Download The State of Search Engine Marketing 2005

The State of
Search Engine Marketing 2005
Survey of Advertisers and Agencies
Search Engine Marketing Professional Organization (SEMPO)
December, 2005
Complete Results for SEMPO Member
Research Project Objectives
PROJECT OVERVIEW
Radar Research, LLC 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 2005. Global
Results. Copyright © 2005
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 2005. Global
Results. Copyright © 2005
3
Research Methodology
PROJECT OVERVIEW
Radar Research oversaw the following research initiatives as part of this
project:

Extensive analysis of secondary research, reporting and commentary

Development of SEM forecast model

Detailed online survey completed by 553 search engine advertisers and
SEM agencies, conducted via IntelliSurvey, Inc.
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
4
Key Research Conclusions
PROJECT OVERVIEW

Advertisers and agencies are approaching their pricing limits. While most
advertisers felt keyword pricing has risen in the past year, four out of five advertisers
claimed they could still afford an increase in keyword pricing in 2006. Less than a
quarter claimed they were currently at maximum efficiency. Yet even among
advertisers who report the capacity to increase their ad expenditure, the vast
majority can only absorb increases of less than 30%.

Most advertisers are relying on both paid and organic search strategies.
Although most of the SEM budget is allocated to paid search media, strategic SEO
is a high priority. To the extent that the search engines can support the legitimate
efforts of marketers to get their sites found when relevant to searchers, there is both
an opportunity to capture more revenue and better service those business
customers.

SEM agencies will have to prove their worth to advertisers. Two-thirds of
advertisers report they intend to manage 100% of their SEM initiatives in-house.
While this indicates that advertisers are viewing their SEM holistically, it also implies
this is a stop-gap measure as the SEM agency marketplace undergoes
consolidation and contraction. Agencies must show demonstrable ROI to clients.
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
5
About Respondents
Most Respondents Are U.S. Companies
ABOUT RESPONDENTS
Location of Surveyed Companies
"What country is your company located in?"

In total 553 respondents completed the
survey

North American firms (U.S. and Canada)
made up almost three-quarters of all
respondents

Respondents from other countries
included Argentina, Australia, Belgium,
Canada, Costa Rica, France, Germany,
Hong Kong, India, Italy, Netherlands,
Norway, South Africa, Spain, Sweden
Other
22%
Canada
7%
U.S.
65%
UK
6%
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Total n=553
7
Agencies Comprise Two Thirds of Respondents
ABOUT RESPONDENTS
Business Descriptions
"Please choose whichever of these options best
describes your business"

Two thirds of global respondents are
agencies

47 of the 161 advertiser respondents are
from firms of 500-plus employees

Three quarters of advertiser respondents
have budget or strategic oversight or are
directly involved in SEM.
100%
86%
90%
% of Respondents
80%
70%
73%
67%
60%
50%
40%
30%
29%
23%
20%
9%
10%
0%
Total
Agency
Firms of <500
Employees
Firms of 500+
Employees
Advertiser
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Total n=553
8
Most Advertiser Respondents Have Hands-on
SEM Roles
ABOUT RESPONDENTS

Most advertiser respondents are directly responsible for SEM programs

12% of advertiser respondents are senior managers with little or no hands-on SEM experience
but familiarity with and oversight of the programs
Personal Role At Company Regarding Search Engine Marketing Programs
% of Advertiser Respondents
"What is your personal role within your company as regards search engine marketing programs?"
80%
60%
60%
48%
40%
20%
44%
23%
12%
14%
9%
14%
19%
10%
4%
5%
25%
4%
2%
3%
3%
2%
0%
Sr. manager w ith budget
and strategy oversight
but no hands-on SEM
experience
Manager overseeing SEM,
but subordinates do most
hands-on w ork
All Advertisers
Directly responsible for
SEM programs
Advertisers of <500 Employees
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Only tangential SEM
responsiblities
Company is too small for
such distinctions; I do it all
Other
Advertisers of 500+ Employees
Advertisers n=161
9
Vast Majority of Advertiser Respondents Influence
Budget Decisions on SEM Programs
ABOUT RESPONDENTS

Over a third of advertiser respondents have ultimate budget authority for SEM programs,
especially at agencies

Well more than half significantly influence budget decisions on SEM, even if someone else has
final sign-off responsibility
Level of Involvement on Budget Decisions
% of Advertiser Respondents
"What is your level of involvement on budget decisions as pertains to spending on search engine marketing programs?"
80%
62%
60%
40%
20%
52%
35%
42%
48%
19%
17%
9%
5%
4%
4%
2%
0%
I am the ultimate decision maker on
such budget allocations
I have a significant amount of influence
on such spending decisions, but
someone else signs off
All Advertisers
My opinion counts for something, but
there are others w ho have more
influence
Advertisers of <500 Employees
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
My opinion does not hold much sw ay in
spending decisions like this
Advertisers of 500+ Employees
Advertisers n=161
10
Online Is Top Sales Channel for SEM Advertisers
ABOUT RESPONDENTS

Roughly three quarters of advertiser respondents using SEM cite their web site as among their top
three sales channels; smaller firms by an even wider margin

The popularity of phone as a sales channel has fallen significantly from about half last year to 38%
Top Three Sales Channels
% of Advertiser
Respondents
"What are your top three sales channels?"
100%
80%
60%
40%
20%
0%
74%
76%
68%
38%
Yor ow n online retail w eb site
36% 43%
Phone orders
37% 36% 40%
Face to face sales
All Advertisers
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
28%
33%
15%
Retail w eb sites of partners
16%
15% 17%
Your bricks-and mortar retail
store(s)
Advertisers of <500 Employees
11% 13%
6%
Paper catalogs
11% 11% 11%
Bricks-and-mortar retail stores
of your partners
Advertisers of 500+ Employees
Total n=553
11
Advertiser Respondents Spanned Several Service
Sectors
ABOUT RESPONDENTS

Business services, computer manufacturing, retail, communications, financial services, and
electronics manufacturing are the top sectors represented by advertiser respondents.
Survey Participants’ Industry Sectors
% of Advertiser Respondents
“What best defines your industry sector?”
20%
15%
12%
10%
5%
4%
4%
4%
4%
Computer Manufacturing
Retail
Communications
4%
0%
Business Services
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Total n=553
Financial Services
Electronics
Manufacturing
12
Large Revenue Firms Well Represented Among
Advertiser Respondents
ABOUT RESPONDENTS

A quarter of all advertiser respondents expected their firms to book more than $100 million in
revenue in 2005

A third of all advertiser respondents expected their firms to book less than $1 million in revenue
in 2005

The majority of small firms (<500 employees) expected to book between $1 and $100 million in
revenue in 2005
Revenue Expected for 2005
% of Advertiser Respondents
“How much revenue do you expect your business to book in 2005?”
60%
52%
50%
40%
43%
42%
34%
33%
30%
34%
21%
20%
14%
11%
10%
11%
5%
1%
0%
< $1 million
All Advertisers
$1-100 million
Advertisers of <500 Employees
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
$100 million - $1 billion
$1+ billion
Advertisers of 500+ Employees
Advertisers n=161
13
Advertiser Respondents Represent a Broad Range
of Sizes
ABOUT RESPONDENTS

The majority of advertiser respondents (56%) have 100 or fewer employees, nearly a quarter
have over 1,000 employees

Most agency respondents (51%) have 10 or fewer employees
Number of Employees
"How many employees does your company have?"
% of All Respondents
50%
43%
40%
30%
22%
20%
20%
10%
16%
11%
8%
12%
12%
4%
9%
9%
5%
11%
9%
7%
1%
1%
3%
0%
0%
0%
1
2-10
11-25
26-50
Advertisers
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
51-100
101-500
501-1,000
1,001-5,000
5,001-10,000
More than
10,000
Agencies
Total n=553
14
Research Highlights
Key Research Highlights: 2005
RESEARCH HIGHLIGHTS

SEM was a $5.75 billion industry in North America in 2005, and will grow to $11.1 billion in
2010

Brand awareness is advertisers' top objective for SEM programs, particularly large firms

Organic SEO is the most popular form of SEM, with 4 out of 5 advertisers using this
method, with paid placement a very close second at 76%

ROI is in line with inflation: Four out of five advertisers say they could afford to pay a mild
increase in the price of paid placement, while three-quarters of advertisers and all agencies
report moderate price hikes this year.

SEM is poaching budget from other marketing channels for the vast majority of advertisers
– especially from affiliate marketing and web site development.

Senior executives consider SEM a high business priority with almost half of advertiser
respondents (47%) saying that senior management at their companies were "very involved"
in SEM programs, especially among companies with fewer than 500 employees

Most advertisers plan to manage the majority of their SEM spending in-house in 2006.
SEM agencies will see a significant decline in business as a result.
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Source: Radar Research Forecast,
North America, 12/05
16
2005 U.S. & Canadian SEM Industry Size Estimate,
by Tactic
RESEARCH HIGHLIGHTS
2005 Advertiser SEM Spending Share of Total Share of Tactic
Paid Placement
Search Media Firms
SEM Agencies
In-House
$4,771,061,673
$4,257,875,000
$137,036,561
$376,150,112
83.0%
74.1%
2.4%
6.5%
89.2%
2.9%
7.9%
Paid Inclusion
Search Media Firms
SEM Agencies
In-House
$245,775,760
$173,729,826
$11,500,000
$60,545,934
4.3%
3.0%
0.2%
1.1%
70.7%
4.7%
24.6%
Organic SEO
SEM Agencies
In-House
$642,994,066
$163,897,864
$479,096,202
11.2%
2.9%
8.3%
25.5%
74.5%
SEM Tech
Leasing
SEM Agencies
In-House
$90,357,143
$32,775,000
$32,857,143
$24,725,000
1.6%
0.6%
0.6%
0.4%
36.3%
36.4%
27.4%
Total
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
$5,750,188,644
Source: Radar Research Forecast,
North America, 12/05
17
SEM growth will be driven by both its global reach
and improved local services
RESEARCH HIGHLIGHTS
Maximum adv
efficiency
Growth of
SEM revenue
N. American
market maturity
Global growth
Growth of niche
and local SEM
Inventory Limits
Greater emphasis
on branding value
Second wave of
SMB using SEM
Time
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Source: Radar Research Forecast,
North America, 12/05
18
North American SEM Expenditures to Reach
$11.1B in 2010

RESEARCH HIGHLIGHTS
Growth will be driven by:
– Increased emphasis on branding value of search
– Second wave of small-to-mid size businesses using search
– Growth of niche and local search
– Increase in broadband users
– Rising cost per click
Search Engine Marketing Projections, North America 2005-2010
$ 1 1 .1 0
$1 2
$ 1 0 .2 3
$ 9 .3 0
$1 0
(billions)
$ 8 .2 7
$ 7 .1 9
$8
$ 5 .7 5
$6
$4
$2
$0
20 0 5
2 0 06
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
20 0 7
20 0 8
2 0 09
20 1 0
Source: Radar Research Forecast,
North America, 12/05
19
Organic SEO Most Popular of SEM Programs
With Advertiser Respondents
RESEARCH HIGHLIGHTS
Engagement in SEM Programs
"Do you currently engage in …?"

