Here’s another reason to join the Search Engine Marketing Professional Organization (SEMPO) -- the recent "State of Search Engine Marketing" report prepared by Executive Summary Consulting, Inc. that snuck out last month during the notorious holiday lull.
Search spending is up, but how do marketers really feel about SEM costs? Advertisers plan to dole out more cash for search this year, but will they get any more bang for their buck? Where will said additional budgets come from? Will SEM specialist firms die a slow painful death by advertisers bringing the task in-house?
The report places our beloved search industry at just over 4 billion dollars. Ordinarily, releasing a document like this mid-December is a recipe for disaster, but this bad boy is definitely worth a look with more than 100 pages of “wicked smaht” search insights and a few ah-has we haven’t seen elsewhere.
The view from 30,000 feet
The report’s information was based on SEMPO survey data that included 288 respondents. About 70 percent of survey takers came from the United States, while the remaining firms called Canada, United Kingdom, and a smattering of other countries from Australia to the United Arab Emirates home.
What’s really special about the bulk of respondents is that 38 percent were advertisers. People always love to hear from advertisers, as opposed to agencies -- a thought process which may or may not apply to SEM. Sure, advertisers control budgets and one could argue that agencies live in a reactive world, so the source of information should be the ones who control the budgets.
In search however, the agency model often takes a slightly different route. While the prototypical agency lives off a few key clients, search agencies often have many clients. The knowledge set is very specific, and best practices can often be applied to the entire client base.
100 percent organic, no additives or preservatives
Above all, the information presented speaks to the importance of natural or organic search. Nearly 90 percent of those surveyed indicated that they engaged in organic search marketing programs. There was only a slight trail off in the paid placement number at 77 percent and the participation percentage takes a nosedive with paid inclusion at only 44 percent.
There are a couple of reasons for this. One, organic search has been around longer than paid placement, as far as pop advertising is concerned. Two, paid placement has seen incredible growth and can certainly be credited with “bringing online advertising back from the dead,” while paid inclusion is losing its charm with special interest groups complaining that paid inclusion is unfair unlabeled advertising. Inclusion is also fairly complicated compared to other forms of search.
Another interesting note on the subject of organic: Only 40 percent of firms expected to pay more for organic search in 2005, which indicates that not only are natural search costs perceived as fixed, but also that the services associated with natural search do not justify an increase.
There is also the search engine optimization abuse situation. A big chunk of respondents thought search abuse, (search spamming to you and me) is a “big problem,” but thought that legislation was not the solution.
Add all of this up and regulations or best practices would seem like a banner idea, short of organizing a C.O.L.O.N. action committee.
Spend a lot to get a little more
Although search engine marketing is a), often held to a higher standard than other forms of online marketing and b), was unfairly frescoed into the direct response chapel ceiling, about 61 percent of those surveyed said they used search for “enhancing brand awareness,” while only 58 percent said they used search to sell products. Of course, marketers could have many requirements for search since it is so gosh darn versatile.
The defining characteristics of multiple use items often dictate higher costs. Paid search has cost increase built in with the dynamic bidding environment, and marketers have responded with a solid intention to spend more on paid placement in 2005.
The dominant portion (83 percent) said they would increase search spending, while 66 percent of firms said they expected to pay up to 90 percent more on search this year. Also, large firms planned bigger increases in search spending than smaller firms.
How much more will that search dollar really buy?
Increased spending is a good news/bad news scenario in that advertisers also felt that paid placement costs increased about 26 percent. So, by extension, if one increases one’s spending by 52 percent and media costs continue to increase, said advertiser won’t quite get 52 percent more search bang. This sounds like a perfect excuse to triple the 2005 search budget, yes? Or, maybe we spend a few bucks on SEM education to slow those cost increases.
And now, the budget separation
Given the sharp budget increases along with a sharper increase in costs, it’s also worth mentioning that 23 percent of respondents said they were “maxed out,” meaning they couldn’t afford any more cost increases, while over 60 percent said they could tolerate more costs.
Where is this money going to come from? The report indicates money is being taken from several other online areas. Shopping engines proved to be the biggest losers in the budget fight with 13 percent of respondents shifting money away from paid listings there. Closely behind the shopping engines were Web display and email ads at 9 percent.
Before I go off on another rant about the categorically stupid practice of taking money from the already small online budget and dropping it into search, marketers also indicated (9 percent of them) that money was taken from print magazine and newspaper budgets. Of course, the 9 percent of spending on Web ads would be about .09 percent of the print “anything” budget, so that’s encouraging.
The in-house threat
Although the line between the two is beginning to blur, you can still draw a line between SEM firms and agencies. Speaking of encouraging information, advertisers still plan to outsource some of their search engine marketing budget in 2005.
The only thing that bothers me in my last sentence is the word “some.”
Why are 96 percent of marketers planning to have at least 10 percent of their organic optimization budgets in house? Also, according to the survey results, 92 percent of marketers are planning to absorb the costs by at least 10 percent as well.
Some of the in-house organic can be attributed to the negativity associated with search abuse and the lack of best practices, but given the complexities and nature of the bid environment, that number seems rather high for paid placement.
I think we need “some” more cross-comparative analysis on the effects of in-house efforts compared to the efforts of specialized search agencies if these firms are to get more than $400 million of a $4 billion industry.
SEMPO has get up and go
Search is well on its way to finding a seat at the grown-up’s table. The objectives are defined, the needs have been assessed, and we now know a little bit more about the industry thanks to SEMPO.
The SEMPO naysayers cried out on message boards and the occasional published article for something earth shattering or at least some evidence of effort on behalf of its constituency. While it would be easy to argue that SEMPO has been working hard on multiple initiatives, this report will no doubt provide a roadmap for efforts to come.
The key understandings are quite plainly a message to members -- we came to play and we are going to have a plan. All the more interesting will be the comparison of 2004 data to 2005 as a measure of successful industry efforts.
Read about search and your brand here.
Visit the SEMPO Web site here.
iMedia Search Editor Kevin Ryan’s current and former client roster reads like a “who’s who” in big brands; Rolex Watch, USA, State Farm Insurance, Farmers Insurance, Minolta Corporation, Samsung Electronics America, Toyota Motor Sales, USA, Panasonic Services, and the Hilton Hotels brands, to name a few. Ryan believes in sound guidance, creative thought, accountable actions and collaborative execution as applied to search, or any form of marketing. His principled approach and staunch commitment to the industry have made him one of the most sought after personalities in online marketing. Ryan volunteers his time with the Interactive Advertising Bureau, Search Engine Marketing Professional Organization, and several regional non-profit organizations.
Ryan serves as Executive Vice Amphibian (be the frog) at the search engine marketing specialist agency, Did-it.Com.