SEM Growing Faster Than Projected

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Safa Rashtchy was a speaker during the “Swimming with the Sharks: What You’ll Get From VCs and Investment Bankers” session at this week’s Search Engine Strategies conference.

Rashtchy, principal of major investment banking firm U.S. Bancorp Piper Jaffray and Senior Internet Analyst, was the Wall Street Journal’s “Best In the Street” Analyst of 2002,

He gave a speech at the New York-based conference on new opportunities in the evolving search market for 2004.

In 2003, search was a $1.5 billion industry. Just two years ago, it was projected that by 2007 search would grow to become a $7 billion industry. This year, that prediction has increased by $2 billion to value search at $9 billion by 2007. By 2008, it’s believed that search will be an $11 billion industry.

What does that tell us? The value of the search industry is increasing much faster than expected. Furthermore, these estimates don’t include local search, which could raise the value even higher. There are now more searchers and more advertisers than ever before in the search industry. Why is search growing so fast? Because the cost per lead is so low.

See what people are saying about these projections on the e-Business forum WebProWorld.

The Virtuous Cycle. He points to something he calls the Virtuous Cycle. Searchers find relevant results. New advertisers begin to advertise on the search engine. Searchers use the engine more often because they get relevant results. They start to use more detailed search terms because they become more intelligent. More advertisers continue to join. The cycle keeps rebuilding and feeding itself.

Right now local advertising in the Yellow Pages is a $12 billion to $18 billion offline industry. He says watch for this to migrate online.

Brand Better with Search Marketing. Search has a high brand recognition value when compared to other media, he says. Wow! That’s really fascinating because it means your ability to brand and advertise well on television is not as good as the ability to brand on search engines.

Why? Because searchers are already looking for something specific so advertising is more targeted. People aren’t as likely to remember an advertisement during the Super Bowl, for example, when they’re just taking a bathroom break and getting another bag of chips as they are when they’re at the office looking specifically for a certain product or service.

Comparing contextual advertising to widely syndicated classified ads, he says early results are very promising.

What investors are looking for when investing in a search engine or any company:

They’re looking for an indispensable position and a unique competitive advantage. Any investor is going to ask, “Why can’t I just start my own company like this?” They look at market size. If a company is under $100 million, forget it. They look at market share. How big is this company? How big is the market? How fragmented is the market? They look for growth and valuable expansion plans. They look at evaluations. They look at the risks, such as monetization, price pressure, and changing market conditions. He says the SEM market is clearly evolving from a collection of consultants and search optimizers to larger companies. Consolidation is the key to success.

A growth path beyond search will be very valuable to investors.

Discuss search engine marketing with professionals at WebProWorld, your forum for e-Business news and information.

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SEM Growing Faster Than Projected
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