European Search Engine Marketing To Grow 65% In 2005

Hellen Omwando , Consumer Markets Analyst at Forrester Research, says: “Growing numbers of online shoppers, online advertising budgets, and pay-for-performance search marketing models will attract both large and small firms. But while search spending will more than triple, its share in online advertising will decline by 2007, as consumer mistrust of paid listings takes effect, rich media ads gain prominence, and as prices of keywords rise.”

Search Marketing Tops €3 Billion In 2010

According to Forrester Research, the maturity of search marketing in Europe varies markedly by country:

• In the UK, the largest online ad market in Europe, search marketing will grow to over €1 billion in 2010 — up from €763 million at the end of 2005; marketers in travel, finance, auto, and retail will fuel the spend.
• France, with 19% of search marketing spend in Europe by the end of 2005 — and 31% by 2010 — is the most surprising growth market, as it has historically been a laggard in anything digital.
• Germany was Europe’s second largest search marketing spender in 2004 (with spend of €165 million); however, spending will slow down and will reach €399 million in 2010 — a CAGR (compound annual growth rate) of 11% in the next five years.
• By the end of 2005, the Netherlands will spend 40% of online advertising on search marketing; in Sweden, 26% of online ad spending will go to search marketing.
• The rest of the Western European countries will contribute just 4% of search marketing spend in 2005; their contribution will change little in the next five years.

Search Marketing’s Growth To Cool Down By 2007

While search marketing’s share in online advertising will increase for another two years, Forrester believes it will start decreasing in 2007. Why the slowdown? According to Forrester, growth on a larger basis will be harder to achieve as the share of search spending declines due to, for example, growing consumer backlash against paid listings — which will turn off some marketers. Growth of rich media ads, enabled by increased residential broadband access (67% by 2010), will pull ad spending away from other forms of offline and online advertising — including search marketing as we know it today. Finally, the price of keyword searches will inevitably increase.

Omwando explains: “While it’s unlikely that prices in Europe will reach the same levels as in the US — where the same keyword might command five times the price than in Europe — increases will be significant enough to make it difficult for some marketers to justify the ROI of high prices; they won’t be able to compete for popular keywords.”

Forrester concludes its report by stating that the trend of industry players moving beyond search engines to forms of online marketing that blend display ads and sponsored keyword listings — as NYTimes.com does — is also likely to gain steam in Europe. Search engines will respond with search types and business models that combine the best of display ads and search — for example: personalized search marketing linked to email conversations and content page viewing histories; comparison search engines and vertical search; and video-based search for branding purposes. The result? Hyper-partnering between search engines, media sites, and retail sites to create networks of hybrid search marketing models.