Search engine marketing is booming.According to a report released today by the Search Engine Marketing Professional Organization (SEMPO), advertisers in the U.S. and Canada spent $5.75 billion on Search Engine Marketing in 2005, a 44% increase over the $4 billion spent in 2004.

While I should disclose that I handle public relations for SEMPO, I think the industry-wide survey of 553 respondents conducted in November 2005 by Radar Research, LLC and Intellisurvey, speaks for itself.

The report also projects that spending in North America on search engine marketing will reach $11 billion in 2010.The annual totals include payments to search engine media companies such as Google and Yahoo!, search engine marketing agencies, and in-house expenditures in support of such programs. The programs include paid placement, paid inclusion, organic search engine optimization, and search engine marketing technology.

“This report confirms our belief that Search Engine Marketing has almost single-handedly revived a flagging online advertising marketplace after the stock market crashed in 2000,” said Kevin Lee, Chairperson of SEMPO, in a press release distributed this morning.“As consumers have become increasingly reliant on search engines to navigate the Web, investors have shown a renewed interest in the digital technologies -- and in search marketing in particular,” he added.

The survey found the bulk of spending on search engine marketing was on paid placement, accounting for 83% or $4.7 billion in 2005.While four out of five advertisers report they engage in organic search engine optimization (SEO), organic SEO accounted for approximately 11% of overall spending.Paid inclusion accounted for just 4% of overall spending.And search engine marketing technologies, including leasing, agency solutions and in-house development, accounted for less than 2% of overall spending.

“The data shows that 2005 was a good year for search, but 2006 should be a great year,” said Gord Hotchkiss, Co-chairperson of SEMPO’s Research Committee, in this morning’s press release.“The growth shown has largely been driven by maturation in existing segments.Future growth will be fueled by an increased search presence from major advertisers and new monetization strategies from the major engines. The increased competitiveness in the marketplace will really drive the industry forward in the coming year,” he added.

The survey also found:

• Google and Yahoo still command the lion’s share of Internet advertising.
• Branding, sales, leads and traffic are the top objectives of paid placement programs.
• Little SEM funding is newly created; most is shifted from other programs.
• Advertisers and agencies are approaching their pricing limits.
• SEM agencies need to prove their value-add to advertisers.

Some of the key highlights from the survey are included in a report entitled, “The State of Search Engine Marketing 2005,” which is available on the SEMPO site at http://www.sempo.org.