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The Tipping Point is Approaching December 22, 2005 |
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I’ve had this PDF sitting on my desktop for some time. Usually when something piques my interest either through seeing it online somewhere or through a link I’ve followed I will create a shortcut to it or, better yet if it’s available, download a copy. In this case I came across a PDF online a few weeks back which is entitled “Silk Road - The Tipping Point is Approaching.” The title intrigued me, so I bookmarked it knowing it was something to do with search engine marketing. But like most people, I’ve been too busy to read it up until today. And that’s when I realized that I should have read this as soon as I got it. The document is produced by PiperJaffray, a well known investment firm and in it they talk about online advertising and how they expect it to grow in the coming years. Some of the numbers they mention are quite astounding when you consider them. Right from the first sentence of this document I was immersed: “We believe that online advertising is now positioned to exceed $55 billion globally by 2010.” That’s an incredible gain considering that the online advertising spend in 2002 was estimated at a mere $6 billion, according to The Interactive Advertising Bureau and PricewaterhouseCoopers. Even more incredible when you consider that spending online actually dropped 10% in the first half of 2001 when compared to the same period in 2002 and that Internet ad spending for the first half of 2001 totaled $1.5 billion. Yet the study goes on to say that the company has “consistently raised our estimates for online advertising and search as the growth rates and monetization have exceeded our initial projections.” That’s pretty impressive to me. As you see I named this article the same as their study because it sounded interesting but also because of even more statements made within it: “We believe online media now receives about 5% of total marketing spending, up from 3% two years ago. However, online is on its way to a 10% share much faster then we anticipated, and we believe we are now approaching an inflection point when spending growth could accelerate.” They then go on to quote figures of companies which already have met or exceeded this online spend. For example, a recent announcement by Absolut Vodka says that the company will spend 20% of its total marketing budget online. In addition, some industry experts expect companies like Ford and GM to move in this direction as well - allocating 20% or more of their total marketing campaign budget to online spending. I guess the only drawback to all this great news is for me, as an organic search engine marketer, I’d like to see more money spent on improving algorithmic rankings. While Enquiro offers full service SEM including PPC management, my role here is primarily algorithmic search. Yet the study seems to indicate that much of this new money will be spent on online advertising. That trend could change over the next 3-4 years, however, as more and more companies realize the cost savings in improved organic positioning. A recent study by SEMPO seems to not only back up the figures from PiperJaffray but also indicates that more and more companies are beginning to realize the value of organic search In it, it says that “Organic SEO is the most popular form of SEM, with 4 out of 5 advertisers using this method, with paid placement a close second at 76%.” So, here’s how I think things will play out: More large companies will enter the search space, but many will opt for paid listings initially. Because agencies handle most of the large accounts, it is easier for them to measure ROI on paid ads. As time goes on, however, we should see more and more agency clients beginning to realize that they could better spend their money elsewhere. That is because our own studies have shown that while there are decent clicks and even conversions on paid advertising online, organic search results get the lions share of clicks. As such, the big spenders will begin to shift budget away from paid and into organic. This many not happen for a few years. In fact I don’t think it will begin to happen until 2008 or 2009. But by then there will be more concrete methods for measuring organic success, and more agencies will begin to realize that SEO isn’t “black magic.” But until that time, I’m quite happy to sit back and watch it play out. Sure our PPC department will be running at full steam for the foreseeable future, but I also know that as companies realize that they can get the same quality clicks for a fraction of their total annual paid spend, they will begin to invest in services that the other side of Enquiro can offer - namely organic search marketing. |
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Rob Sullivan |
