organization (SEMPO).

SEMPO breaks down advertiser spending for 2004 in several areas: $3.058 bln to search media companies; $618 mln on SEM-related in-house expenses within advertising corporations; $380 mln to search engine marketing agencies, and $30 mln 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 bln on paid placement campaigns; $492 mln on organic search engine optimization; $182 mln on paid inclusion, and $72 mln on SEM-related technology services.

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 generation initiatives. 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.