Four out of five advertiser respondents
engage in organic search engine
optimization

More than three-quarters (76%) engage
in paid placement

Two out of five advertisers engage in
paid inclusion, a slight decline from 44%
in 2004
90%
% of Advertiser Respondents
80%
80%
76%
70%
60%
50%
40%
40%
30%
20%
10%
0%
Organic SEO
Paid Placement
Paid Inclusion
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Advertisers n=161
20
Organic SEO Surpasses Paid Placement as Top
SEM Service Offered by Agencies
RESEARCH HIGHLIGHTS
SEM Program Offerings
"Do you currently offer the following SEM services …?"

Paid placement and Organic SEO were
offered by the vast majority of agency
respondents

Organic SEO has surpassed paid
placement as the top SEM service in 2005

Paid inclusion has fallen significantly in
2005, in line with lower supply
90%
% of Agency Respondents
80%
80%
76%
70%
60%
50%
40%
40%
30%
20%
10%
0%
Organic SEO
Paid Placement
Paid Inclusion
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Agencies n=299
21
Agencies and Advertisers Closely Share Opinions
Regarding Best Practices
RESEARCH HIGHLIGHTS
Statements Concerning Industry Standards for
“Search Optimization” Best Practices
"Do you agree or disagree with the following statements
concerning industry standards for 'search optimization'
best practices?"
There is a need f or industry
standards to guide 'best practices'
f or search engine optimization
practices
Abuse of search optimization
practices is a major problem
There was strong agreement that
abuse of search optimization was "a
major problem" and that there was a
need for industry standards on the
question

Most respondents did not believe,
however, that legislation was the best
solution to the problem

Advertisers and Agencies agreed
closely about best practices, within a
tenth of a point on a 5-point scale
2.0
2.1
Agencies
2.1
2.2
An industry body should issue
"best practice" standards f or
search optimization and penalize
companies that do not abide by
them, such as by publishing a list of
names of companies to avoid
Advertisers
2.6
2.6
There should be law s passed to
mandate some 'best practices' f or
search engine optimization
1.0

3.6
3.5
2.0
3.0
4.0
Strongly
Agree
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
5.0
Strongly
Disagree
Total n=553
22
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, post-click conversion, click-thru rate, ROI, cost-per-click, cost-per-action (e.g., sale),
and total number of conversions

Agencies were more likely to track all metrics by about a margin of 10% in the case of all
metrics
Metrics Tracked To Gauge the Success of SEM Programs
% of Advertiser Respondents
"What metrics do you track / measure / generally pay attention to gauge the success of Search Engine Marketing programs?"
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
85%
80%
71%
80%
76%
65%
74%
69%
70%
62%
57%
60% 55% 63%
47%
Increased traffic
volume
Conversion rate
Click-thru rate
Total
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Return on Investment
Cost per click
Advertisers
62%
54%
57%
52%
39%
41%
CPA
Total number of online
sales
Agencies
Total n=553
23
Brand, Sales, Leads and Traffic Are Top Objects of
Paid Placement Programs Among Advertisers
RESEARCH HIGHLIGHTS

Among advertisers, enhancing brand awareness is the top objective of Paid Placement
campaigns (albeit by a narrow margin)

Selling products follows closely as an objective for Paid Placement, especially among smaller
firms

Larger firms are more interested in driving leads and traffic via Paid Placement than smaller
firms
Purpose of Search Engine Marketing Use
"What is your company using search engine marketing to accomplish?"
[Multiple responses applicable]
77%
% of Advertiser
Respondents
80%
62%
60%
55%
60%
70%
65%
49%
58% 54%
40%
37% 36%
40%
32%
19% 13%
20%
11% 9%
17%
3% 4% 2%
0%
To increase / enhance
brand aw areness of
our products/services
To sell products,
services or content
directly online
All Advertisers
To generate leads that To drive traffic to our To generate leads for
w e ourselves w ill
w eb site, the revenue a dealer of distributor
close as sales via
model of w hich is
netw ork to close as
another channel
online advertising
sales
Advertisers of <500 Employees
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
To provide
informational /
educational content
only
Other
Advertisers of 500+ Employees
Advertisers n=161
24
Paid Placement Prices Have Risen Moderately
RESEARCH HIGHLIGHTS

Advertisers and agencies are experiencing similar trends in overall pricing

Over three-quarters of advertiser respondents felt that prices for their common keywords rose in
the past 12 months; 100% of agencies thought prices went up

Nearly a quarter of advertisers do not know whether they are paying more for paid placement in
2005 versus the previous year
Changes in Paid Placement Prices Compared to Last Year
35%
"Have you observed prices for Paid Placement ads change in the last year for the keywords you routinely bid on?"
32%
30%
25%
26%
25%
23%
20%
20%
15%
15%
Advertisers
Agencies
15%
10%
10%
6%
7% 7%
0%
6%
4%
5%
0%
Don't
know
3%
1%
10%
more
20%
more
30%
more
40%
more
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
50%
more
60%
more
1%
0% 0%
0%
70%
more
80%
more
0% 0%
90%
more
0%
Twice
as much
Advertisers n=123; Agencies n=229
1%
More
than
twice
25
Most Advertiser Respondents Could Still Tolerate
Further Price Rises, at Moderate Levels
RESEARCH HIGHLIGHTS

Four out of five 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.

Even among advertisers who report the capacity to increase ad expenditure, the vast majority 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?"
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Advertisers n=123
26
Faced With Escalating Keyword Prices,
Advertisers Would Increase Program Efficiency
RESEARCH HIGHLIGHTS

Paid placement advertisers would address price rises by improving the efficiency of their
programs before cutting back on spending

Improving site conversion efficiency and improving the overall efficiency of bidding programs
would be first steps in maintaining paid placement programs intact

Larger firms more likely to assign branding value to their search programs than smaller firms
Reaction to 2-Year Steady Increase in Paid Placement Costs
% of Advertiser Respondents
"How would you likely react to hypothetical scenario where the cost of Paid Placement steadily increased for the next
two years?"
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Try to
Try to improve Shift more Grin and bear Increase the
Decrease Rely more on Rely less on Rely more on Supplement Cease Paid
improve site's our bid mgmt
budget to it; w e can still number of budget for Paid
more
outside SEM outside SEM
cost from
Placement
efficiency at
programs
niche search afford to pay keyw ords
Placement sophisticated
agencies
agencies brand budgets programs
converting *
ad netw orks
more
w e bid on
softw are
altogether
All Advertisers
Advertisers of <500 Employees
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Advertisers of 500+ Employees
Advertiser: n=123
27
Majority of Respondents Shift Budget Away From
Other Marketing Programs for Paid SEM Programs
RESEARCH HIGHLIGHTS

Only 27% of respondents said their funding for paid placement and paid inclusion programs
came from newly created budgets, a significant drop from 2004, indicating a growing maturity
among advertisers

Most respondents said they were shifting in whole or in part budgets from other marketing
programs to fund these new initiatives
Source of Budget for Paid Placement and Paid Inclusion Programs
% of Advertiser Respondents
"Where is the budget coming from for your Paid Placement and Paid Inclusion programs?"
50%
40%
40%
30%
27%
26%
28%
20%
40%
38%
28%
22%
19%
12%
14%
6%
10%
0%
It is new ly allocated budget
specifically for these SEM
programs
All Advertisers
It is money shifted aw ay
from the budgets of existing
marketing programs
A combination of new funds
and funds shifted from existing
marketing programs
Advertisers of <500 Employees
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Not applicable; w e do not
engage in these tw o types
of programs
Advertisers of 500+ Employees
Advertisers n=161
28
Majority of Respondents Shift Budget Away From
Other Marketing Programs for Organic SEO
RESEARCH HIGHLIGHTS

Only 30% of respondents said their funding for organic search engine optimization programs
came from newly created budgets, again dropping from last year

Most respondents said they were shifting in whole or in part budgets from other marketing
programs and/or web development budgets to fund these new initiatives
Source of Budget for Organic Search Optimization Programs
% of Advertiser Respondents
"Where is the budget coming from for your Organic Search Optimization programs?"
50%
40%
30%
20%
10%
0%
30% 31%28%
19% 19%17%
It is new ly allocated
budget specifically
for these SEM
programs
A combination of
new funds and
funds shifted from
existing marketing
budgets
16% 14%
21%
12% 13% 11%
9% 10% 9%
4% 2%
11%
9% 11%
4%
It is money shifted A combination of new A combination of new It is money shifted Not applicable; w e do
aw ay from the
funds, plus budgets
funds and funds
aw ay from budgets not engage in Organic
budgets of existing shifted from existing shifted from existing of existing w eb site
Search Engine
marketing programs
marketing and from w eb site development
development
Optimization
w eb site dev
budgets
programs
programs
programs
All Advertisers
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Advertisers of <500 Employees
Advertisers of 500+ Employees
Advertisers n=161
29
SEM Is Poaching Budget From Established
Marketing Program
RESEARCH HIGHLIGHTS
Affiliate Marketing
11%
Web site development
11%
Print yellow page advertising
7%
Email marketing
7%
Direct mail
7%
TV advertising
7%
Print newspaper advertising
4%
Print magazines advertising
4%
Web graphical display advertising
4%
Online yellow page advertising
4%
Coupons
4%
Telemarketing
4%
Conferences and exhibitions
4%
Point-of-sale promotions
4%
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 web
development, affiliate marketing,
email marketing, yellow pages, TV
and direct mail.
50%
Other
0%
20%
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
40%
60%
Advertisers n=28
30
Senior Executives Appreciate the Value of SEM
RESEARCH HIGHLIGHTS

Almost half of all advertiser respondents said that senior management at their companies were
"very involved" in SEM programs and considered them "a high priority," especially among
companies with fewer than 500 employees

Another 37% said senior execs were "moderately aware and interested" in SEM programs;
almost half of larger firms agreed with this statement
Extent of Senior Management’s Interest in SEM Practices
% of Advertiser Respondents
"To what extent is your senior management interested in and aware of Search Engine Marketing practices your company
engages in?"
70%
60%
50%
40%
54%
49%
47%
32%
37%
33%
30%
20%
9%
10%
10%
11%
9%
6%
4%
0%
Very involved; they consider it
a high priority
Moderately aw are and interested
All Advertisers
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Dimly aw are and interested at best
Advertisers of <500 Employees
Not at all
Advertisers of 500+ Employees
Advertisers n=168
31
Advertisers See Increases in SEM Spending
Across the Board
RESEARCH HIGHLIGHTS

Agency respondents anticipate 2006 revenue increasing faster than advertisers plan to increase
spending

Agencies expect paid placement rates to double next year
Anticipated Increase in 2006 over 2005 for Specific SEM Programs
"How much more or less do you expect to spend in 2006 compared to 2005 for [each of the following SEM programs]?"
100%
100%
91%
72%
% Increase
70%
49%
46%
48%
Paid Placement
Paid Inclusion
64%
53%
40%
10%
(20%)
Advertisers
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Organic SEO
SEM Tech
Agencies
Advertisers n=299, Agencies n=161
32
Majority of 2006 Paid Placement Spending Will Be
Managed In-House, Not Outsourced to Agencies
RESEARCH HIGHLIGHTS

