Search Advertising Up 44 Percent Last Year

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January 10, 2006 (6:52 PM EST)

By Antone Gonsalves , TechWeb Technology News

North American advertisers spent 44 percent more on search engine marketing last year, with Google Inc. and Yahoo Inc. taking a large share of the market, an industry trade group said.

Advertisers spent $5.75 billion last year, according to the Search Engine Marketing Professional Organization. Spending on search marketing is expected to continue growing, reaching $11 billion in 2010.

The survey of 553 respondents conducted in November by Radar Research LLC and Intellisurvey found that the bulk of the spending last year was on paid placement, which accounted for 83 percent or $4.7 billion. Optimization of Web sites for better search rankings accounted for 11 percent of spending, paid inclusion 4 percent, and the remainder on agency solutions, in-house development and other tactics.

Gord Hotchkiss, research committee co-chair for SEMPO, said growth in 2005 was driven primarily 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," Hotchkiss said. "The increased competitiveness in the marketplace will really drive the industry forward in the coming year.”

The survey also found that Google and Yahoo commanded the "lion's share" of Internet advertising last year. In addition, advertisers and agencies are approaching their pricing limits, and most search-engine marketing funding is shifted from other programs.