Search Marketing Revs Its Engine
Search marketing currently represents the hottest segment of online advertising and the temperature will only continue to rise, according to a new report from Jupiter Research. "U.S. Paid Search Forecast" finds that paid search marketing spending will grow rapidly in the next few years, jumping from $6.5 billion in 2006 to $11.1 billion in 2011. This projected compound annual growth rate will be driven both by consumer demand and company performance. Higher levels of search traffic, improved yield management by search engines, and vertical search opportunities will all contribute to this ramped up interest. However, Jupiter advises that as spending swells, attention to budget monitoring and optimization must increase as well.
Sapna Satagopan, associate analyst at Jupiter Research's marketing and media group and author of the study, says that search is quite attractive to marketers. Its popularity can be attributed to a "low barrier to entry, be it small or large marketers," she says. "Plus, they are targeting consumers who are looking for them, versus position[ing] their message as banner ads." Today, search marketing claims the largest percentage (40 percent) of companies' online advertising budgets, according to the report. This grip is projected to grow to 42 percent of total advertising budget by 2011, followed by display advertising (36 percent) and classified advertising (22 percent).
This increase in interest has in turn led to an increase in competition in the search space, according to the report. The number of marketers bidding on more than 10,000 key words has more than doubled in the last year alone. Additionally, nearly one half of search marketers are planning to increase their budgets in the upcoming year. The report notes that many marketers can justify this spend through return. In 2005, 28 percent of marketers spent on search marketing due to the ROI of past search marketing endeavors.
The continuing growth of search marketing can be attributed to a number of factors. This year has seen 8 billion more search queries than 2005, meaning more traffic to companies' sites. The vast majority of people who perform online search connect with companies online, according to the report. Ninety-three percent look for company information through search and 80 percent use search to make purchases on the Web. Additionally, search engines are doing a better job of putting value into clicks and evaluating landing pages, allowing companies to feel more confident shelling out for expensive key words. The study also cites Yahoo!'s Panama platform (which is set for release at the end of 2006) and increased adoption of Microsoft adCenter as further optimizing paid search performance. The opportunity for companies to sell through vertical search sites in the future may also increase spend.
With companies under pressure to spend more on search in order to keep up with the market, the study warns that due attention must be paid to budget optimization. The study reports that managing search marketing across engines (38 percent) and selecting key words (39 percent) to be the biggest challenges in search marketing. However, Satagopan does not believe that budget worries (or anything else) could derail the growth of search marketing. "Search engines themselves are striving to offer so much more to marketers in terms of data and measurement to encourage their spending in this area," she says. "They are also, on the other side, offering better relevancy and categorization for searchers."
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