Two-third of advertiser respondents said they plan manage all of their 2006 paid placement
spending in-house; larger firms were more likely to outsource more of their campaign budgets

Only 13% of advertisers plan to outsource more than half of their paid placement expenditures
in 2006.
Management of Planned 2005 Paid Placement Spending
"How much of your planned spending next year (2006) for Paid Placement programs are you likely to manage with
in-house resources versus through an external search engine marketing service provider?"
% of Advertiser Respondents
80%
65%
60%
69%
53%
40%
20%
9% 9%9%
6%
7%
3%
0%
100%
in house
90%
in house
80%
in house
All Advertisers
1%1% 0%
70%
in house
4%
5%
3%
60%
in house
3%2% 6%
1% 0% 3%
50%
in house
40%
in house
Advertisers of <500 Employees
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
3% 1%
6%
30%
in house
3% 2%
6%
20%
in house
4% 3%
6%
10%
in house
6%
2% 0%
100% via
SEM service
provider
Advertisers of 500+ Employees
33
Advertisers n=122
Majority of 2006 Organic SEO Spending Will Be
Managed In-House, Not Outsourced to Agencies
RESEARCH HIGHLIGHTS

Like paid placement, nearly two-thirds of advertiser respondents said they plan to manage all of
their 2006 organic SEO spending in-house; larger firms were more likely to outsource more of
their campaign budgets

Only 11% of advertisers plan to outsource the majority of their organic SEO spending in 2006
Management of Planned 2006 Organic Search Engine Optimization Spending
% of Advertiser Respondents
"How much of your planned spending next year (2006) for Organic Search Engine Optimization programs are you likely to
manage with in-house resources versus through an external search engine marketing service provider?"
70%
60%
64%
69%
51%
50%
40%
30%
20%
10% 9%
10%
13%
9%9% 8%
0%
100%
in house
90%
in house
80%
in house
All Advertisers
2%3%
0%
70%
in house
1% 1% 0%
3%1% 8%
0% 0% 0%
60%
in house
50%
in house
40%
in house
Advertisers of <500 Employees
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
2% 2% 3%
30%
in house
3%2%
5%
20%
in house
10%
3% 0%
10%
in house
3% 3% 3%
100% via
SEM service
provider
Advertisers of 500+ Employees
Advertisers n=129
34
Majority of 2005 Paid Inclusion Spending Will Be
Managed In-House, Not Outsourced to Agencies
RESEARCH HIGHLIGHTS

Like paid placement and organic SEO, two-thirds of advertisers said they plan to manage all of
their 2006 paid inclusion spending in-house; larger firms were more likely to outsource more of
their campaign budgets

The consistency in the data suggests an opportunity for agencies, if they can prove their valueadd to clients. Agencies must prove that they can provide superior service in contrast to an
advertiser bringing SEM in-house.
Management of Planned 2006 Paid Inclusion Spending
% of Advertiser Respondents
“How much of your planned spending next year (2006) for Paid Inclusion programs are you likely to manage with in-house
resources versus through an external search engine marketing service provider?”
70%
60%
66%
70%
58%
50%
40%
30%
21%
16%
20%
5% 7%
10%
0%
0%
100%
in house
90%
in house
3%4% 0%
80%
in house
All Advertisers
2%2%
0%
70%
in house
3% 4%
0%
60%
in house
3%5% 5%
50%
in house
Advertisers of <500 Employees
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
0% 0% 0%
0% 0% 0%
2%2% 0%
40%
in house
30%
in house
20%
in house
6% 2%
10%
in house
11%7%
100% via
SEM service
provider
Advertisers of 500+ Employees
Advertisers n=65
35
Advertisers > Paid Placement
The Vast Majority of Advertiser Respondents Buy
Paid Placement Ads on Search Engines
ADVERTISERS > PAID PLACEMENT
Engagement in “Paid Placement” Programs
"Do you currently engage in “Paid Placement”
programs?"
90%
% of Advertiser Respondents
80%
76%
77%
72%

More than three quarters of all advertiser
respondents participate in paid placement
programs

Small advertisers are more likely to buy
paid placement ads than larger firms
70%
60%
50%
40%
28%
30%
24%
23%
20%
10%
0%
Yes
All Advertisers
Advertisers of <500 Employees
No
Advertisers of 500+ Employees
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Advertisers n=161
37
Most Respondents Have Been Advertising With
Paid Placement for at Least Three Years
ADVERTISERS > PAID PLACEMENT
 The majority of advertisers (56%) began using Paid Placement within the last three years
 On average, larger advertisers began using paid placement earlier than smaller ones
Year of First “Paid Placement” Program Engagement
% of Advertiser
Respondents
"What year did you first engage in “Paid Placement” programs?"
36%
40%
28%
30%
20%
25%
18% 19% 17%
10% 11%
10%
14% 12%
6%
17%
9% 8% 11%
8%
11%
7% 8% 6%
6% 6% 8%
1999
1998 or earlier
0%
0%
2005
2004
All Advertisers
2003
2002
Advertisers of <500 Employees
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
2001
2000
Advertisers of 500+ Employees
Advertisers n=123
38
Respondents Report Heavy Spending on
Paid Placement
ADVERTISERS > PAID PLACEMENT
2005 Annual Spending on Paid Placement by
Cost Category
"Approximately what is the amount you expect your
company will spend in 2005 on Paid Placement programs
in each of the following three areas: Media costs; SEM
service providers; internal costs?"

On average, 6% of total spending went to
SEM agencies, and 7% to internal
expenses.

19% of respondents reported planning to
spend over $1 million on paid placement
in 2005

Larger marketers (with staffs of 500 or
more) were spending on average more
than twice as much (135% more) than
marketers with staffs of fewer than 500
$1.73M
$1.02M
$0.74M
89%
All Advertisers
Search Media Costs
Advertisers of
<500 Employees
SEM Services Costs
Advertisers of
500+ Employees
Internal Costs
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Advertisers n=123
39
Most Internal Time on Paid Placement is Spent on
Analytics and Strategy
ADVERTISERS > PAID PLACEMENT

On average, respondents said they dedicated a total of 106 hours a month to internal management
of paid placement programs

Most of the time marketers allocated internally to paid placement was on marketing strategy and
measurement and analytics

Analytics have outstripped Marketing as the top expense in terms of hourly resources
Hours Spent Monthly on Paid Placement Internally by Function
"Please estimate the monthly hours allocated towards Paid Placement by internal staff in the following roles"
Number of Hours
40
37.6
34.5
30.9
30
25.3
21.6
20
22.3
20.1
16.0
17.7
11.7
10
0
Analytics / trafficking / bid changes /
administration
Marketing & Strategy
All Advertisers
Creative / Design / Copy w riting
Advertisers of <500 Employees
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
IT / Webmaster
Advertisers of 500+ Employees
Advertisers n=123
40
Few Marketers Account for Internal Costs in their
Paid Placement Budgets
ADVERTISERS > PAID PLACEMENT
HR Costs of Internal Paid Placement Staff vs.
SEM Budget
"Do you account for the HR costs of internal staff
engaged in Paid Placement towards your SEM
budget(s)?"
90%
77%
80%
% of Advertiser Respondents
72%
70%

Fewer than 1 in 3 respondents explicitly
separated staff costs in their paid
placement budget allocations

However, this number (29%) has more
than doubled since last year’s survey
(14%)
69%
60%
50%
40%
30%
29%
31%
23%
20%
10%
0%
Yes
All Advertisers
Advertisers of <500 Employees
No
Advertisers of 500+ Employees
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Advertisers n=123
41
Advertisers Plan to Increase Their Spending on
Paid Placement Moderately in 2006
ADVERTISERS > PAID PLACEMENT
Spending Expectations for 2006
"How much more or less do you expect to spend in 2006
compared to 2005 for 'Paid Placement" programs
(including all forms of expenditures noted above)?"
% of Advertiser Respondents
60%
51%

83% of respondents planned to increase
their spending on paid placement
campaigns in 2006

Over half of advertiser respondents plan
to increase spending on Paid Placement
by 30 percent or less
50%
40%
30%
20%
20%
17%
10%
10%
2%
0%
Don't know
10%-30%
more
40%-60%
more
70%-90%
more
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Tw ice or
more
Advertisers n=123
42
Google, Overture 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
59%
Google AdSense
46%
Yahoo! Search Content Match
46%
38%
Yahoo! Search Site Match (paid inclusion)
59% reported using Yahoo’s general "Precision
Match" paid placement program

MSN is third behind Google and Yahoo! – an
enormous feat considering the site just debuted
in the survey this year

An equal number of respondents (46%)said they
used each leader's contextual advertising
programs (Google AdSense and Yahoo’s
Content Match)

MIVA (formerly FindWhat) was the next mostpopular search ad program, followed by
AskJeeves, Business.com, Looksmart, and
Kanoondle
28%
MIVA
AskJeeves
24%
Yahoo! Search Local Match
15%
Business
15%
13%
LookSmart
14%
Kanoodle
Enhance
Mamma
6%
Search123
5%
Lycos Insite Adbuyer
4%
7Search
3%
Other

29%
MSN
goClick
Google AdWords is the most popular search
advertising program, used by 95% of
respondents
95%
Yahoo! Search Precision Match
ePilot

6%
2%
1%
18%
% of Advertiser Respondents
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Advertisers n=123
43
Most Firms Bid on Their Own Trademarks, But
Policies for Competitors and Affiliates Vary
ADVERTISERS > PAID PLACEMENT

The majority (but not all) advertisers bid on their own trademarks as keywords; more than half
bid on misspellings

Larger advertisers are far more aggressive in defending their trademarks than smaller firms
Trademarks vs. Paid Placement Programs
% of Advertiser Respondents
"How do your trademarks factor into your Paid Placement programs?"
91%
100%
80%
60%
76%
71%
65%
54%50%
35%
40%
19%17%24%
20%
18%
11%
17%17%18%
16%17%15%
11%13%
6%
10% 7%
18%
2% 2% 0%
0%
We buy our ow n
We buy
trademarked
misspellings of
keyw ords
our trademarked
keyw ords
We buy our
competitors'
trademarked
keyw ords
All Advertisers
We have a policy
We allow
prohibiting our affiliates to buy
affiliates using our trademarks in
our trademarks
some cases
Advertisers of <500 Employees
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
We don't
currently, but
w e're
considering
buying
competitors'
trademarks
We have not
We have taken
We allow
sued, but
legal action over affiliates to buy
considering legal our keyw ord
our trademarked
action against
trademarks
keyw ords in all
those buying our
cases
trademarks
Advertisers of 50+ Employees
Advertisers n=123
44
Over a Third of Respondents Would Pay More for
Keywords With Small Icons and Larger Fonts
ADVERTISERS > PAID PLACEMENT

Banner ads and a small icon were the most popular ideas for premium features that would make advertisers pay
more for paid placement keywords

