According to SEMPO’s key analysis, the U.S. & Canadian SEM Industry Size Estimate by tactic in 2004, organic SEO accounted for 12% of the market share or $492,057,200 while Paid Placement accounted for $3,341,878,176 or 81.8%.

Interestingly, 9 out of 10 respondents are actively engaged in organic SEM marketing programs accounting for 89% of the respondent advertisers. This trend can be contributed to the average cost of popular keywords continuing to escalate.

If the escalation continues to raise it could make paid search engine advertising exponentially cost prohibitive for all but the largest advertisers… the 900lb gorillas!

Simply put, ROI is outpacing inflation: SEMPO’s key analysis indicates advertisers could afford to pay on average 33% more for their keywords and remain profitable, while they say prices have gone up 26% on average in the last 12 months. That’s leaves a 7% advertising margin to maintain current profits for 2005!

SEMPO’s data also noted that advertisers will get smarter about managing their paid placement programs before they cut back on spending.

This is also consistent with a report released by Nielsen/Net Ratings indicating that the growing demand for search engine advertising is outstripping the supply of currently available advertising space.

These findings seem to indicate the inventory of keywords is approaching a critical demand problem however; most advertisers felt they still have some degree of price flexibility in their paid placement programs before they will reach the threshold of diminishing returns.

Is there any wonder why organic search engine positioning has gained popularity for online marketers in 2004? Could it be higher (ROI) return on investments?

SEMPO also cites that 43% of advertiser respondents have shifted their budgets away from other marketing programs for Organic SEO.

So what does it all mean? Let the numbers speak for themselves.

Organic SEO is undeniably gaining favor over the lower ROI paid advertising. This is evidenced by virtue of the fact that paid advertising is becoming less profitable.

Although paid advertising will continue to hold a large portion of the market share, as paid advertising returns diminish and keyword costs soar my early 2005 forecast is for the materialization of a progressive organic SEO market trend to facilitate the need for advertising space.

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