Australian advertisers have ramped up the amount of money being allocated to search at the expense of other media budgets, with the trend set to continue over the next 24 months, according to the latest report from Frost & Sullivan.
Australian search advertising reached a total value of AU$869.7 million during the 2008 calendar year making it the fastest growing segment in the local digital media advertising industry. The Australia Search Advertising Market 2008-2012 report found that keyword sponsorships continue to lead demand with 51% or $442.6 million of the total revenue. Online directories follows, valued at $263.9 million and contextual searches at $163.2 million.
Frost & Sullivan claim that 75% of advertisers are now spending more than 10% of their total media budget on search related activities. Twelve months ago only 65% of advertisers were investing the same amount.
Frost & Sullivan ICT director, Andrew Milroy forecast that the increasing appetite for measurability will have a direct impact on traditional media spend over the next one or two years.
He added that the reallocation of budgets towards search is likely to be exacerbated by the current financial turmoil.
“With marketing activity as a whole predicted to slow, we believe that advertisers will turn to search advertising because of its greater cost-effectiveness,” he said.
Competition for search advertising budgets also decreased significantly during 2008 due to market consolidation in both the search engine and directories markets. Although further consolidation is expected in 2009 the study concludes that it is not yet clear what effect this will have on advertiser activity, if any.
The study does caution that some industries are clearly experiencing weaker levels of success with search advertising and there are signs that return on investment levels are beginning to decrease. The report found that 59%of brands that used search advertising said it resulted in increased leads, however this was down from 66% of brands last year, while 44%said it increased conversions/leads compared to 49% last year. Only 25%of the advertisers surveyed said search advertising achieved high ROI, down from 31% last year.