Banners, rich media and audio enhancement warrant the highest premiums among those willing to pay. Larger
firms put the highest premium on rich media, while smaller firms would pay the most for banners
Premiums for Paid Placement Enhancements
“How much more would you pay for Paid Placement if they included the following type of enhancement?”
100%
20%
80%
70%
15%
60%
50%
53%
43%
40%
50%
42% 39%
40%
50%
39%
35%
36%
38%
32%
33%32%
35%
30%
32%
25%
22%
19%
10%
18%21%
20%
% of Premium
% of Resp. Willing to Pay
90%
14%15%12%
10%
0%
5%
Banner ad
A small icon
(e.g., 32x32 pixels)
Larger fonts
Colored fonts
Rich media
A small bar
(e.g., 88x31 pixels)
Font style
Audio
All Advertisers
Advertisers of <500 Employees
Advertisers of 500+ Employees
All Advertisers
Advertisers of <500 Employees
Advertisers of 500+ Employees
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Advertisers n=123
45
Agencies Would Set Different Priorities for
Keyword Enhancements Compared to Advertisers
ADVERTISERS > PAID PLACEMENT
 Rich media and audio caught the fancy of agencies as keyword enhancements more than
advertisers
 Larger and colored fonts impressed advertisers more than agencies
Premiums for Paid Placement Enhancements
50%
40%
30%
43%
38%
42%
45%
39%
36%
29%
27%
33%
25%
38%
33%
25%
25%
19% 18%
20%
10%
14%
0%
20%
15%
10%
5%
0%
Banner ad
A small icon
(e.g., 32x32
pixels)
Larger fonts
Colored fonts
Advertisers
Advertisers
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Rich media
A small bar
(e.g., 88x31
pixels)
Font style
Audio
% Premium Willing to
Pay
% of Resp. Willing to
Pay
"How much more would you pay for Paid Placement if they included the following type of enhancement"
Agencies
Agencies
Advertisers n=123
46
SEM Generalist Agency Most Popular Type of
Service Provider for Paid Placement Advertisers
ADVERTISERS > PAID PLACEMENT

Nearly half of advertiser respondents (48%) used a firm specialized in a variety of types of
search engine marketing practices for their paid placement programs

One quarter used a firm specialized specifically in paid placement

Very few respondents used a general marketing agency or an Internet marketing agency
Type of SEM Providers for Paid Placement Programs
% of Advertiser Respondents
"What type of SEM service providers do you rely on for Paid Placement programs?"
50%
48%
40%
30%
20%
25%
11%
9%
More than one type of firm
A general Internet marketing
firm
10%
7%
0%
A firm specialized in multiple A firm specialized specifically
forms of Search Engine
in Paid Placement programs
Marketing
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Advertisers n=123
A general
marketing/advertising agency
(offline and online programs)
47
Advertiser Respondents Estimate Their Paid Placement
Agency Employs 25-30 People, on Average
ADVERTISERS > PAID PLACEMENT
Number of SEM Provider Employees
"According to your best estimate, how many employees
does the primary SEM service provider you engage for
Paid Placement programs employ?"
% of Advertiser Respondents
25%
23%

More than a quarter of respondents
(27%) estimate that their paid placement
agency employs 5 or fewer people

The average estimate is 25-30
employees
20%
18%
14%
15%
11%
10%
11%
9%
9%
5%
5%
0%
1
2-5
6-10
11-25
26-40
41-60
More
No idea
than 60
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Advertisers n=123
48
Efficiency and Specialized Tool Sets Are Best
Cases for Agencies
ADVERTISERS > PAID PLACEMENT

Lack of in-house tools, efficiency and economy top the list of reasons for outsourcing

Complexity and keeping abreast of best practices were not significant issues
Reasons For Using Outside SEM Providers for Paid Placement Programs
% of Advertiser
Respondents
"What are your reasons for using an outside SEM service provider for Paid Placement programs?"
[Multiple responses allowed]
40%
39%
39%
36%
32%
23%
18%
16%
14%
It's too
complicated
It's too complicated
to track and
measure this
in-house
Other
20%
0%
We get more
efficiency
/ effectiveness
w ith a service
provider; "more
We don't have
the necessary
tools
in-house
It is more
economical
to outsource
this
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Our SEM
It's too hard
service provider(s) to stay abreast
has/have good of best practices
industry contacts,
such as w ith the
Advertisers n=123
49
Revenue Models That Advertisers Paid SEM
Agencies Vary Widely
ADVERTISERS > PAID PLACEMENT

Flat agency fees and an additional percent on top of media spend to search engines are the
most common pricing models that advertisers pay to SEM agencies
Typical Fee Structure Paid to SEM Providers
"What is the typical fee structure you pay to the SEM service provider that you engage for Paid Placement programs?"
[Multiple responses applicable]
% of Advertiser Respondents
50%
44%
40%
35%
30%
20%
16%
12%
12%
10%
5%
5%
Commission for other
marketing objective
Other
0%
Additional percent on
top of ad spend w ith
the search engines
Flat agency fee
Commission for sales
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Time and materials
Fee per click
Advertisers n=123
50
Two Thirds of Respondents That Pay Agencies a
Spiff on Keyword Ad Spend Pay Less Than 15%
ADVERTISERS > PAID PLACEMENT

Of advertiser respondents who pay their SEM agencies a percent on top of their ad spend for paid placement
campaigns 79% say the cut is not more than 11%;

On average, respondents who pay agencies such a fee on top of keyword ad spend say it is 10%
Typical Percent Paid to SEM Service Providers
% of Advertiser Respondents
“What is the typical percent you pay to SEM service providers for Paid Placement programs on top of the ad spend
with search engines?”
50%
42%
40%
30%
20%
16%
16%
11%
10%
11%
5%
0%
Less than 3%
3-5%
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
6-8%
9-11%
12-14%
Advertisers n=123
15-17%
51
Advertisers report mixed results for their
satisfaction level with their agencies
ADVERTISERS > PAID PLACEMENT
Opinion on SEM Service Providers
"How happy have you been in the past year with the
services delivered by the primary SEM service provider
you engage for Paid Placement programs?"
45%
Just one third (33%) of respondents said
they were happy ("moderately" or "very")
with their SEM agencies for paid
placement campaigns, down from 62%
last year

A quarter of respondents are unhappy
(“moderately” or “very”)

Over 2/5 of advertisers report “mixed
results” when asked for their satisfaction
level
42%
40%
% of Advertiser Respondents

35%
30%
23%
25%
19%
20%
15%
14%
10%
5%
2%
0%
Very happy
Moderately
happy
Mixed results
Moderately
unhappy
Very unhappy
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Advertisers n=43
52
Advertisers > Organic
Search Engine Optimization (SEO)
9 out of 10 Respondents Engage in
Organic Search Engine Optimization
ADVERTISERS > ORGANIC SEO
Engagement in Organic Search Engine
Optimization
ORGANIC SEARCH ENGINE OPTIMIZATION
"Do you currently engage in Organic Search Engine
Optimization?"
90%
83%
80%
% of Advertiser Respondents
80%
79%

Organic SEO was the most popular form
of SEM with advertisers in the survey

SEO is almost as popular with larger firms
as smaller ones
70%
60%
50%
40%
30%
20%
20%
21%
17%
10%
0%
Yes
All Advertisers
Advertisers of <500 Employees
No
Advertisers of 500+ Employees
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Advertisers n=161
54
Average Advertiser Respondent Plans to Spend a
Quarter More on Organic SEO in 2005
ADVERTISERS > ORGANIC SEO
Spending Expectations for 2005
"How much more or less do you expect to spend in 2006
compared to 2005 for “Search Engine Optimization”
programs?"
80%
Two-thirds of advertiser respondents said
they expected to spend between 10%
and 50% more on organic SEO in 2006
compared to 2005

This is a significant chance from 2004,
when just 40% of advertisers reported
they were going to increase organic SEO
spending at all

Large firms (500+ employees) were likely
to increase spending on SEO by a larger
percentage than smaller companies, who
tended to report smaller overall increases
in spending for 2006
67%
70%
% of Advertiser Respondents

60%
50%
40%
30%
20%
19%
12%
8%
10%
0%
Don't know
10%-50%
80% more
tw ice to five
times as much
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Advertisers n=129
55
Organic SEO has come of age since 2001
ADVERTISERS > ORGANIC SEO

About half of respondents (50.4%) began conducting Organic SEO programs in the past three
years

More than three-quarters of respondents (76.7%) began conducting Organic SEO in the past
five years
Year of First Organic Search Engine Optimization Engagement
% of Advertiser Respondents
"What year did you first engage in such Organic Search Engine Optimization programs?"
40%
30%
20%
23%
19%
19%
14%
18%
17%
13%
14%
21%
17%16%
13%
13%
10%11%
8%
9%8%
10%
5%6%
3%
2%2% 3%
2% 2% 3%
1998
1997
1% 1%0%
2%2%3%
0%
2005
2004
2003
All Advertisers
2002
2001
2000
Advertisers of <500 Employees
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
1999
1996
1995 or
earlier
Advertisers of 500+ Employees
Advertisers n-129
56
Advertisers Estimate Spending 59 Hours of
Internal Resources on Organic SEO Monthly
ADVERTISERS > ORGANIC SEO

Larger companies will spend significantly greater hourly resources on
creative/design/copywriting and analytics/trafficking/administration than smaller companies

Internal time resources are balanced across marketing and IT functions regardless of company
size
Hours Spent Monthly on Paid Placement by Function
"Please estimate the monthly hours allocated towards Organic Search Engine Optimization by internal staff in the following
roles"
Number of Hours
60
50.5
48.8
50
40
29.3
30
28.7
30.5
30.8
30.5
22.6
23.8
24.7
22.2
21.7
20
10
0
Marketing & Strategy
Creative / Design / Copy w riting
All Advertisers
Advertisers of <500 Employees
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
IT / Webmaster
Analytics / trafficking / bid changes /
administration
Advertisers of 500+ Employees
Advertisers n=1n=129
57
Minority of Advertiser Respondents Account for
Staff Time Allocated to Internal SEO Programs
ADVERTISERS > ORGANIC SEO
HR Costs of Internal Organic Search Engine
Optimization Staff vs. SEM Budget
"Do you account for the HR costs of internal staff
engaged in Organic Search Engine Optimization towards
your SEM budget(s)?"
100%
% of Advertiser Respondents
90%
80%
69%
70%
69%
69%

Almost one third of respondents count
staff time allocated to internal organic
SEO resources as part of their SEM
budget

This is a significant change from 2004,
when only one in five responded
positively
60%
50%
40%
31%
31%
31%
30%
20%
10%
0%
Yes
All Advertisers
Advertisers of <500 Employees
No
Advertisers of 500+ Employees
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Advertisers n-129
58
Organic SEO Advertisers Have a Good Sense of
Best Practices
ADVERTISERS > ORGANIC SEO

By and large, advertiser respondents had a reasonably good sense of which SEO tactics were
best practices (e.g., keywords in title tags and headlines, avoiding frames and query URLs)
while not being mislead by red herrings in our list (e.g., avoiding keywords in meta tags,
avoiding red text)

