More than one-third — 37% — of respondents to our survey said they engage in pay-per-click or pay-per-call advertising. Of those, 78% were business-to-consumer marketers, and 22% were business-to-business firms.

That may not seem like a huge number given the popularity of SEM as a topic at industry conferences and in trade magazines. But another 45% of respondents said they planned to test or start an SEM campaign, including performance-based ads and optimization for organic rankings, this year. Thirty-one percent did not plan to start an SEM program, and 23% were unsure. Consumer marketers were more likely to launch a campaign (54%) than their b-to-b counterparts (35%).

The respondents that did have performance-based search programs in place spent a mean 18.4% of their marketing budget on SEM. Seventy-five percent said they would increase their SEM budget this year over last year; only 4% planned to decrease it, and 11% were unsure. Respondents planning to increase their SEM budget in 2006 expected to do so by a mean 42.9%. Respondents with annual revenue of $10 million or more were more likely to increase the budget (81%) than those with less revenue (63%).

To fund the SEM increase, 50% of respondents will shift money from other marketing channels. Of those, 42% said they would reduce spending on catalogs to channel more money to search; 29% will trim direct marketing to prospects, 25% will cut back on space advertising, and 17% will reduce card pack mailings. Notably, none of the respondents planned to shift money from e-mailing customers, and just 4% said they would take money away from e-mailing prospects; another 4% will scale back Website development maintenance in favor of SEM.

Biggest concerns in 2006 for search engine marketers

Maintaining ROI from search marketing 33%

Growing complexity of managing search campaigns 26%

Acquiring reliable or useful performance metrics from search campaigns 17%

Rising keyword prices 12%

Wasted spending due to fraudulent or poorly qualified clicks 6%

Competitors bidding on your corporate name or trademarks 3%

Other 3%

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