THE SURGE OF SEARCH ADVERTISING

The Unstoppable Surge of Search Advertising


There are two giants in the space, and they are getting bigger!

Saying that search engine marketing is a highly concentrated industry is an understatement.

Looking at the numbers, according to comScore, US Internet users performed 75.8% of their January 2007 searches on Google or Yahoo!, and Nielsen//NetRatings put the combined total at 76.4%.

"In fact, over 90% of US paid search ad spending will go to the two search giants in 2007," says eMarketer Senior Analyst David Hallerman, author of the new Search Marketing: Counting Dollars and Clicks report. "One side effect of this degree of concentration is that it can often make marketing on second-tier search engines a better value for the money — less competition for keywords means that advertisers get broader reach for fewer ad dollars."

Paid search makes up the largest slice of the US online advertising market, as it has since 2003.

"The point to note, however," says Mr. Hallerman, "Is that with its 42.5% contribution to the online total in 2007, according to eMarketer's estimates, paid search's spending share has remained fairly level at the 40%-plus plateau since early in the decade."

Projections through 2011 indicate a similar, although no greater, dominance.

"Of course, paid search's relatively flat share growth obscures the enormous sums going to this advertising format, along with Internet advertising as a whole," says Mr. Hallerman. "US spending on search advertising will rise by more than $3.2 billion from 2006 to 2008 alone."

Paid search is currently the key driver of US online advertising, and spending on paid search in 2008 will exceed the $9.6 billion that was spent on all online advertising in 2004.

There are many reasons to expect even more paid search spending.

According to the annual "The State of Search Engine Marketing" study from the Search Engine Marketing Professional Organization (SEMPO), 44% of the companies now advertising on search engines began advertising during the past two years. These companies are new to the game, and many are likely to boost budgets as they measure the effects of search ads on their marketing.

In addition, as marketers grow familiar with advertising on search engines, they buy more keywords. As they buy more keywords, competition leads to higher prices. And higher prices leads to overall spending increases.

"The SEMPO research shows 36% of advertisers saying search marketing programs get their budgets newly allocated funds, rather than shifts away from existing programs," says Mr. Hallerman. "Again, new money continues to enter the arena."