All in all, smaller sites seemed to have a better sense than larger sites about actual best
practices
Best Practices to Improve Volume of Visitors
"Which of the following techniques would you say is a "best practice" when it comes to increasing the volume of
interested visitors to your site through organic search engine optimization?"
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Advertisers n=129
59
Most Respondents Agreed that Abuse of SEO
Practices Was a Problem
ADVERTISERS > ORGANIC SEO
Statements Concerning Industry Standards for
“Search Optimization” Best Practices
"Do you agree or disagree with the following statements
concerning industry standards for 'search optimization'
best practices?"
Abuse of SEO practices is a major
3.9%
problem
An industry body should issue "best
practice" standards for SEO and
penalize companies that do not abide
by them, such as by publishing a list of
names of companies to avoid
11.6%
10.9%
There should be laws passed to
mandate some 'best practices' for SEO
There is a need for industry standards
1.6%
to guide 'best practices' for SEO
practices
0%
Strongly Disagree
14.7%
14.7%
30.2%
10.1%
11.6%
20%
Somewhat Disagree
37.2%
16.3%
32.6%
39.5%
19.4%
27.9%
45.7%
40%
No Opinion

There was strong agreement that abuse of
search optimization was "a major problem"
and that there was a need for industry
standards on the question

Most respondents did not believe, however,
that legislation was the best solution to the
problem and would prefer the industry to selfregulate rather than face government
regulation
18.6%
16.3%
6.2%
31.0%
60%
Somewhat Agree
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
80%
100%
Strongly Agree
Advertisers n=129
60
Vast Majority of Advertiser Respondents Use Only
One Organic SEO Agency
ADVERTISERS > ORGANIC SEO
Number of SEM Providers Currently Used
"How many SEM service providers do you use currently to
help you with your Organic Search Engine Optimization
programs?"
100%
92%
% of Advertiser Respondents
90%
80%
70%

The vast majority (92%) of advertisers
prefer to deal with a single agency for
their organic search engine optimization

This is an increase from 2004, when
80% of advertiser respondents were
using a single agency, indicating a shift
towards consolidation
60%
50%
40%
30%
20%
8%
10%
0%
1
2
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Advertisers n=129
61
Majority of Advertiser Respondents Have Worked
With Only One SEO Agency Ever
ADVERTISERS > ORGANIC SEO
Number of SEM Providers Since First
Organic Search Engine Optimization Program
"How many different SEM service providers have you used
in total to help you with your Organic Search Engine
Optimization programs since you first started with these
programs?"
70%
65%

The majority (65%) of respondents
have ever worked with only one SEO
agency, increasing from 56% in 2004

Very few advertisers (12%) have
worked with more than two SEO
agencies
% of Advertiser Respondents
60%
50%
40%
30%
23%
20%
8%
10%
2%
2%
4
6
0%
1
2
3
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Advertisers n=48
62
Almost Half of Advertiser Respondents Use a
Generalist SEM Firm for Their SEO Agency
ADVERTISERS > ORGANIC SEO

Almost half (48%) of respondents use a generalist SEM agency for help with their organic SEM,
a decrease from two-thirds in 2004

Two in five marketers prefer to use a firm that specializes in organic SEO

Only 2% of respondents use a generalist Internet marketing firm for SEO, and no respondents
used a traditional (online/offline) marketing firm
Type of SEM Providers for Organic Search Engine Optimization Programs
% of Advertiser Respondents
"What type of SEM service providers do you rely on for Organic Search Engine Optimization programs?"
75%
60%
48%
40%
45%
30%
15%
6%
4%
More than one type of firm
A general w eb site
development firm
2%
0%
0%
A firm specialized in multiple
forms of Search Engine
Marketing
A firm specialized specifically
in Organic Search Engine
Optimization programs
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Advertisers n=48
A general Internet marketing
firm
A general
marketing/advertising agency
(offline and online programs)
63
More Than Half of Advertiser Respondents
Estimate Their SEO Agencies Employ 25 or Less
ADVERTISERS > ORGANIC SEO
Number of SEM Provider Employees
"According to your best estimate, how many employees
does the primary SEM service provider you engage for
Organic Search Engine Optimization programs employ?"

52% of advertiser respondents estimate
that their organic SEO agencies employ
not more than 25 staff members

44% believe their SEO agencies have
10 or fewer employees

One in five respondents are working with
firms that employ between 2 and 5
people

More than 20% of respondents have no
idea what how many people are
employed by their SEO firm
25%
21%
% of Advertiser Respondents
21%
20%
17%
15%
13%
10%
10%
10%
8%
5%
0%
1
2-5
6-10
11-25
26-40
More
than 60
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
No idea
Advertisers n=48
64
Outsourcing Organic SEO Seen by Advertisers as
More Efficient Than Doing It Internally
ADVERTISERS > ORGANIC SEO

Almost half of advertiser respondents report their primary reason for outsourcing organic SEO are
time constraints and difficulty staying abreast of ‘best practices’

Only a third thought it was “too complicated,” compared to 40% who cited that issue when it came
to outsourcing paid placement

Less than a third of respondents (28%) cite greater economic efficiency increased effectiveness
are primary reasons to outsource, suggesting agencies must improve their ability to communicate
efficacy to clients.
Reasons For Using Outside SEM Providers for Organic Search Engine Optimization Programs
% of Advertiser
Respondents
“What are your reasons for using an outside SEM service provider for Organic Search Engine Optimization programs?”
[Multiple responses allowed]
80%
60%
40%
20%
0%
47%
47%
32%
It's too hard
to stay abreast
of best practices
It's too time
consuming
30%
Our SEM service Don't have the
provider(s) has necessary tools
/ have good
in-house
industry contacts,
such as w ith the
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
30%
It's too
complicated
28%
28%
More efficiency
It is more
/ effectiveness economical to
w ith a service
outsource it
provider; "more
bang for our buck"
Advertisers n-47
15%
It's too
complicated
to track and
measure
in-house
6%
Other
65
Flat Fees Are by Far the Most Common Pricing
Structure Advertisers Pay Organic SEO Agencies
ADVERTISERS > ORGANIC SEO

Just over half of advertiser respondents (53%) cited flat fees as the pricing model by which they
paid their agency for organic SEO services, down from three-quarters in 2004

Only 15% cited performance objectives (namely price per click and commission for marketing
objectives other than sales), dropping from 20% in 2004

More than a third of respondents (38%) reported compensating their agency based on time and
materials, up from 17% last year
Typical Fee Structure Paid to SEM Providers
% of Advertiser Respondents
“What is the typical fee structure you pay to the SEM service provider that you engage for Organic Search Engine
Optimization programs?” [Multiple responses allowed]
80%
60%
53%
38%
40%
20%
11%
6%
4%
2%
0%
Flat agency fee
Time and materials
Fee per click
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Commission for sales
Commission for other
marketing objective
Advertisers n=48
Other
66
One Thirds of Advertiser Respondents Are happy
With Their SEO Marketing Firm
ADVERTISERS > ORGANIC SEO
Opinion on SEM Service Providers
“How happy have you been in the past year with the
services delivered by the primary SEM service provider
you engage for Organic Search Engine Optimization
programs?”

There is slightly greater displeasure with
agencies this year than in 2004. Almost a
quarter of advertiser respondents report
they are moderately or very unhappy with
their SEO agency, up from 20% last year

Almost half of respondents (45%) report
mixed results

Almost a third of respondents (32%) report
they are moderately to very happy with
their SEO agency, a dramatic decrease
from 2004, when two-thirds of advertiser
respondents reported they were happy
with their SEO firm
50%
45%
% of Advertiser Respondents
45%
40%
35%
30%
25%
21%
20%
15%
13%
11%
11%
10%
5%
0%
Very happy
Moderately
happy
Mixed results
Moderately
unhappy
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Very unhappy
Advertisers n=48
67
Advertisers > Paid Inclusion
Two Out of Five Advertiser Respondents Engaged
in Paid Inclusion Programs
ADVERTISERS > PAID INCLUSION
Engagement in Paid Inclusion Programs
"Do you currently engage in Paid Inclusion?"

Two out of five advertisers currently
engage in paid inclusion, down slightly
from 44% in 2004

In terms of paid inclusion participation,
there was no difference between large and
small firms in 2005
70%
60%
% of Advertiser Respondents
60%
60%
60%
50%
40%
40%
40%
40%
30%
20%
10%
0%
Yes
All Advertisers
Advertisers of <500 Employees
No
Advertisers of 500+ Employees
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Advertisers n=161
69
Most Advertiser Respondents Doing Paid Inclusion
Have Done So for Only Two Years
ADVERTISERS > PAID INCLUSION

Almost a third of respondents (30%) began conducting paid inclusion programs in 2005

Two thirds of respondents (66%) that have been conducting paid inclusion programs began in
the past three years
Year of First Paid Inclusion Engagement
% of Advertiser Respondents
“What year did you first engage in such Paid Inclusion programs?”
40%
30%
30%
18%
20%
18%
12%
10%
10%
6%
5%
1999
1998 or earlier
2%
0%
2005
2004
2003
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
2002
2001
2000
Advertisers n=67
70
Most Advertisers Predict a Modest Lncrease in
their Paid Inclusion Spending for 2006
ADVERTISERS > PAID INCLUSION
Spending Expectations for 2006
“How much more or less do you expect to spend in 2006
compared to 2005 for ‘Paid Inclusion’ programs?”
% of Advertiser Respondents
45%
29%
30%
25%
15%

Almost one in three respondents plan to
spend 10% more in 2006 compared to
2005

A quarter of respondents were unsure
how their paid inclusion spending will
change in 2006

The average amount by which
advertisers expected to increase paid
inclusion programs was 19%
15%
8%
9%
6%
6%
2%
2%
0%
Don't
know
10%
more
20%
more
30%
more
40%
more
50%
more
60%
more
Tw ice
to
five
times
as
much
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
more
than
five
times
as
much
Advertisers n=65
71
Advertisers Commit Relatively Few Internal Hours
Monthly to Paid Inclusion Programs
ADVERTISERS > PAID INCLUSION

On average, those who engaged in paid inclusion programs estimate they spend just 9 hours
per month on internal resources dedicated to such programs, mostly on strategy and analytics.
This number has decreased from 2004, when advertisers reported an average of 17 hours per
month of internal resources dedicated to paid inclusion
Hours Spent Monthly on Paid Placement by Function
Number of Hours
“Please estimate the monthly hours allocated towards Paid Inclusion by internal staff in the following roles”
15
10.4
10
11.5
10.3
10.7
7.6
9.2
9.6
9.5
8.3
7.2
5.3
5
1.5
0
Marketing & Strategy
Analytics / trafficking / bid changes
/ administration
All Advertisers
Creative / Design / Copy writing
Advertisers of <500 Employees
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
IT / Webmaster
Advertisers of 500+ Employees
Advertisers n=65
72
Three-quarters of Respondents Engaged in Paid
Inclusion Do Not Account for Internal HR Costs
ADVERTISERS > PAID INCLUSION
HR Costs of Internal Paid Inclusion Staff vs.
SEM Budget
“Do you account for the HR costs of internal staff
engaged in Paid Inclusion towards your SEM
budget(s)?”
% of Advertiser Respondents
80%
74%
60%

Just one quarter of respondents engaged
in paid inclusion bother to track internal
HR costs dedicated to these programs

