Search Marketers Content with ROI, Plan to Spend More

A majority of search marketers are planning on spending more on search this year, and are mostly satisfied with the return on investment (ROI) they are seeing from search. Those are two of the findings from a new JupiterResearch report, “US SEM Executive Survey, 2007: Understanding the Increasingly Sophisticated Search Marketer,” released Tuesday afternoon at Search Engine Strategies New York.

“Very few people are dissatisfied with search. The ones that are tend to be smaller advertisers managing less than 1,000 keywords,” Kevin Heisler, JupiterResearch analyst and lead author of the report, told ClickZ. “We see many advertisers getting more aggressive with their spending, especially agencies. They’ve figured out what makes search so successful, and are content with the ROI.”

Overall, 65 percent of advertisers expect to increase their spending, while only 7 percent expect to decrease spending on search this year. Twenty-eight percent expect no change in their spending.

The report found that 26 percent of large advertisers in companies with annual revenues of $50 million or more plan to increase spending on search engine marketing by more than 25 percent this year. Another 28 percent of large advertisers anticipate spending increases between 11 and 25 percent, mostly due to an expectation of a continued rise in keyword prices. About 21 percent of large advertisers expect no change in search spending.

The majority of advertisers, especially larger advertisers, report that they are satisfied with the ROI of their search marketing activities over the last year. Among advertisers in companies with annual revenues of $50 million or more, 27 percent reported being “very satisfied” with their ROI, and 40 percent said they were “satisfied.” Another 25 percent said they were “neither satisfied nor dissatisfied,” while 7 percent were “dissatisfied,” and 2 percent were “very dissatisfied.”

At the other end of the scale, small advertisers, those in companies with less than $1 million in annual revenues, were less satisfied, though about half were still satisfied (37 percent) or very satisfied (13 percent) with their ROI from search. Another 28 percent were neutral, while 17 percent were dissatisfied and 5 percent were very dissatisfied.

While search advertisers are mostly satisfied with their ROI, they still face several challenges. The biggest problem reported by advertisers across the board was rising keyword prices, which topped the list for large advertisers in companies with annual revenues of $50 million or more (64 percent), advertisers in companies with annual revenues between $15 and $50 million (64 percent), advertisers in companies with annual revenues between $1 and $15 million (63 percent), and small advertisers, with less than $1 million in annual revenues (57 percent).

The next-biggest concern of large advertisers was measuring the offline impact of search, reported by 50 percent of those advertisers. That was a worry of 34 percent of advertisers in the $15 to $50 million revenue range, 29 percent of advertisers in companies with annual revenues between $1 and $15 million, and 24 percent of smaller advertisers.

Tracking ROI was a bigger concern than measuring offline for everyone but large advertisers, but they were still concerned. Problems with tracking ROI were reported by 47 percent of large advertisers, 41 percent of advertisers in the $15 to $50 million revenue range, 48 percent of advertisers in companies with annual revenues between $1 and $15 million, and 41 percent of smaller advertisers.

Many of these problems are the result of advertisers not adequately implementing analytics, Heisler said. The problem is especially magnified for marketers looking for branding effects from search, he said.

“Direct response marketers by far have been better at measuring ROI. Branding measurement is more complex, and many marketers are not using the right metrics or analytics goals,” he said. “Overall, many marketers are not using analytics to their fullest extent, although they’ve really closed the gap in the past year.”

More advertisers are beginning to use sophisticated measurements of ROI, especially multi-channel retailers, who for example might implement metrics for things like return on profit margin, rather than the simpler return on ad spend, he said.

“The way we analyze and measure, across the board, is very narrow. The focus has always been on last click. Google and the other search engines have tremendously benefited by lack of sophistication in the way marketers have tracked their search marketing results,” he said.

That’s beginning to change, as more marketers begin to understand and measure “assists” and other more granular metrics, and to tie in the effects of other media on the sale, he said.

A more complete look at the results of the study can be found in today’s SearchDay.