SEMPO: State of Search Engine Marketing Survey of Advertisers and Agencies Search Engine Marketing Professional Organization (SEMPO) February, 2009

Agenda About SEMPO SEMPO Mission & Team Local and Global Activity State of Search Marketing, 2008

About SEMPO

SEMPO Mission & Team

Local and Global Activity

State of Search Marketing, 2008

About SEMPO Global non-profit with over 875 SEMPO members, representing thousands in 40 countries Membership includes traditional agencies , interactive agencies , in-house marketers, individual search, and technology Produce the industry’s most comprehensive market research annually, 5 years running We invest in education , research, and thought leadership We are building community locally and globally

Global non-profit with over 875 SEMPO members, representing thousands in 40 countries

Membership includes traditional agencies , interactive agencies , in-house marketers, individual search, and technology

Produce the industry’s most comprehensive market research annually, 5 years running

We invest in education , research, and thought leadership

We are building community locally and globally

Mission and Board of Directors 2009-2010 Chairperson Jeffrey Pruitt Partner, Arkon Ventures President Sara Holoubek Corporate Strategy Consultant Vice President Ron Jones President/CEO, Symetri Internet Marketing Secretary Chris Boggs SEO Manager, Roseta Treasurer Dave Fall VP Product Mgmt-Search, Google Jessica Bowman In-House SEO Consultant Massimo Burgio Global Search Expert, Global Search Interactive Bruce Clay President, Bruce Clay, Inc. Duane Forrester Senior Program Manager, MSN SEMPO is a global non-profit organization serving the search engine marketing industry and marketing professionals engaged in it. Our purpose is to provide a foundation for industry growth through building stronger relationships, fostering awareness, providing education, promoting the industry, generating research, and creating a better understanding of search and its role in marketing. Gordon Hotchkiss, President, Enquiro Search Solutions Bill Hunt, President, Back Azimuthl Kevin Lee Executive Chairman, Didit Dana Todd, CMO, Newsforce

Local and Global Activity Active working group New working groups for 2009-2010 SEMPO working groups create a needed space for education, content, and networking at the local level

SEMPO Research “ A study by the Search Engine Marketing Professional Organization (SEMPO) slated for release on Dec. 4 found that 71% of advertisers are "worried" about click fraud, or describe it as a "moderate" or "significant" problem.” (2006) SEMPO research, including the State of the Market survey and the salary surveys, is widely regarded and frequently referenced “ Companies spent an estimated $8 billion in 2006 for sponsored links on search engines, according to the Search Engine Marketing Professional Organization, or SEMPO, a trade group.” (2007) “ Also, search is continuing to steal from traditional ad budgets, according to the survey. More than a quarter of advertisers reported that they were shifting budgets into search marketing from print magazines. Nineteen percent said they were shifting their budgets into search from print newspaper advertising” (2009) “ Even as some marketers rein in spending to hedge against further economic problems, search engine marketing (SEM) is in great shape—at least for the moment” (2008)

About the Report Radar Research, Inc. oversaw the following research initiatives as part of this project: Understand the size of the industry in order to help promote its growth Understand where marketer spending is going, among different recipients (search engine media companies, SEM agencies, in-house) and towards what types of SEM programs (paid placement, organic SEO, SEM technology) Identify key industry trends Identify key industry issues SEMPO should address Radar Research oversaw the following research initiatives as part of this project: Development of SEM forecast model Detailed online survey completed by 890 search engine advertisers and SEM agencies, administered via IntelliSurvey, Inc. Extensive analysis of secondary research, reporting and commentary Almost two thirds of global respondents are agencies 125 of the 317 advertiser respondents are from firms of 500-plus employees 95% of advertiser respondents have budget or strategic oversight or are directly involved in SEM.

Radar Research, Inc. oversaw the following research initiatives as part of this project:

Understand the size of the industry in order to help promote its growth

Understand where marketer spending is going, among different recipients (search engine media companies, SEM agencies, in-house) and towards what types of SEM programs (paid placement, organic SEO, SEM technology)

Identify key industry trends

Identify key industry issues SEMPO should address

Radar Research oversaw the following research initiatives as part of this project:

Development of SEM forecast model

Detailed online survey completed by 890 search engine advertisers and SEM agencies, administered via IntelliSurvey, Inc.