While this number is low, it represents
significant progress. In 2004, only 1 in 10
respondents bothered to track internal HR
costs dedicated to these programs,
suggesting better internal resource
management
40%
26%
20%
0%
Yes
No
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Advertisers n=65
73
Two-thirds of Advertisers Plan to Manage Paid
Inclusion Spending Internally
ADVERTISERS > PAID INCLUSION

Two thirds of advertiser respondents that engaged in paid inclusion plan to control 100% of their
paid inclusion spending in 2006 internally, increasing from about 40% last year

A little more than 10% plan to delegate their entire paid inclusion budget to an SEM service
provider
Management of Planned 2006 Paid Inclusion Spending
% of Advertiser Respondents
“How much of your planned spending next year (2006) for Paid Inclusion programs are you likely to manage with in-house
resources versus through an external search engine marketing service provider?”
70%
66%
60%
50%
40%
30%
20%
5%
10%
3%
2%
3%
3%
6%
11%
2%
0%
100%
in house
90%
in house
80%
in house
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
70%
in house
60%
in house
50%
in house
Advertisers n=65
20%
in house
10%
in house
100% via SEM
service provider
74
Price per Click Is the Most Common Payment
Model for SEM Agencies With Paid Inclusion
ADVERTISERS > PAID INCLUSION

A flat agency fee is now the most popular pricing model for paying SEM agencies for paid
inclusion programs, usurping price-per-click models, which was the dominant model in 2004

Almost 20% of respondents said they were paying their agencies with more than one pricing
model for paid inclusion programs
Typical Fee Structure Paid to SEM Providers
% of Advertiser Respondents
"What is the typical fee structure you pay to the SEM service provider that you engage for Paid Inclusion programs?"
[Multiple responses applicable]
50%
46%
40%
27%
30%
20%
9%
9%
Additional percent on top
of ad spend w ith the
search engines
Time and materials
10%
14%
14%
Commission for sales
Other
0%
Flat agency fee
Fee per click
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Advertisers n=22
75
Satisfaction With SEM Agencies Generally Strong
for Paid Inclusion
ADVERTISERS > PAID INCLUSION
Opinion on SEM Service Providers
"How happy have you been in the past year with the
services delivered by the primary SEM service provider
you engage for Paid Inclusion programs?"
50%
46%

Almost half of respondents are neutral on
their satisfaction with their SEM agencies
as regards paid inclusion programs

41% were "moderately happy" or "very
happy"

Just 14% were “moderately unhappy” or
“very unhappy” with their SEM agency’s
paid inclusion services
% of Advertiser Respondents
45%
40%
35%
30%
25%
20%
23%
18%
15%
9%
10%
5%
5%
0%
Very happy
Moderately
happy
Mixed results
Moderately
unhappy
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Very unhappy
Advertisers n=22
76
Advertisers > General
Email, Direct Mail and Web Ads Are Next Most
Popular Forms of Marketing for SEM Advertisers
ADVERTISERS > GENERAL

In addition to SEM, email marketing was the most common form of marketing respondents cited as another
vehicle their company used

Email,, public relations, web advertising, direct mail, conferences and print ads were all cited by a majority of
respondents as other forms of marketing they also employed

Unsurprisingly, larger firms were much more likely to engage in expensive marketing vehicles such as TV, radio
and magazine advertising
Other Forms of Marketing and Advertising Used
% of Advertiser Respondents
"What other forms of marketing and advertising does your company engage in?"
[Multiple responses allowed]
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Email
mktg
PR
Web
display
ads
Direct
mail
Co nf.
A nd
exhib.
All Advertisers
P rint
mag
ads
Web
rich
media ads
P rint
newsp.
A ds
TV
ads
Advertisers of <500 Employees
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Radio
ads
P OS
pro mo s
Online
yello w
page ads
P rint
yello w
page ads
Telemktg
Co upo ns
Other
Advertisers of 500+ Employees
Advertisers n=161
78
Paid Placement, SEO, Email and Magazine Ads Top
the List by Spending Among Respondents
ADVERTISERS > GENERAL

Paid placement is the most popular form of marketing with more than a third of advertisers
identifying it as their number one advertising expense annually

Paid placement, organic SEO, TV advertising, email marketing, and direct mail are the most
popular forms of marketing among respondents by amount of spending
Marketing Respondents Cited as Among Their Top Three by Spending
"What are the top-three forms of advertising or marketing you spend the most money on annually?“ (ranked one)
% of Advertiser Respondents
50%
40%
30%
20%
10%
0%
Paid
Placement
TV
ads
Organic
SEO
Email
mktg
Direct
mail
Print
mag
ads
All Advertisers
Conf.
and
exhib.
Telemktg
Web
display
ads
Paid
Inclusion
Contextually Affiliate
targeted
mktg
Print
Keyword- text ads
yellow
targeted
page ads banners
Advertisers of <500 Employees
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
PR
Print
newsp.
Ads
Coupons
Web
rich
media ads
Paid
listings
on
shopping
directories
Other
Advertisers of 500+ Employees
Advertisers n=149
79
Paid Placement and SEO Top the Chart for
ROI Value
ADVERTISERS > GENERAL

Paid placement and organic SEO provide the highest ROI for advertising respondents of any
marketing vehicles in their marketing mix
Marketing Vehicles Respondents Cited as Among Their Top Three by ROI
"What are the top-three most-efficient forms of advertising or marketing you spend money on in terms of the return on
investment (ROI) or return on ad spend (ROAS) that they yield?“ (ranked one)
% of Advertiser Respondents
60%
50%
40%
30%
20%
10%
0%
Paid
Placement
Email
mktg
Organic
SEO
Paid
Inclusion
Telemktg
Direct
mail
Conf.
and
exhibit.
All Advertisers
PR
Web
rich
media
ads
Affiliate
mktg
Print
mag
ads
Web
display
ads
Advertisers of >500 Employees
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Keyword- Coupons
targeted
banners
Contextually
targeted
Paid
text ads
listings
on
shopping
directories
TV
ads
Print
yellow
page
ads
Print
newsp.
Ads
POS
promos
Advertisers of 500+ Employees
Advertisers n=149
80
Most Companies Have Just One Budget for All
Forms of SEM
ADVERTISERS > GENERAL
Budget Segmentation for Various SEM
Programs
"How do you segment budgets for various types of SEM
programs?"
Funds for all SEM programs (PP, PI, SEO,
etc.) along w ith their associated costs
(tech, media, staff, SEM agencies, etc.)
come from the same budget devoted to
SEM strategies in general
57%
Organic SEO has one fixed budget for
internal and external resources, but
performance-based SEM strategies (PP,
PI), are funded on pure ROI: as much
needed so long as they remain profitable

More than half of respondents (57%) have
one source of budget for all types of SEM
programs, dropping from two-thirds in
2004

Close to 1 in 5 firms keeps a separate
budget for performance-based programs,
giving them as much budget as they
require so long as they generate a positive
ROI

Another 17% report each SEM program
they engage in has its own dedicated,
fixed budget
19%
Each different type of SEM program w e
engage in has its ow n dedicated and
fixed budget and assigned resources
17%
8%
Other
0%
10% 20% 30% 40% 50% 60%
% of Advertiser Respondents
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Advertisers n=161
81
Majority of Respondents Shift Budget Away From
Other Marketing Programs for Paid SEM Programs
ADVERTISERS > GENERAL

Just over a quarter of respondents report their funding for paid placement and paid inclusion
came from newly created budgets, a drop from 41% in 2004.

Two in five respondents report SEM programs are funded by a combination of new funds and
budget shifted from existing marketing programs, reinforcing the efficacy of SEM
Source of Budget for Paid Placement and Paid Inclusion Programs
% of Advertiser Respondents
"Where is the budget coming from for your Paid Placement and Paid Inclusion programs?"
50%
40%
40%
30%
27%
26%
28%
38%
28%
22%
20%
40%
19%
12%
14%
6%
10%
0%
It is new ly allocated budget
specifically for these SEM
programs
It is money shifted aw ay
from the budgets of existing
marketing programs
All Advertisers
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
A combination of new funds
and funds shifted from existing
marketing programs
Advertisers of <500 Employees
Not applicable; w e do not
engage in these tw o types
of programs
Advertisers of 500+ Employees
Advertisers n=161
82
Majority of Respondents Shift Budget Away From
Other Marketing Programs for Organic SEO
ADVERTISERS > GENERAL

Almost a third of respondents said their funding for organic search engine optimization programs
came from newly created budgets

Most respondents said they were shifting in whole or in part budgets from other marketing
programs and/or web development budgets to fund these new initiatives
Source of Budget for Organic Search Optimization Programs
% of Advertiser Respondents
"Where is the budget coming from for your Organic Search Optimization programs?"
50%
40%
30%
30% 31%28%
19% 19%17%
20%
21%
16% 14%
12% 13% 11%
10%
11%
9% 10% 9%
9% 11%
4% 2%
4%
0%
It is newly allocated
budget specifically
for these SEM
programs
A combination of
new funds and
funds shifted from
existing marketing
budgets
All Advertisers
It is money shifted
away from the
budgets of existing
marketing programs
A combination of new
funds, plus budgets
shifted from existing
marketing and from web
site dev programs
Advertisers of <500 Employees
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
A combination of new
funds and funds
shifted from existing
web site development
budgets
It is money shifted
away from budgets
of existing web site
development programs
Not applicable; we do
not engage in Organic
Search Engine
Optimization programs
Advertisers of 500+ Employees
Advertisers n=161
83
On Average, Advertiser Respondents Had Four
Employees With Any SEM Responsibility
ADVERTISERS > GENERAL
Average Number of People With Some
Responsibility for SEM Initiatives
“How many people inside your organization have any
responsibility for search engine marketing initiatives?”

