Locally placed search advertising in the U.S. is projected to grow 30 percent over the next five years, from $4.1 billion in 2008 to $5.3 billion in 2013. According to new research by Borrell Associates, this growth will be led primarily by advertising service providers that adopt scalable technology infrastructure and recalibrate their economics to allocate more customer investment to search media spend.
JUNE 2009
ECONOMICS OF SEARCH MARKETING
Addressing the Challenges of a Scalable Local Online Advertising Model
White Paper Prepared For
Clickable
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Acknowledgements
We would like to thank Clickable for its willingness to help media managers understand the critical metrics of the SEM industry and, ultimately, to help local businesses achieve greater e!ciencies in reaching consumers. We are also appreciative of the many industry executives and front-line local SEM sales reps who contributed greatly to our knowledge of this evolving landscape.
Borrell Associates Leadership Team:
Colby Atwood, PresidentCAtwood@borrellassociates.com
Gordon Borrell, CEOGBorrell@borrellassociates.com
Kip Cassino, Vice President of ResearchKCassino@borrellassociates.com
Peter Conti, Jr., Senior Vice PresidentPConti@borrellassociates.com
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Contents
4 Introduction
CHAPTER
6 SEM's Role in the Advertising Landscape Figure 1.1: $15 Billion in Annual Spending Shifts from O!ine to Online Advertising by 2013 Figure 1.2: High Growth of Local Online Sales in 2008
CHAPTER
9 What Makes a Successful Local Advertising Program? Figure 2.1: U.S. Businesses: SMBs Dominate the Landscape Figure 2.2: "Typical" High-Performance Sales Results: 81% Churn in 12 Months Figure 2.3: More SEM $ Goes to Keywords at Higher Spending Levels
CHAPTER
15 Break-even Customer Spending !resholds Figure 3.1: 12-Month Churn Rates and Customer Base Size Figure 3.2: Churn Drops with More $ Spent on Media Buys
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18 Conclusions Figure 4.1: through 4.3: Lower Churn, Higher Pro?ts with Increased Media Spend Figure 4.4: Interactive Ad Spending for SMBs, Forecast to 2013
22 Clickable
Borrell Associates
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0ECONOMICS OF SEARCH MARKETING
Introduction
!e Search Engine Marketing marketplace has become like a boisterous carnival, overcrowded with people trying to elbow in on the excitement, but inevitably a place where many end up feeling hoodwinked and ?eeced.
Despite the hype, it really is a big business. It swelled to $11.5 billion in 2008 on the ?ngertips of millions of wallet-ready consumers researching products and services. !e rise of broadband household usage and its "always on" capabilities have given consumers yet another opportunity to shave a few seconds o" their busy days by turning to the computer to search for a business phone number or address. Today, ?ve times as many people use search engines on a regular basis than they use the yellow pages to ?nd a local business.
!e economy has accelerated this mediamorphosis. Advertisers - especially the Small and Medium-Size Businesses (SMBs) are glomming to search advertising. !e harsh economic environment has caused them to re-evaluate longstan-ding practices of relying on Yellow Pages, newspapers, radio and Direct Mail to reach consumers. Over the next ?ve years, their ad spending on these four legacy media alone are forecast to fall 19%, representing average annual declines of $3.4 billion. Meanwhile, spending on paid search by local advertisers is forecast to rise 39%, representing average annual increases of $242 million. Other interactive media that a#liated with search and directory advertising - n... [download for more]
