August 10, 2004, 12:00 AM

Paid search spending will more than double in 5 years, study says

The popularity of paid search as an online advertising tool will continue to surge over the next several years, as spending on it more than doubles to $5.5 billion by 2009, Jupiter Research reports.

The popularity of paid search as an online advertising tool will continue to surge over the next several years, as spending on it more than doubles to $5.5 billion by 2009 from $2.6 billion this year, Jupiter Research reports in a new study, "Paid Search Through 2009."

The increase in spending will stem mostly from the competitive pressures that are driving up the average cost-per-click for keywords, Jupiter says. It adds that incremental growth in the number of searches will also drive overall spending on paid search.

Jupiter warns, however, that marketers need to hone their skills in using paid search as a marketing tool to get more bang for the buck. "With a majority of search marketers using unsophisticated bid strategies, improved measurement and increased efficiency will be necessary to maintain an effective return on investment," Jupiter says.

Jupiter divides its paid search figures between paid listings and paid inclusion. Paid listings place text ads among sponsored listings, ranked by the amount bid on keywords, on search results pages. Paid inclusion guarantees that text ads will appear within organic listings on search results pages, but unranked.

Jupiter notes that paid search listings will grow at a cumulative annual growth rate of 15% from 2004 to 2009, rising from $2.4 billion to $4.9 billion. Paid listings account for 96% of the market in 2004, and will continue to dominate search marketing for the foreseeable future, Jupiter says. It adds that the cost-per-clickthrough for paid search will rise from $0.29 last year to $0.36 this year and continue rising to $0.47 in 2009. "For most advertisers, this means that search marketing ROI will slide from great to good," Jupiter says. "However, some advertisers could see ROI dip to unprofitable levels."

Paid inclusion will decline this year due to Microsoft Corp.`s MSN`s discontinuation of its paid inclusion program, but will make a strong comeback in the next few years, rising from $110 million this year to $202 million next year and $639 million in 2006, Jupiter says.

 

 

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