Large firms (500 or more employees) had
nearly twice as many staff members with
some SEM responsibility compared to
smaller firms: seven vs. three
8
7.1
% of Advertiser Respondents
7
6
5
4.2
4
3.1
3
2
1
0
All Advertisers
Advertisers of
<500 Employees
Advertisers of
500+ Employees
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Advertisers n=160
84
Most Advertiser Respondents Have Fewer Than
Two Employees Focused on SEM Full Time
ADVERTISERS > GENERAL

On average, advertiser respondents had 2 employees devoted full-time to search engine
marketing programs

For firms with 2 or more full time SEM employees, there was virtually no difference between larger
and smaller firms

Almost a third of firms did not have any employees devoted full time to SEM, up from 20% in 2004
indicating a greater dependence on outsourcing
Number of People With Full-Time Responsibility for SEM Initiatives
% of Advertiser Respondents
“How many people inside your organization have full-time responsibility for search engine marketing initiatives?”
60%
50%
43%
46%
41%
40%
31%
33%
26%
30%
20%
13%
13%
13%
14%
13%
15%
10%
0%
1
2
All Advertisers
Advertisers of <500 Employees
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
3+
None
Advertisers of 500+ Employees
Advertisers n=160
85
Three Quarters of Advertiser Respondents Are
Coordinating SEM With Other Marketing
ADVERTISERS > GENERAL

Two thirds of advertiser respondents said they were coordinating their SEM initiatives to a
moderate or great extent with other types of marketing programs

Advertiser respondents who report they are coordinating to a great extent rose from a quarter in
2004 to over a third in 2005, indicating greater commitment and sophistication

Only 10% were not doing so at all; 22% were doing so minimally
Extent of Coordination Between SEM Campaigns and Other Marketing Programs
% of Advertiser Respondents
“To what extent do you coordinate your Search Engine Marketing campaigns with other types of marketing programs (brand
advertising initiatives, public relations, promotions, other web marketing initiatives, etc.)?”
60%
50%
40%
34%
35%
32%
34%
35%
32%
26%
30%
22%
20%
20%
10%
10%
10%
11%
0%
Very much so; SEM ties in tightly to
other marketing program
All Advertisers
To a moderate extent; though w e could
probably do better
Advertisers of <500 Employees
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
To a minimal extent
Not at all
Advertisers of 500+ Employees
Advertisers n=161
86
Agencies > Overview
Most Agency Respondents Are All-around SEM
or SEO Specialists
AGENCIES > OVERVIEW

Almost a third of agency respondents are all-around SEM generalists

Almost a quarter of respondents were Internet Marketing specialists who also do general SEM

No agency respondents specialized specifically in Paid Inclusion
Agency Description
% of Agency Respondents
“Which of the following best describes your agency?”
40%
30%
29%
22%
20%
20%
8%
10%
6%
4%
2%
1%
0%
Only
Paid
Placement
Specialized
in Internet
marketing,
outsource
SEM
Specialized
in Paid
Inclusion,
also other
SEM
0%
Specialized
in all forms of
SEM
Specialized
in Internet
marketing,
also SEM
Specialized
in Organic
SEO, also
other SEM
General
ad / mktg
agency
(online &
offline)
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Specialized
in Paid
Placement,
also
other SEM
Only
Organic
SEO
Agencies n=368
88
Most SEO Agency Respondents Offer Paid
Placement Services In-house
AGENCIES > OVERVIEW
SEM Program Offerings
"Do you currently offer clients 'Paid Placement' program
services?”

Almost three-quarter of agency
respondents offer clients paid placement
programs in-house

Just 13% of agencies do not offer that
service

Another 5% of agencies who sub-contract
paid placement expect to build their own
capability in 2006
% of Agency Respondents
90%
80%
77%
70%
60%
50%
40%
30%
20%
13%
6%
10%
5%
0%
Yes, w e do this
No, w e don’t
in-house
offer that service
Yes, but w e
Yes, but w e
currently
currently
outsource that
outsource that
activity to a
activity to a
business partner business partner,
and w e expect to
although w e
continue
expect to offer
outsourcing it in
that service
2006
ourselved in 2006
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Agencies n=368
89
Average Clients Spending Five Times More on
Paid Placement Than on PI or SEO
AGENCIES > OVERVIEW

Agency respondents say on average their biggest clients are spending nearly $2 million (gross)
on Paid Placement programs, and $200,000 for the average client

By comparison, they say average clients are spending at least five-times less on average for
SEO and Paid Inclusion and the biggest spenders are putting only a tenth or less as much into
those programs compared to Paid Placement
Gross Client Spend Estimates
“Approximately how much will your average / largest client spend with you gross on the following SEM programs in 2004?”
$1,916,456
$2,000,000
$1,500,000
$1,000,000
$500,000
$206,505
$35,143
$121,214
$40,098
$171,225
$0
Paid Placement
Paid Inclusion
Average 2004 Client Spend
Organic SEO
Largest 2004 Client Spend
Ask jonathan
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
90
Agencies > Paid Placement
Paid Placement has Come of Age since 2001
AGENCIES > PAID PLACEMENT

Paid placement in the agency community has experienced steady growth since 1999, building
expertise over the past seven years

The number of agencies that just began practicing paid placement dropped significantly in 2005,
to 6%, as the agency industry almost ubiquitously adopts paid placement services
Year First Engaged in “Paid Placement” Programs
% of Agency Respondents
“What year did you first engage in such ‘Paid Placement’ programs?”
30%
20%
17%
14%
15%
14%
13%
11%
10%
6%
5%
3%
1%
0%
2005
2004
2003
2002
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
2001
2000
1999
Agencies n=284
1998
1997
1996
92
Almost Two Thirds of Agency Respondents Expect Not
More Than 20 Clients in 2005 for Paid Placement
AGENCIES > PAID PLACEMENT

46% of agency respondents expect 10 or fewer Paid Placement clients in 2005

62% of respondents expect 20 or fewer, virtually the same as 2004
Number of Clients Paying for Paid Placement Programs in 2004
“How many clients do you expect your firm will receive payments from in 2004 for Paid Placement programs?”
% of Agency Respondents
30%
21%
22%
20%
16%
14%
10%
8%
5%
3%
3%
5%
2%
3%
76-100
101-200
0%
1
2-5
6-10
11-20
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
21-30
31-40
41-50
51-75
Agencies n=282
200+
93
Agencies View Paid Placement’s Time and Complexity as
the Primary Frustrations Their Clients Face
AGENCIES > PAID PLACEMENT

Almost three-quarters of agency respondents assume their clients outsource paid placement
programs to them because these programs are “too time consuming” and “too complicated”

Less than a third (31%) cited their agency’s industry contacts as a primary motivator for
outsourcing
Reasons For Using Outside SEM Providers for Organic Search Engine Optimization Programs
“What do you believe are the reasons your clients use an outside SEM service provider for Paid Placement programs as
opposed to doing it in-house themselves?”
[Multiple responses allowed]
80%
% of Advertiser Respondents
72%
72%
60%
60%
57%
53%
40%
40%
36%
34%
20%
6%
0%
It's too time
consuming
It's too
complicated
More ef f iciency
It's too hard
/ ef f ectiveness
to stay abreast
w ith a service
of best practices
provider; "more
bang f or our buck"
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
They don't have
the
necessary tools
in-house
It's too
complicated
to track and
measure
in-house
It is more
economical to
outsource it
Agencies n=282
As an SEM
service
provider, w e have
good
industry contacts,
such as w ith the
search engines
Other
94
Most Agencies Include Some Contextual Ads in
Paid Placement Programs, But Not a Lot
AGENCIES > PAID PLACEMENT

Three-quarters of agency respondents include contextually targeted text ads in their Paid
Placement campaigns

63% do not typically include more than 20% of the overall Paid Placement campaign budget on
contextual ads
Percentage of Overall Spending on Paid Placement Programs Spent on
Contextually Targeted Ads
% of Agency Respondents
“Approximately what percentage of your overall spending for an average Paid Placement program is spent in the
form of Contextually Targeted Text Ads?”
30%
20%
20%
21%
22%
18%
10%
5%
4%
4%
1%
1%
2%
1%
1%
60%
70%
80%
90%
100%
0%
Don't know
Less than
10%
10%
20%
30%
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
40%
50%
Agencies n=213
95
Agencies Exhibit Growing Concern Over Click
Fraud
AGENCIES > PAID PLACEMENT

The percentage of agencies who claim click fraud is a significant problem and they are tracking
it has quadrupled since last year, from 4% to 16% in 2005

However, an almost equal percentage of agencies claim click fraud is not a significant concern

A third of agency respondents report it’s a moderate problem they are tracking and another third
claim that while they are not tracking it, it is a concern for them
Click Fraud vs. Paid Placement
"In your experience, how much of a problem is "click fraud" with regard to Paid Placement?"
% of Agency Respondents
60%
50%
40%
33%
33%
30%
20%
18%
16%
10%
0%
0%
This is a significant problem
w e have tracked
It is a moderate problem w e
have tracked
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
We have not tracked it much,
but w e are w orried about it
It is not a significant concern
Agencies n=282
Never heard of it before
96
Agencies > Organic SEO
On Average Agency Respondents First Began
Organic SEO Programs in 1999
AGENCIES > ORGANIC SEO

More than a quarter of agency respondents (27%) say they first began Organic SEO campaigns
in 1998 or earlier

Only 18% have been doing so for two years or less, as agencies steadily began to adopt
organic SEO programs between 1999 and 2004
Year of First Organic Search Engine Optimization Engagement
"What year did you first engage in such Organic Search Engine Optimization programs?"
% of Agency Respondents
20%
14%
15%
13%
12%
10%
10%
10%
9%
9%
9%
5%
5%
5%
2%
2%
1995
1994 or
before
0%
2005
2004
2003
2002
2001
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
2000
1999
1998
1997
Agencies n=299
1996
98
Agencies Have More Clients on Average for
Organic SEO Than for Paid Placement
AGENCIES > ORGANIC SEO

Two out of five agency respondents expect more than 20 clients to pay for Organic SEO
services in 2005

Nearly 60% of agency respondents report they expect 20 or fewer clients to pay for Organic
SEO in 2005
Number of Clients Paying for Organic Search Engine Optimization Programs in 2005
"How many clients do you expect your firm will receive payments from in 2005 for Organic Search Engine
Optimization programs?"
% of Agency Respondents
30%
25%
22%
18%
20%
16%
15%
11%
10%
7%
6%
5%
5%
2%
5%
2%
3%
76-100
101-200
0%
1
2-5
6-10
11-20
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
21-30
31-40
41-50
51-75
Agencies n=299
More than 200
99
Like Advertisers, Agencies Also Believe SEO
Abuse Is a Significant Problem
AGENCIES > ORGANIC SEO
Statements Concerning Industry Standards for
“Search Optimization” Best Practices
"Do you agree or disagree with the following statements
concerning industry standards for 'search optimization'
best practices?"
Abuse of SEO practices is a major
problem
4.3%
An industry body should issue "best
practice" standards for SEO and
penalize companies that do not abide
by them, such as by publishing a list of
names of companies to avoid
11.4%
11.4%
There should be laws passed to
mandate some 'best practices' for SEO
There is a need for industry standards
to guide 'best practices' for SEO
practices
9.4%
17.4%
38.8%
13.0%
37.5%
5.0%
0%
Strongly Disagree
7.4%
9.0%
20%
Somewhat Disagree
22.1%
15.7%
35.5%
40%
No Opinion
Agencies fairly well agree with advertisers
that SEO abuse is a problem but one best
left to industry self-regulation, not
legislation
36.1%
36.1%
21.1%

15.4%
10.4%
43.1%
60%
Somewhat Agree
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
80%
100%
Strongly Agree
Agencies n=299
100
All Respondents > General
Niche Search Shows Limited Promise
ALL RESPONDENTS > GENERAL

Respondents show interest in niche search engines (e.g., Business.com or SideStep.com) but
are far from enthusiastic about results
Level of Experience or Interest in Keyword Targeted Text Ads on “Niche Sector” Search Engines
"What is your level of experience or interest in the following search marketing tactics: Keyword-targeted Text Ads on 'Niche
Sector' Search Engines (e.g., Business.com, SideStep.com)"
% of Respondents
29%
28%
30%
22%
20%
18%
14%
13%
17%
19%
16%
14%
16%
16%
15%
16%
16%
14%
10%
10%
7%
0%
Tried it, w orks great
Tried it, w orks okay
Tried it, unimpressed
All Respondents
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
No experience, but very
interested
Advertisers
No experience, but
somew hat interested
No experience, not
interested
Agencies
Total n=553
102
Experience and Interest Extremely Limited For
Targeted Ads on Shopping Portals
ALL RESPONDENTS > GENERAL

