Transcript Executive Summary - Annual State of Search Survey 2007

The State of
Search Engine Marketing 2007
Survey of Advertisers and Agencies
Search Engine Marketing Professional Organization (SEMPO)
February 2008
Executive Summary
Research Project Objectives
PROJECT OVERVIEW
Radar Research, Inc oversaw the following research initiatives as part of this
project:

Understand the size of the industry in order to help promote its growth

Understand where marketer spending is going, among different
recipients (search engine media companies, SEM agencies, in-house) and
towards what types of SEM programs (paid placement, paid inclusion,
organic SEO, SEM technology)

Identify key industry trends

Identify key industry issues SEMPO should address
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2007. Global
Results. Copyright © 2008
2
DEFINITIONS: Respondents Were Given the
Following Definitions at the Start of the Survey
PROJECT OVERVIEW

Search Engine Marketing (SEM): the entire set of techniques and strategies used to direct more visitors from search
engines to marketing web sites, including all of the tactics and strategies defined below.

Paid Placement: Text ads targeted to keyword search results on search engines, through programs such as Google
AdWords and Yahoo Search "Precision Match," also sometimes referred to as "Paid Placement," "Pay-per-Click" (PPC)
advertising and Cost-per-Click (CPC) advertising.

Contextually Targeted Text Ads: Text ads targeted to the subject of writings on web pages, such as news articles and
weblogs, using programs such as Google's "AdSense" and Yahoo Search’s "Content Match" programs.

Paid Inclusion: The practice of paying a fee (fee structures may vary) to search engines and similar types of sites (e.g.,
directories, shopping comparison sites) so that a given web site or web pages may be included in the service's directory,
although not necessarily in exchange for a particular position in search listings, such as Yahoo Search’s "Site Match"
program, formerly known as Inktomi)

Organic Search Engine Optimization: The practice of using a range of techniques, including augmenting HTML code,
web page copy editing, site navigation, linking campaigns and more, in order to improve how well a site or page gets listed
in search engines for particular search topics.

Search Engine Marketing (SEM) Service Provider: Agencies or individuals who assist companies with the various
search engine marketing practices described above.

Search Engine Marketing Technology Provider: Makers of a software application specialized to assist in the execution
of search engine marketing programs, with features such as "bid management," "campaign management," "portfolio
management" and "dynamic optimization."

Web Analytics: Using a reporting platform for measuring and analyzing the results of any/all of your online marketing
campaigns, including search engine marketing.
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2007. Global
Results. Copyright © 2008
3
Research Methodology
PROJECT OVERVIEW
Radar Research oversaw the following research initiatives as part of this
project:

Development of SEM forecast model

Detailed online survey completed by 867 search engine advertisers and
SEM agencies, administered via IntelliSurvey, Inc.

Extensive analysis of secondary research, reporting and commentary
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2007. Global
Results. Copyright © 2008
4
2007 North American SEM Industry Size Estimate,
by Tactic
RESEARCH HIGHLIGHTS
2007 Advertiser SEM Spending
Share of Total
Share of Tactic
Paid Placement
Search Media Firms
SEM Agencies
In-House
$10,648,350,000
$9,597,200,000
$308,640,000
$742,510,000
87.4%
78.8%
2.5%
6.1%
90.1%
2.9%
7.0%
Paid Inclusion
Search Media Firms
SEM Agencies
$85,290,000
$76,760,000
$8,530,000
0.7%
0.6%
0.1%
90.0%
10.0%
Organic SEO
SEM Agencies
In-House
$1,279,210,000
$263,510,000
$1,015,700,000
10.5%
2.2%
8.3%
20.6%
79.4%
SEM Tech
Leasing
SEM Agencies
In-House
$171,690,000
$12,470,000
$61,540,000
$97,680,000
1.4%
0.1%
0.5%
0.8%
7.3%
35.8%
56.9%
Total
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2007. Global
Results. Copyright © 2008
$12,184,540,000
Source: Radar Research
5
Forecast, North America, 1/08
North American SEM Expenditures to Reach
$25.2B in 2011

