March 17, 2008, 12:00 AM

Search engine marketing spending exceeds 2007 projections, survey finds

Spending on search engine marketing reached $12.2 billion in 2007, up from $9.4 billion in 2006 and topping an earlier projection of $11.5 billion, finds the Search Engine Marketing Professional Organization.

Katie Evans

Managing Editor, International Research

Search marketing spending exceeded projections in 2007 and is on track to continue to grow at a healthy rate, says the Search Engine Marketing Professional Organization, which tempers its projections by saying the effects of any major economic downturn could not be estimated.

Search engine marketing spending in North American grew to $12. 2 billion in 2007 from $9.4 billion in 2006, topping earlier projections of $11.5 billion for 2007. The 2007 State of the Market Survey of 867 search engine advertisers and marketing agencies projects that North American search engine marketing spending will reach $25.2 billion in 2011; SEMPO previously had projected spending of $18.6 billion in 2011.

“Search engine marketing continues to prove its worth in the larger marketing arena,” says Jeffrey Pruitt, SEMPO president and executive vice president of corporate partnerships at search marketing company iCrossing. “However, in light of the concerns about the overall economy, it’s important to note some of this spending is the result of shifting market dollars from other offline and online marketing endeavors.”

According to survey results, print magazine advertising faces the biggest hit in terms of cannibalization to fund search engine marketing spending ,with 32% of the marketers surveying saying they planned to shift budget away from print to search marketing programs. 22% say they plan to shift funds from web site development to search marketing, while 17% expect to cut back on direct mail and 15% on newspaper advertising. 13% plan to reduce spending on television advertising to shift more funds to search marketing.

Underlying the projection of increases in search marketing spending are advertising demand, the rising cost of keywords and pay-per-click campaigns, and an increase in the number of small to medium-sized companies using search engine marketing. The survey found that other drivers of rising search spending are greater consumer use of search engines, including for pre-purchase research, and increased use of behavioral and demographic targeting by search advertisers.

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