April 3, 2008, 12:00 AM

Paid search spending to double in Europe over next five years, Jupiter says

Growth in the search market abroad means European online marketers will spend 6.9 billion euros on paid search in 2012, up from €3.3 billion in 2007, says a Jupiter Research report. Paid search is expected to grow faster than display ads, it says.

Paid search is rapidly gaining as the online marketing vehicle of choice in Western Europe, according to new findings from Jupiter Research Inc. A new report, “European Search Marketing Executive Survey 2007,” finds that paid search spending in Europe will more than double from €3.3 billion in 2007 to €6.9 billion in 2012. At a forecasted 15% compound annual growth rate in Europe over the next five years, spending on paid search is expected to eclipse growth in online display advertising, estimated at 12%, and in online classified advertising, estimated at 7%.

According to Jupiter’s report, growth in the European Internet search market has three main drivers. It’s popular among advertisers, with nearly three-quarters of online advertisers using paid search in the past year, compared with 62% that used online display ads and 38% that used affiliate marketing. Search marketing budgets of individual advertisers are up, and more consumers are using online search.

Growth in the search market overall, however, means more competition for keyword position and rising keyword prices for the individual online marketers using paid search, Jupiter’s report notes. That’s putting the onus on search marketers to be more efficient so as to be able to use search profitably, and driving adoption of advanced targeting methods such as behavioral and demographic targeting. In a comparison of search marketing tactics used by European online marketers in 2006 with those they said they planned to use in 2007, 36% planned to use demographic targeting in 2007, up from the 24% who did so the previous year. 25% planned to use behavioral targeting in 2007, up from only 10% in 2006, according to Jupiter.

Though use of those two forms of online targeting is on the increase, it’s critical for European marketers to use a broader range of targeting tactics, such as language targeting, to maximize their return on search spending, Jupiter says. For example, in 2006 more than two-thirds of European search marketers paid for clicks from web users located outside their target market; more than 60% paid for clicks from users who speak different languages, Jupiter found.

“Marketers who fail to use such basic targeting tactics will eventually fall behind more sophisticated competitors,” Jupiter says in the report.

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