Growth will be driven by:
– Advertiser demand
– Rising keyword pricing and cost per click
– Increase in small-to-midsize businesses using SEM
– Greater consumer usage of search utilities
– Better targeting and niche offerings
RESEARCH HIGHLIGHTS
(billions)
Search Engine Marketing Projections, North America 2007-2011
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2007. Global
Results. Copyright © 2008
Source: Radar Research
6
Forecast, North America, 1/08
Google, Yahoo Most Popular Search
Media Companies
ADVERTISERS > PAID PLACEMENT
Most Popular Paid Placement Search Engine
Networks Among Advertisers
"Which of the following Paid Placement search engine
networks do you run campaigns on?"
[Multiple responses applicable]

Google AdWords (search)
Google AdWords (network)
Yahoo sponsored search
Google AdWords (Content network, kw)
53%
50%
35%
24%
22%
20%
13%
9%
8%
7%
4%
3%
3%
3%
1%
Live search by MSN
Google AdWords (Content network, site)
Yahoo search content match
Ask.com
Microsoft content ad
Yahoo Local sponsored search
Business.com
MIVA
Looksmart
Other
7Search
Enhance
Pulse 360
Kanoodle
Search123
0%
20%
40%
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2007. Global
Results. Copyright © 2008
60%
71%
70%
69%
80%
Google AdWords is the most popular search
advertising program, used by 97% of
97%respondents

70% reported using Yahoo’s general “Sponsored
Search" paid placement program (down from
86% last year)

MSN is third behind Google and Yahoo! –
although it’s dropped in popularity since last year
as well

Of the rest, Ask.com was the next most-popular
search ad program, followed by Business.com,
MIVA, and Looksmart, consistent with 2005 and
2006 surveys
100%
Advertisers n=240
7
Brand, Sales, Leads and Traffic Are Top Objects of
Paid Placement Programs Among Advertisers
RESEARCH HIGHLIGHTS

Among advertisers, brand awareness is the top objective of Paid Placement campaigns,
especially for larger firms

Selling products follows closely as an objective for Paid Placement
Purpose of Search Engine Marketing Use
"What is your company using search engine marketing to accomplish?"
[Multiple responses applicable]
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2007. Global
Results. Copyright © 2008
Advertisers n=338
8
Site Traffic, Conversion Rate, Click-Thru and ROI
are Top Performance Metrics for SEM Programs
RESEARCH HIGHLIGHTS

More than 50% of respondents tracked the following success metrics for the SEM campaigns: site traffic, postclick conversion, click-thru rate, ROI, cost-per-click, cost-per-action (e.g., sale), and sales volume

Agencies were more likely to track all metrics by about a margin of 10-20% in the case of all metrics

These figures are very consistent with the 2006 survey
Metrics Tracked To Gauge the Success of SEM Programs
"What metrics do you track / measure / generally pay attention to gauge the success of Search Engine Marketing programs?"
% of Advertiser Respondents
100%
Total
90%
80%
70%
76%
80%
Advertisers
Agencies
83%
76%
70%
65%
70%
73%
65%
60%
76%
67%
53%
62%
58% 64%
64%
55%
62%
64%
55%
55%
50%
50%
41%
40%
41%
43%
44%
49%
44%
35%
30%
37%
33%
37%
26%
33%
31% 31%
32%
26%
16%
20%
10%
0%
Increased Conversion Click-thru
traff ic
rate
rate
volume
Return on
Investment
Cost per
click
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2007. Global
Results. Copyright © 2008
CPA
Cost of
Total
generating number of
sale off line online sales
Overall
revenue
increase
Return on Rank of link
Boss'
Adspend
on SE
satisfaction
Total n=867; advertisers
n=338; agencies n=529
Brand
impact
9
SEM Is Poaching Budget From Both Online and
Off-line Marketing Programs
RESEARCH HIGHLIGHTS
Shift of Marketing / IT Funds to
Search Marketing Programs
"From which marketing/IT programs are
you shifting budget away and moving it to
your search marketing programs?"
 The biggest shares of budgets for
SEM programs are being shifted away
from offline marketing such as print,
direct mail and TV advertising, as well
as online marketing such as Web site
development
 Both print advertising and Web site
development face significantly higher
levels of cannibalization than in 2006
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2007. Global
Results. Copyright © 2008
Advertisers n=234
10
Paid Placement Prices Have Risen Moderately
RESEARCH HIGHLIGHTS

