Research shows that in the US alone, adspend on search marketing will account for a significant 39 per cent of total online budgets this year. Arun Sudhaman investigates

According to data from Forrester Research, online spending on search marketing in the US will also grow by 33 per cent in 2005, and will account for 44 per cent of online adspend by next year. In Asia, meanwhile, the rapid growth of both Yahoo and Google demonstrates the viability of the search marketing model. Both portals are currently locked in a battle for market leadership throughout the region, which is likely to be heightened by the impending launch of MSN adCenter ?currently piloting in Singapore. And China, of course, has its own dominant search portals, lead by Baidu and Sina.

For marketers, the myriad search options on offer can confuse. Paid search is probably the best understood, where brands bid for a search term, and pay the bid amount each time their 'result?is clicked on the search page. Contextual ads take this process one step further, placing these paid ads onto websites that are deemed to provide a content match ?such as, in Google's case, aside Gmail messages.

Search engine optimization, meanwhile, is considerably less transparent, and involves a range of techniques to 'push?a site into the top-ranked natural search results. "Originally, people wanted 'natural?rather than paid,?explains OneXeno managing director Michael Zung. "But bigger brands are finding that there are ways to make paid dynamic.?/p>

James Dutton, associate director of XM Asia's analytics wing, believes that search engine optimization is a "mandatory deliverable? but one that comes at a high cost, involving high risk and unclear ROI. In contrast, agencies can add real value in three ways when it comes to paid search: campaign management, analytics and consulting.

"The nature of search advertising is that it is highly scalable ?operating as a self service model at the entry level through to fully-automated bid and keyword management operations at the enterprise level ?it's not unknown for the largest advertisers to be managing inventories of over one million keywords and phrases,?says Dutton. "At the very start of engagement, terms need to be clearly defined ?what level of servicing is expected from your agency? What are the success criteria for the programme? How will the measurement framework be executed and monitored??/p>

With increasing competition among the search vendors has come a growing sophistication of search marketing options. Google offers graphical and animated contextual ads, while Yahoo recently announced it will do likewise. Players such as Omniture and WebSideStory will launch integrated bid management tools later this year, which will allow agencies and clients to better manage the bid process.

"When a client seeks search advertising services, they should be looking for three things: analytical processes, case study credibility and effective campaign processes,?notes Dutton.