Extensive analysis of secondary research, reporting and commentary

Almost two thirds of global respondents are agencies

125 of the 317 advertiser respondents are from firms of 500-plus employees

95% of advertiser respondents have budget or strategic oversight or are directly involved in SEM.

We Need Your Feedback! Source: Search Engine Marketing Professional Organization survey of SEM agencies and advertisers, Nov 08-Jan 09. Global Results. Copyright © 2009 In total 890 respondents completed the survey North American firms (U.S. and Canada) made up three-quarters of all respondents Respondents from other countries included Argentina, Australia, China, France, Germany, Hong Kong, India, Israel, Italy, Netherlands, Norway, South Africa, Spain, Sweden Location of Surveyed Companies "What country is your company located in?" Total n=890 ABOUT RESPONDENTS UK 5% Other 20%

In total 890 respondents completed the survey

North American firms (U.S. and Canada) made up three-quarters of all respondents

Respondents from other countries included Argentina, Australia, China, France, Germany, Hong Kong, India, Israel, Italy, Netherlands, Norway, South Africa, Spain, Sweden

Key Points Search spending is still growing Search ROI Revenue from Search Senior executives and search Search in the marketing budget & mix Forward looking Video Mobile Local Social

Search spending is still growing

Search ROI

Revenue from Search

Senior executives and search

Search in the marketing budget & mix

Forward looking

Video

Mobile

Local

Social

Show Me The Money Spending will grow to $26.1 billion by 2013 in North America. We actively encourage more European respondents to participate to effectively measure global spend. Source: Search Engine Marketing Professional Organization survey of SEM agencies and advertisers, Nov 08-Jan 09. Global Results. Copyright © 2009

Search Still Rules ROI Source: Search Engine Marketing Professional Organization survey of SEM agencies and advertisers, Nov 08-Jan 09. Global Results. Copyright © 2009 Marketing Vehicles Respondents Cited as Among Their Top Three by ROI "What are the top-three most-efficient forms of advertising or marketing you spend money on in terms of the return on investment (ROI) or return on ad spend (ROAS) that they yield?“ (ranked 1-3)

Projected Revenues from SEM Climb Steeply from Last Year More than one-third of advertiser respondents expected their firms to book more than $100 million in revenue in 2008 – continuing the upward trend from previous years. Nearly a fifth of all advertiser respondents expected their firms to book less than $1 million in revenue in 2008 Almost two-thirds of small firms (<500 employees) expected to book between $1 and $100 million in revenue in 2008, and more than a third of large firms expect to book more than $1 billion in 2008 Revenue Expected for 2008 “ How much revenue do you expect your business to book in 2008?” Advertisers n=317 ABOUT RESPONDENTS Source: Search Engine Marketing Professional Organization survey of SEM agencies and advertisers, Nov 08-Jan 09. Global Results. Copyright © 2009

More than one-third of advertiser respondents expected their firms to book more than $100 million in revenue in 2008 – continuing the upward trend from previous years.

Nearly a fifth of all advertiser respondents expected their firms to book less than $1 million in revenue in 2008

Almost two-thirds of small firms (<500 employees) expected to book between $1 and $100 million in revenue in 2008, and more than a third of large firms expect to book more than $1 billion in 2008

Senior Executives Appreciate the Value of SEM Half of all advertiser respondents said that senior management at their companies were &quot;very involved&quot; in SEM programs and considered them &quot;a high priority” Smaller firms are far more likely to have a high level of SEM involvement by senior management. 85% of companies report that senior management is involved at least to a moderate degree – up from prior years. Source: Search Engine Marketing Professional Organization survey of SEM agencies and advertisers, Nov 08-Jan 09. Global Results. Copyright © 2009 Extent of Senior Management’s Interest in SEM Practices &quot;To what extent is your senior management interested in and aware of Search Engine Marketing practices your company engages in?&quot; RESEARCH HIGHLIGHTS Advertisers n=317

Half of all advertiser respondents said that senior management at their companies were &quot;very involved&quot; in SEM programs and considered them &quot;a high priority”

Smaller firms are far more likely to have a high level of SEM involvement by senior management.

85% of companies report that senior management is involved at least to a moderate degree – up from prior years.

