Companies invest heavily in search marketing as marketers continue to reap good returns

London, 23 April 2009. Companies are continuing to invest in search marketing as both paid and natural search channels continue to deliver, according to a report published today by Guava and Econsultancy.

Search engine optimisation (SEO or natural search) is the digital channel where companies are most likely to be investing more money, 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 increasing 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, gives a comprehensive overview of the search marketing landscape, and also includes research about the use of social media.

Twitter, in particular, has shown phenomenal growth since last year. 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.

Linus Gregoriadis, Econsultancy’s Research Director, said: “UK search marketers are still getting strong return on investment from paid search marketing despite the recession, increased competition and click cost inflation. This research provides more proof that companies are turning to digital channels such as paid search and search engine optimisation where there is a demonstrable return on investment.

He added: “Crucially, companies are also getting better at measuring their returns from this channel which, in turn, is leading to more investment.”

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%.

Lucy Cokes, Director at Guava, said: “We were delighted by the response to the surveys and feel we have gone some way to achieving our aim of providing the most comprehensive and useful piece of year on year Search Engine Marketing research in the UK. At Guava we predict that Social Media Marketing will move from an integrated part of our SEO campaigns to being delivered as a standalone service. This will change will occur over the coming year as larger companies want to take more control of this element of their marketing."

Other findings

• It is clear 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.

The full Econsultancy / Guava UK Search Engine Marketing Benchmarking Report 2009 is available for download here

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About Guava:

Guava is a fresh thinking, digital marketing agency specialising in Search Marketing, Web Development, Search Engine Optimisation, and PPC in the UK. Part of the pan-European Guava group with over 200 employees, the UK division is headed up by UK CEO, Graeme Radford with offices in Berkshire and Cornwall. Current Guava clients include Confused.com, Black & Decker and The Royal Mail.

Contact Guava for further industry comments.
www.guava.co.uk
0870 063 0707

About Econsultancy

Econsultancy is the leading source of independent advice and insight on digital marketing and e-commerce. Our reports, events, online resources and training programmes help a community of over 80,000 registered marketers make better decisions, build business cases, find the best suppliers, look smart in meetings and accelerate their careers.

Join Econsultancy today to learn what’s happening in digital marketing – and what works.
Call us to find out more on +44 (0)20 7681 4052 or contact us online.
http://econsultancy.com

The full E-consultancy / Guava UK Search Engine Marketing Benchmarking Report 2009 is available for download here