Search Engine Optimisation, Promotion and Internet Marketing

Search engine spending 'to reach $5.1 billion in 2005'

27 June 2005

Spending on paid search engine advertising will soar by 47 per cent to around $5.1 billion, up from around $3.5 billion in 2004, new research claims.

Investment house Merrill Lynch predicts that paid search and paid inclusion advertising combined will reach $5.5 billion this year, representing 45 per cent of the firm's estimate for the total online ad market in 2005.

The report on internet advertising suggests that much of the growth this year will stem from the rise in broadband adoption, which will result in more queries to search engines. Overall, Merrill Lynch forecasts that online advertising will reach $12.4 billion this year and $25 billion by 2009.

Lauren Rich Fine, first vice president at Merrill Lynch and the report's author said: "[S]earch volume growth really has been the bigger driver of growth in paid search advertising in late 2004 and into early 2005. We believe this trend will continue as broadband subscription prices continue to drop, more users move to broadband connections, and ultimately conduct more queries."

Merrill Lynch forecasts that query volume for 2005 will rise by 20 per cent. An analysis of data from comScore Networks revealed that the volume of queries per user grew between 16 and 18 per cent in the first quarter of this year, compared to between zero and four per cent a year ago.

The investment house has now reviewed its revenue estimates for Google for next year, increasing them from $5.1 billion to $5.2 billion, despite increasing competition from rivals MSN and Yahoo!

"[T]he company's ability to withstand market share loss is better than we previously expected," Merrill Lynch stated.

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