Most respondents, both agencies and advertisers, had little experience with targeted text ads on
shopping portals

Advertisers in particular express little interest in this approach
Level of Experience or Interest in Keyword Targeted Text Ads on Shopping Portals
"What is your level of experience or interest in the following search marketing tactics: Keyword-targeted Text Ads on Shopping
Portals (such as MySimon, BottomDollar, BizRate)"
% of Respondents
50%
42%
40%
28%
30%
17%
20%
10%
8%
6%
19%
14%
19%
16%
15%
17%
14%
8%
20%
22%
No experience, but
somew hat interested
No experience, not
interested
18%
14%
6%
0%
Tried it, w orks great
Tried it, w orks okay
Tried it, unimpressed
All Respondents
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
No experience, but very
interested
Advertisers
Agencies
Total n=553
103
Rich Media Text Ads Still Unfamiliar to Most
ALL RESPONDENTS > GENERAL

Only 28% of respondents said they had any experience with rich media components to search
ads

Interest in this technique is muted, with an almost equal percentage of respondents reporting
they are “very” or “somewhat” interested or not interested at all
Level of Experience or Interest in Keyword Targeted Text Ads with “Rich Media”
"What is your level of experience or interest in the following search marketing tactics: Keyword-targeted Text Ads with a
'Rich-media' component (e.g., pictures and phrases jumping up from search results on mouse-over)"
% of Respondents
50%
40%
32%
27%
30%
23%
20%
12%
10%
5%
4%
14%
11%
5%
25%
21%
28%
23%
16%
13%
11%
24%
6%
0%
Tried it, w orks great
Tried it, w orks okay
Tried it, unimpressed
All Respondents
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
No experience, but very
interested
Advertisers
No experience, but
somew hat interested
No experience, not
interested
Agencies
Total n=553
104
Contextually Targeted Ads Familiar to Most,
But No Big Shakes
ALL RESPONDENTS > GENERAL

The vast majority of respondents (79%) were familiar with contextually targeted text ads, exactly
the same as 2004

Slightly more of those who had tried the technique were "not impressed" than those who said "it
works great"
Level of Experience or Interest in Contextually Targeted Text Ads
"What is your level of experience or interest in the following search marketing tactics: Contextually Targeted Text Ads
(using programs such as Google's 'AdSense' and Overture's 'Content Match')"
% of Respondents
50%
40%
39%
36%
31%
30%
20%
20%
22%
23%
17%
25%
19%
15%
8%
10%
10%
7%
7%
3%
6%
8%
4%
0%
Tried it, w orks great
Tried it, w orks okay
Tried it, unimpressed
All Respondents
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
No experience, but very
interested
Advertisers
No experience, but
somew hat interested
No experience, not
interested
Agencies
Total n=553
105
Few Yet Experienced With Graphically Enhanced
Paid Placement Ads, But Interest Exists
ALL RESPONDENTS > GENERAL

Experience with paid placement ads with graphical elements is split almost 50/50, but
enthusiasm for its effectiveness is low

Among those who have not yet tried it, interest is fairly high, with 37% reporting they were “very”
or “somewhat” interested
Level of Experience or Interest in Paid Placement Ads with Graphics
"What is your level of experience or interest in the following search marketing tactics: Paid Placement ads enhanced
with graphical elements (like small logos affixed to the text ads)"
% of Respondents
50%
40%
30%
23%
25%
19%
20%
10%
16%
7%
8%
14%
17%
22%
21%
23%
19%
20%
18%
18%
14%
7%
10%
0%
Tried it, w orks great
Tried it, w orks okay
Tried it, unimpressed
All Respondents
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
No experience, but very
interested
Advertisers
No experience, but
somew hat interested
No experience, not
interested
Agencies
Total n=553
106
Keyword Targeted Banners Familiar to Most But
Not a High Priority
ALL RESPONDENTS > GENERAL

More than half of all respondents (57%) had experience with banner ads targeted to keywords

Of those, the majority were not terribly excited by the results
Level of Experience or Interest in Banners and Other Display Ads
"What is your level of experience or interest in the following search marketing tactics: Banners and other Web Display
Ads targeted to search query terms"
% of Respondents
50%
40%
27%
30%
29%
24%
22%
22%
23%
17%
20%
10%
8%
11%
14%
17%
12%
14%
12%
15%
16%
14%
8%
0%
Tried it, w orks great
Tried it, w orks okay
Tried it, unimpressed
All Respondents
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
No experience, but very
interested
Advertisers
No experience, but
somew hat interested
No experience, not
interested
Agencies
Total n=553
107
The click fraud problem
Advertisers and agencies are becoming
increasingly concerned about click fraud
CLICK FRAUD

Nearly 2 out of 5 advertisers and nearly half of agencies have tracked fraud; 16% of advertisers
say it's serious, nearly triple from 2004

Yet a quarter do not believe it's a problem

A third of advertisers and a third of agencies are concerned but not tracking fraud
Click Fraud vs. Paid Placement
% of Advertiser Respondents
"In your experience, how much of a problem is "click fraud" with regard to Paid Placement?"
60%
50%
40%
29%
30%
20%
10%
16%
23%
18%
16%
35% 34%
33%
38%
33%
25%
21%
27%
18% 18%
9%
2%
0%
6%
0%
0%
This is a significant problem w e
have tracked
All Advertisers
It is a moderate problem w e
have tracked
We have not tracked it much,
but w e are w orried about it
Advertisers of <500 Employees
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
It is not a significant concern
Advertisers of 500+ Employees
Never heard of it before
Agencies
Advertisers n=122; Agencies n=282
109
Over 2 out every 5 advertisers and half of all
agencies have been a victim of click fraud
CLICK FRAUD

Over 40% of advertisers claim they’ve been a victim of click fraud and more than half of
agencies.

Nearly 1/3 of advertisers do not know if they’ve been a victim of click fraud
Prevalence of Click Fraud
% of Advertiser Respondents
"Have you been a victim of click fraud?”
60%
50%
51%
42%
49%
46%
38%
40%
32%
36%
36%
27%
30%
21%
20%
18%
10%
0%
0%
Yes
All Advertisers
No
Advertisers of <500 Employees
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
I don't know
Advertisers of 500+ Employees
Agencies
Advertisers n=122; Agencies n=282
110
Competitive click fraud is less of a problem than publishers,
networks and affiliates attempting to artificially inflate their
clicks
CLICK FRAUD

More than three-quarters of advertisers claim their click fraud was due to publishers, networks
or affiliates attempting to increase their revenue through non-authentic clicks

However, more than half also claim they have been a victim of competitive click fraud as well
Type of Click Fraud
% of Advertiser Respondents
"What type of click fraud did you experience?”
90%
80%
70%
60%
50%
78%
53%
53%
78%
82%
59%
55%
41%
40%
30%
20%
10%
0%
Competitive Click Fraud
All Advertisers
Advertisers of <500 Employees
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Publishers or netw orks attempting to inflate rev thru non-authentive clicks
Advertisers of 500+ Employees
Agencies
Advertisers n=51; Agencies n=145
111
Majority of advertisers and agencies have received
an incremental credit for click fraud
90%
80%

Nearly 80% of advertisers who have been a victim of click fraud have received an incremental
credit from an engine

Agencies are far more proactive than advertisers in initiating credit requests from search
engines

Engines tend to initiate credit for advertiser
Compensation for Click Fraud
Initiation for make-good
"Have you ever received an incremental credit from a paid
search provider for click fraud?”
"Was it based on your request or was the credit engine
initiated ?”
78%
82%
78%
72%
70%
60%
50%
40%
30%
20%
29%
22%
22%
18%
10%
0%
Yes
All Advertisers
Advertisers of <500 Employees
% of Advertiser Respondents
% of Advertiser Respondents
CLICK FRAUD
90%
80%
70%
60%
50%
60%
40%
40%
30%
20%
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
56%
44%
41%
Based on your request
Agencies
61%
10%
0%
No
Advertisers of 500+ Employees
39%
60%
All Advertisers
Advertisers of <500 Employees
Engine Initiated
Advertisers of 500+ Employees
Advertisers n=51; Agencies n=145
Agencies
112
The rise of local search
High Interest in Locally Targeted Search
LOCAL SEARCH

Nearly a quarter of respondents (mostly agencies) have tried locally targeted search ads and
think "it works great"

Almost a third had tried them and thought "it works okay"

Only 13% had tried them and were "not impressed"

More respondents had tested local search than not, particularly agencies
Level of Experience or Interest in Locally Targeted Search Keyword Text Ads
"What is your level of experience or interest in the following search marketing tactics: Locally Targeted
Search Keyword Text Ads"
% of Respondents
50%
36%
40%
30%
29%
31%
27%
23%
23%
20%
13%
11%
12%
13%
16%
11%
11%
11%
10%
10%
11%
7%
4%
0%
Tried it, w orks great
Tried it, w orks okay
Tried it, unimpressed
All Respondents
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
No experience, but very
interested
Advertisers
No experience, but
somew hat interested
No experience, not
interested
Agencies
114
Not surprisingly, Google and Yahoo! Search
dominate local search
LOCAL SEARCH
Most Popular Local Search Engine Networks
Among Advertisers
“Where have you bought inventory for local search
marketing?"
[Multiple responses applicable]

Google AdWords Local Targeting is the
most popular local search advertising
program, used by 79% of advertiser
respondents, 83% of agencies

53% of advertisers reported using Yahoo!
Search’s Local Match paid placement
program

Agencies are more likely to spend with
the established search players for local
targeting, while advertisers are more
willing to spend with yellow page
providers for local targeting
83%
79%
67%
% of Advertiser
Respondents
53%
32%34%
21%
16%
6%
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Advertisers
Agencies
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
Advertisers n=34; Agencies n=209
115
About the Research Partners

About the Search Engine Marketing Professional Organization (SEMPO)
SEMPO is a non-profit professional association working to increase awareness and promote the
value of search engine marketing worldwide. The organization represents the common interests
of more than 315 companies and consultants worldwide and provides them with a voice in the
marketplace. For more information, or to join the organization, please visit www.SEMPO.org

About Radar Research, LLC
Radar Research is a Los Angeles-based research and consulting firm aimed at the nexus of
media, technology, culture and commerce. It was founded by two former JupiterResearch
analysts, Marissa Gluck and Aram Sinnreich. Radar conducts research on behalf of both
corporate clients and non-profit organizations, such as DoubleClick, Sony Pictures
Entertainment, Nielsen//Netratings, the Online Publishers Association and The Norman Lear
Center. For more information, please visit www.radarresearch.com

About IntelliSurvey, Inc.
IntelliSurvey helps organizations, including leading research firms and in-house researchers,
make better business decisions by gathering intelligence from their customers, members, and
prospects. For more information, please visit www.IntelliSurvey.com
Source: Search Engine Marketing Professional Organization
survey of SEM agencies and advertisers, December 2005. Global
Results. Copyright © 2005
116