San Francisco — Even search engines get the pinch of recession. According to a recent report that has appeared at the WSJ blog, the Search Engine Marketing Professional Organization, (SEMPO), is trimming down its forecasts for the search-marketing industry, facing the ongoing economic turmoil to easily succeed through what has been a bright spot in the online ad market.
In a survey planned to be released this week, the search trade organization, revised it spending forecasts, says North American search marketing spending rather than blossoming to $18.8 billion in 2009, will increase only 9% to $14.7 billion in 2009 from $13.5 billion a year ago.
In its previous estimates, made in early 2008, predicted that the industry would grow at more than twice that rate this year, from $15.7 billion in 2008 to $18.8 billion in 2009. The new SEMPO forecasts demands the industry to reach $19.8 billion in 2011, down from a previous estimate of $25.2 billion for that year.
But the report calls for some very crucial issues that cannot be explained away by a simple economic downturn. Among them:
Amount Of Active Advertisers: A marginal decrease of small-to-medium sized businesses can be expected in this economy. On the other hand it would be fair to expect that more companies will embrace search as a low-cost high ROI tactic.
Non-Google Revenue: How much growth comes from other search engines? The danger of a dominant company in any business is that “as they go, so goes the industry.” If the report finds that there is some growth beyond Google, these numbers look different.
New Advertisers: According to The Wall Street Journal, which disclosed the topline results of the report, more than 25 percent of advertisers surveyed said they would switch budgets into search from print magazines. Nineteen percent said they would switch from newspapers. With this mingled approach it is hard to know how much revenue that will account for. Both newspapers and magazines are high-ticket budgets when compared to search.
In an interview, Kevin Lee, CEO of search-marketing firm Didit who is on SEMPO’s research committee, blasted the adjustment on the macro-economy and said SEMPO would have cut its forecasts further if they had not elaborated the definition of search marketing to include new forms of advertising such as some sorts of social media.
“The data — is based on a survey of 890 search advertisers and agencies — is the latest in a series of alarm bells for the industry. Last week, Google CEO Eric Schmidt said the economy remains “pretty dire” and reiterated that his company, which is the dominant search ad provider, is not immune. Analysts predict Google’s revenues in the current quarter will be slightly lower than revenues in the fourth quarter. If they are correct, that would represent the first sequential revenue dip in the company’s history.”
The SEMPO survey found other reasons to be optimistic however, said Lee.
According to Frank Reed of Marketing Pilgrim, who points out, that this in fact is not so bad considering the dire state of the economy, despite new forms of advertising being thrown together within the definition of search, such as social media.
For instance, advertisers expressed strong interest in new search-targeting technologies, indicating they will allot more when the timing is right. Those technologies include “search re-targeting,” or targeting their search ads to select groups of users based on what Web sites they have previously visited or whether they had visited an advertiser’s own Web site before. The practice is in its early days.
Although search, along with social media, has been the last resort of exponential growth in Internet marketing, it has to be considered that 9 percent growth in this economy might not be bad. Disappointing, but not devastating. As anyone in the TV or print business will tell you: “Flat is the new profitable.”
Certainly it would be nice to carry on the blooming days of high double digit growth with no end in sight but most thinking folks are not surprised by this news. The constant bright spot for the search industry and the online marketing business as a whole is the continued reallocation of budgets to give Internet types some help in succeeding.