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SEO and SEM spends set to increase, despite budget cutbacks

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Companies are continuing to invest in search marketing as both paid and natural search channels continue to deliver, according to the Econsultancy/Guava UK Search Engine Marketing Benchmarking Report 2009.

Search engine optimisation is the digital channel where companies are most likely to be investing more budget, with 55% of respondents expecting an increase in their budgets this year. Just under a third of respondents (31%) say that SEO spending will stay the same and only 6% say there will be decreased investment.

The research also found that 45% of responding organisations are planning to increase their budgets for paid search. Only 11% of respondents say they are decreasing their spend on pay-per-click marketing, for reasons which include click cost inflation and lower conversion rates caused by the credit crunch.

The picture is less positive for online display advertising, although there are still more organisations (24%) who are increasing budgets than there are companies cutting back (16%).

The third annual UK Search Engine Marketing Benchmark Report, based on a survey of more than 800 company and agency digital marketers, looks at both the search marketing landscape and the use of social media sites for marketing.

Last year only 3% of responding organisations said that they were using Twitter in their marketing strategy, compared to an overwhelming 49% this year. Facebook is now being used by 65% of companies as part of their marketing efforts.

The study also found that just under half of company respondents (48%) report that SEO return on investment (ROI) has gone up in the last year, compared to only 6% who say that ROI from this channel has gone down. For paid search, 43% report that ROI has increased compared to 15% who say that it has decreased.

The proportion of company respondents who say that they are tracking paid search return on investment effectively has increased from 33% last year to 45% in 2009. For SEO, there has been an even bigger increase in those tracking ROI effectively, from 20% to 35%.

“Search marketers are still getting strong return on investment from paid search marketing despite the recession, increased competition and click cost inflation,” says Linus Gregoriadis, Econsultancy’s research director . “This research provides more proof that companies are turning to digital channels such as paid search and search engine optimisation where there is a measurable return on investment. Crucially, companies are also getting better at measuring their returns from search marketing which, in turn, is leading to more investment.”

The research also found that:

  • Google remains king, with 85% of responding companies utilising the search engine for paid search. 94% of agencies say their clients typically pay to advertise on Google.

  • Approximately half as many responding organisations (44%) use Yahoo, whilst a third (30%) are using Live (Microsoft’s platform). Yahoo has taken the biggest hit since last year’s survey, with 5% fewer company marketers now using Yahoo for paid search. Similarly, 7% fewer agencies say their clients pay to advertise on Yahoo’s search results pages.

  • Only 5% of companies are paying to advertise on mobile search listings and, surprisingly, that percentage has not increased since last year although 23% are planning to do this. More than two thirds of respondents say this is either not on the radar yet (37%) or that they have no plans to use mobile search (32%).

  • Survey respondents were asked specifically about the factors which had negatively affected their return on investment from paid search in the last 12 months. The higher cost of clicks emerged as the most significant issue and CPC (cost-per-click) inflation is being driven both by increased competition and efforts by the search engines to extract as much profit as they can while still delivering return on investment.

  • Just over a third of respondents (37%) said that the credit crunch was explicitly an issue and a similar proportion (34%) said that lower conversion rates were negatively impacting ROI. These factors are very closely related.

  • Only 5% of respondents report that the end of best practice funding has negatively impacted their return on investment. The change in Google’s trademark bidding policy has had more of an impact, with 15% of company respondents citing this as a negative factor affecting ROI.

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