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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% L Sw i tc hb oa Lo rd ca M lo S rA N O Lo L ca Y l el lo w pa Su ge Ya pe s ho rp o a !S ge G oo s. ea co gl rc e m h Ad Lo W ca or lM ds at Lo ch ca lT ar ge ti n g 9% 18% AO N on e of th e ab ov e 9% 27% 27% 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