Advertisers feel greater price increases than agencies -- a switch from 2006

About two-thirds of advertisers and agencies reported a price increase -- a significantly lower portion than in 2006

Eleven percent of advertisers do not know whether they are paying more for paid placement in 2007 versus the
previous year, a significantly lower number than in previous years, and a number in parity with agency
respondents
Changes in Paid Placement Prices Compared to Last Year
"Have you observed prices for Paid Placement ads change in the last year for the keywords you routinely bid on?"
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2007. Global
Results. Copyright © 2008
Advertisers n=240;
Agencies n=382
11
Most Advertiser Respondents Could Still Tolerate
Further Price Increases, at Moderate Levels
RESEARCH HIGHLIGHTS

Over three-quarters of respondents said they could tolerate further rises in paid placement prices

21% report they cannot afford to pay more for leads/conversions because they are currently at maximum
efficiency, a slight decrease from 2006, and on par with 2005

Even among advertisers who report the capacity to increase ad expenditure, more than half can afford 30% or less

Despite increasing ad spend and year-to-year growth in the value of search engine marketing, we are likely
nearing a pricing plateau as advertisers near their maximum efficacy.
Ability to Afford Further Price Escalation in Paid Placement Ads
"Given the current efficiency you experience with Paid Placement programs, and the quality of the leads that this tactic
generates, how much more could you afford to pay for the leads / conversions this channel provides before you could not
justify the expense?"
% of Advertiser Respondents
30%
21%
20%
17%
18%
16%
10%
10%
6%
5%
4%
1%
1%
60% more
70% -90%
more
2%
0%
Nothing
10% more
20% more
30% more
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2007. Global
Results. Copyright © 2008
40% more
50% more
Tw ice as
much
Three times
as much
Advertisers n=240
Don't know
12
Advertisers Would Improve Their Marketing
Efficiency Rather Than Cut Back On Budget
RESEARCH HIGHLIGHTS

Improving site conversion efficiency and improving the overall efficiency of bidding programs would be advertisers’
first steps in maintaining paid placement programs

An almost equal percentage of respondents said they’d rely more on outside SEM providers (15%) and rely less
on outside SEM providers (14%)
Advertisers tk
"How would you likely react to hypothetical scenario where the cost of Paid Placement steadily increased for the next two
years?” [Multiple Responses Allowed]
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2007. Global
Results. Copyright © 2008
Advertisers n=237
13
Advertisers Are Overwhelmingly Interested in
Behavioral Targeting Opportunities
RESEARCH HIGHLIGHTS

Four out of five advertisers indicated they were wiling to pay more for behavioral targeting opportunities,
particularly for in-market consumers

There is also strong interest in demographic targeting that allows marketers to reach certain demographics such
as age and gender, however advertisers are not particularly enthralled by the prospect of daypart targeting

Advertisers on average would pay 11% more for both behavioral and demographic targeting, and 9% more for
daypart
Willingness to Pay More for Certain Types of Targeting
"Are you willing to bid more for clicks based on the following types of targeting criteria"
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2007. Global
Results. Copyright © 2008
Advertisers n=237
14
Search Retargeting Based on Behavior Is Still In
Its Infancy But Interest Is Strong
RESEARCH HIGHLIGHTS

While advertiser interest in behavioral targeting is very strong, actual investment is still low

Two in five advertisers said they are not currently targeting or retargeting searchers but plan to in the next 12
months

Over a third (35%) said they are not currently targeting or retargeting searchers and do not plan to in the next 12
months

Over a third (37%) said they were targeting searchers either through an ad network, a portal or who had previously
visited their site
Advertisers Interest in Behavioral Targeting for Search Retargeting
"Are you using behavioral targeting solutions for search retargeting? [Multiple Responses Allowed]
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2007. Global
Results. Copyright © 2008
Advertisers n=237
15