Red Door's director of search marketing reports on how much companies allocate to search, and how much you should, too.
The search engine marketing spend in North America was $5.75 billion last year, a 44 percent increase over the previous year. SEMPO estimated that search spending would increase to $7.19 billion in 2006 and reach $11 billion by 2010. It now appears that the estimate for this year was conservative.
TNS Media Intelligence just adjusted its online ad spend figures upward to include search. It normally tracks spending for online display advertising but recently factored in search by using IAB numbers. TNS projects total online spending at $20 billion by the end of 2006. Search is responsible for increasing its 2006 online spend forecast by 50 percent. This gives online advertising a 12 percent piece of the $161 billion total ad-spend pie.
How much should you budget for search marketing?
Estimating a search marketing budget can be a challenge; however, it is wise to establish your budget based on one of two options. If you are ecommerce related, base it from a percentage of sales; if B2B, you'll want to research the inventory available and tackle your competition by grabbing your share of the market.
Considering that 87 percent of commercial search engine traffic is organic (natural listings), and the balance of traffic is paid (sponsored listings), it makes a lot of sense to allocate a fair portion of your search marketing budget for organic search engine optimization.
Multiple links in the search engine results pages (SERPs) create authority and trust, while custom landing pages convert beyond the click. Organic SEO campaigns provide conversion rates three times those of paid search and can last indefinitely when maintained properly. Paid search ads give you immediate exposure in the SERPs and can be controlled to fit your budget and optimized quickly for better performance.
There are 175+ million search engine users in the U.S. today who are conducting approximately 5.5 billion searches each month, and 90 percent of them are going to websites from the first three search result pages. With combined organic and paid search campaigns, you maximize profits from the increased traffic and conversions, achieving branding with your search listings at the same time.
Retailers reveal how they budget overall marketing spend
The latest Internet Retailer Survey shows the following summary for percentage of sales allocated to marketing budgets. While the data refers only to retailers, we think it generalizes across industries as a fairly good overall benchmark guide.
- 4.1 percent of all companies earmark more than 25 percent
- 7.7 percent spend less than 1 percent
- 18 percent spend between 2 percent and 3 percent
- 19.9 percent between 4 percent and 5 percent
- 28.1 percent from 6 percent to 10 percent
- 21.9 percent from 11 percent to 25 percent
- 46 percent of catalogers allocated 6 to 10 percent of sales to marketing and advertising
Search wins hearts and minds
JupiterResearch reports continued growth in the size and complexity of search campaigns, with nearly 24 percent of search marketers spending over $500,000 on SEM campaigns in 2005 versus 12 percent in 2004. This year, 66 percent of marketers plan to increase search spending.
The same study reported marketers are spending larger budgets and generating more revenues. The share of search marketers with annual revenues of $15 million or more has risen from 25 percent in 2005 to 37 percent in 2006.
What does this tell you about search marketing? We believe it means that search has become first and foremost in the hearts and minds of marketers, and with good reason-- every action is traceable to very granular levels.
Marketers are shifting money from other channels to search because it is incredibly effective for both conversions and return on investment. Savvy marketers use both organic SEO and paid search advertising to achieve branding and direct response goals.
Paul Bruemmer is director of search marketing at Red Door Interactive. Read full bio.