2008 Spending on Search Engine Marketing Trumps Search Engine Optimization

eMarketer recently released the results of a SEMPO/Radar Research survey to quantify what marketers spent last year for search.

Categories were split between paid search-engine advertising (SEM), organic SEO, and bid-management software.

Out of an estimated $13.5 billion search spend, paid search gets the lion's share. SEO trails, and automation gets a mere sliver:

88% was spent on paid search SEM
11% was spent on organic SEO
1% was spent on SEM automation software tools

Interestingly, 82% of the total went to outside SEM firms and agencies, with only 6% of merchants opting to do their own SEM.

When it comes to SEO, the proportion is flipped -- about four times as many respondents are doing SEO in-house rather than farming it out. Our initial take is that:

• Very few merchants throw many resources into SEO at all, in-house or out
• Compared to SEM, there's a relative scarcity of good SEO firms out there.

eMarketer expects the ratio of paid placement to SEO will change in the future.

“Internet users prefer organic listings to paid search," said eMarketer senior analyst David Hallerman. "They generally find them more relevant—or simply more acceptable—than advertising. Therefore, they tend to click on organic results more often than on paid search ads.”

To Timberline, one obvious conclusion about the disparity between SEM and SEO spending was left unsaid: The SEO spend is relatively low because SEO provides more bang for the buck.

Or to put it more sarcastically, People spend more for what they have to pay for, and less for what they get for free.

Given that almost 90% of paid search spending goes to outside consultants, SEM numbers are padded with both consulting/management time AND the per-click spend.

On SEO, you might pay some consulting time, but the clicks are free. Sure, in an ideal economic world these two media will approach the same cost and ROI, but don't hold your breath. SEO remains a dicey and mysterious realm for many. I expect merchants to buy their way out of this conundrum for awhile, throwing disproportionate money at paid search while they try to figure out SEO -- or find a reputable SEO consultant to hire.

The SEMPO survey also forecast a bullish $14.7 billion in North American paid search spending this year, 2009. But other prognosticators are not so sure. Barclay's, Oppenheimer, and Credit Suisse all predict lower numbers, and eMarketer itself is in the process of revising its forecasts.