Search Engine Marketers Spent $5.75 Billion in 2005.Google and Yahoo! Continue to Dominate Internet Advertising in North America

SEMPO: Advertisers in the U.S. and Canada spent $5.75 billion on Search Engine Marketing (SEM) in 2005, a 44 percent increase over 2004 spending. SEM spending in North America will reach $11 billion in 2010. The annual totals include payments to search engines and search-related media companies, search engine marketing agencies and in-house expenditures in support of such programs. The programs include paid placement, paid inclusion, organic search engine optimization and search engine marketing technology platforms.

The report is based on an industry-wide survey of 553 respondents conducted in November 2005 by Radar Research, LLC and Intellisurvey.

The bulk of the SEM spending was spent in 2005 on paid placement, accounting for 83 percent or $4.7 billion. While four out of five advertisers report they engage in organic search engine optimization (SEO), organic SEO accounted for approximately 11 percent of overall spending; paid inclusion accounted for just 4 percent of overall spending; and SEM technologies, including leasing, agency solutions and in-house development, accounted for less than 2 percent of overall spending. The data shows that 2005 was a good year for search, but 2006 should be a great year. The growth shown has largely been driven by maturation in existing segments. Future growth will be fueled by an increased search presence from major advertisers and new monetization strategies from the major engines. The increased competitiveness in the marketplace will really drive the industry forward in the coming year.

• Google and Yahoo still command the lion’s share of Internet advertising.

• Branding, sales, leads and traffic are the top objectives of paid placement programs.

• Little SEM funding is newly created; most is shifted from other programs.

• Advertisers and agencies are approaching their pricing limits.

• SEM agencies need to prove their value-add to advertisers.

The State of Search Engine Marketing 2005 Publ 20060109