Spending Boom To Fuel Growth But Skills Crisis An Issue

Spending Boom To Fuel Growth But Skills Crisis An Issue
Darryl Nelson

By Martin Kelly, Editor, Search Engine Room

Paid search and online directories spend will quadruple over the next four years to more than A$1.5 billion as new advertisers “flood” the market and incumbents boost their spending.

But Frost & Sullivan analyst Darryl Nelson said skills within SEM agencies are failing to keep pace, threatening the quality of paid search advertising services in a sector where 85% of the money is spent on Google products.

Nelson, who is speaking at Search Engine Room, said paid search revenues “exploded” during 2006 and swept past online directories in terms of revenue market share - 43% (Search Engines) compared with 41% (Directories).

Only 12 months before the situation was totally differently with directories dominating revenue market share at 47%, while the Search Engines had just 33% of the spend.

Nelson believes paid search spend will reach A$975 million by 2010 due to an annual compound growth rate of almost 40%.

Contextual advertising products such as AdSense will grow at a slower rate and, like directories, lose ground to paid search.

He said the “indirect share of advertiser spending is rising” and estimated that agencies and resellers accounted for 29% of paid search revenues in 2006.

“However the chronic lack of specialist skills is dampening overall quality of this channel,” he said.

Many advertisers felt one of their biggest challenges was choosing the right agency to manage their paid search.

“The most common barrier cited by advertisers against digital media advertising in general was an unclear value proposition offered by digital media,” the report found.

Revenues in the online directory channel – where Sensis has a stranglehold with 98% market share primarily through Yellow Online - will remain buoyant, growing to $532 million by 2010.

The Frost & Sullivan report also examined advertiser attitudes to search engine marketing through an online survey involving more than 450 respondents. Among the findings:

• Almost 30% of existing search marketing advertisers intend to increase their digital media advertising budget in 2007,
• 21% of advertisers which used only offline media intend to start using digital media.
• 31% of existing search advertisers rated paid search marketing as highly effective
• 42% rated online directories as highly effective

In terms of customer satisfaction with vendors:

“Google’s AdWords service is the clear market leader in Australia in terms of overall market satisfaction.

“Against the top eight most important service factors rated by search marketing advertisers, AdWords was rated highest in four and joint highest in one.”

This includes the two most important categories: reliability of services and support, and the targeting capability of the vendor’s network, the report said.

Search Engine Room
19 February, 2007

 

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