Search Earns a Line Item: PPC Source of Budget for Paid Placement and Paid Inclusion Programs &quot;Where is the budget coming from for your Paid Placement programs?&quot; Source: Search Engine Marketing Professional Organization survey of SEM agencies and advertisers, Nov 08-Jan 09. Global Results. Copyright © 2009

Search Earns a Line Item: SEO Source of Budget for Organic Search Optimization Programs &quot;Where is the budget coming from for your Organic Search Optimization programs?&quot; Source: Search Engine Marketing Professional Organization survey of SEM agencies and advertisers, Nov 08-Jan 09. Global Results. Copyright © 2009

Where is The Money Coming From? Shift of Marketing / IT Funds to Search Marketing Programs &quot;From which marketing/IT programs are you shifting budget away and moving it to your search marketing programs?&quot; RESEARCH HIGHLIGHTS The biggest shares of budgets for SEM programs are being shifted away from offline marketing such as print, direct mail and TV advertising, as well as online marketing such as Web site development Source: Search Engine Marketing Professional Organization survey of SEM agencies and advertisers, Nov 08-Jan 09. Global Results. Copyright © 2009

Coordination Source: Search Engine Marketing Professional Organization survey of SEM agencies and advertisers, Nov 08-Jan 09. Global Results. Copyright © 2009; Graphic: Sara Holoubek 79% of advertiser respondents are coordinating SEM with other marketing Only 7% were not doing so at all; 15% were doing so minimally Advertisers n=317

Advertisers Report an Increasing Level of Interest in Video Advertising Tied to Video-Related Search If yes, how interested are you in the following? (Scale of 1-5, 1=lowest, 5=highest) There is almost identical interest levels in video and text advertising attached to video search results Video Search Targeting Would you be interested in contextually targeted advertising attached to video search results? ADVERTISERS > NEW PLATFORMS Advertisers n=229 Source: Search Engine Marketing Professional Organization survey of SEM agencies and advertisers, Nov 08-Jan 09. Global Results. Copyright © 2009

If yes, how interested are you in the following? (Scale of 1-5, 1=lowest, 5=highest)

There is almost identical interest levels in video and text advertising attached to video search results

Video Search Targeting

Would you be interested in contextually targeted advertising attached to video search results?

There is Growing Interest in Mobile Search, Though Level of Interest is Widely Distributed How interested are you in being able to serve geographically relevant advertising to mobile search users? (Scale of 1-5, 1=lowest, 5=highest) Mobile Search Targeting Would you be interested in contextually targeted advertising delivered to mobile search users? ADVERTISERS > NEW PLATFORMS Advertisers n=229 Source: Search Engine Marketing Professional Organization survey of SEM agencies and advertisers, Nov 08-Jan 09. Global Results. Copyright © 2009

How interested are you in being able to serve geographically relevant advertising to mobile search users? (Scale of 1-5, 1=lowest, 5=highest)

Mobile Search Targeting

Would you be interested in contextually targeted advertising delivered to mobile search users?

Advertiser Respondents Are Willing to Pay a Premium for Local Targeting Local Targeting “ How much more would you pay for optimal local/geographically relevant targeting?” ADVERTISERS > LOCAL SEARCH Advertisers n=100 Over three out of five marketers (62%) are willing to pay a premium of 1% -5% for local targeting, up from two in five advertisers last year One in five claim they’re willing to pay between 6%-10% premiums, dropping from one-third in 2007 Source: Search Engine Marketing Professional Organization survey of SEM agencies and advertisers, Nov 08-Jan 09. Global Results. Copyright © 2009

Over three out of five marketers (62%) are willing to pay a premium of 1% -5% for local targeting, up from two in five advertisers last year

One in five claim they’re willing to pay between 6%-10% premiums, dropping from one-third in 2007

1/2 Advertisers Respondents Consider Social Media Promotion Part of Their Overall Web Marketing Half of advertisers account for social media promotion within their overall Web marketing, and almost a third consider it a component of search engine optimization Over a third of advertisers (37%) are considering promoting their brand using social media About one in five advertisers (22%) don’t account for social media promotion since they believe the cost is negligible Accounting for Social Media “ How do you account for the resources you expend on social media promotion?” [Multiple responses allowed] Advertisers n=161 Source: Search Engine Marketing Professional Organization survey of SEM agencies and advertisers, Nov 08-Jan 09. Global Results. Copyright © 2009 ADVERTISERS > SOCIAL MEDIA

Half of advertisers account for social media promotion within their overall Web marketing, and almost a third consider it a component of search engine optimization

Over a third of advertisers (37%) are considering promoting their brand using social media

About one in five advertisers (22%) don’t account for social media promotion since they believe the cost is negligible

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