Forrester also predicts that by 2010, European marketers will spend almost €3 billion on search marketing.
Search marketing – commercial search that includes paid listings, contextual search, site optimisation, and paid inclusions – has to date mostly been the province of large companies, but according to Forrester's new report, SMEs are now also set to include search marketing as part of their marketing mix.
"Growing numbers of on-line shoppers, on-line advertising budgets, and pay-for-performance search marketing models will attract both large and small firms," said Hellen Omwando, Consumer Markets Analyst at Forrester Research.
In the UK, currently the largest European on-line ad market, marketers in travel, finance, auto and retail will fuel the growth of search marketing to over €1billion in 2010 – up from a predicted €763 million at the end of 2005.
But Forrester also expects on-line ad spending to decrease in 2007. This will be due to a growing consumer backlash against paid listings, which will turn off some marketers, and the growth of rich media ads, which will pull ad spending away from other forms of off-line and on-line advertising – including search marketing as we know it today. Finally, the price of keyword searches will inevitably increase.
"While it's unlikely that prices in Europe will reach the same levels as in the US – where the same keyword might command five times the price than in Europe – increases will be significant enough to make it difficult for some marketers to justify the ROI [Return on Investment] of high prices; they won't be able to compete for popular keywords," said Omwando.
But good ROIs can be found today, according to Tino Nombro, Managing Director of Edinburgh-based search engine optimisation and web site promotion firm Ambergreen. "You've got to approach search engine marketing with the ROI in mind," he says. "And you've got to monitor your ROI."
Ambergreen's clients include Marks & Spencer, Mercedes, Boots, Channel 4 and Hamleys. Nobro says that his clients sometimes see returns of ten or twenty times on the investment, which should make search engine marketing an easy sell. But he acknowledges that lots of people claim to be able to offer the service.
"Bad design can easily make a site drop in the search engine rankings. So I'd always recommend that you speak to a specialist rather than someone who just claims they can do it," he says.
Forrester also says that the trend of industry players moving beyond search engines to forms of on-line marketing that blend display ads and sponsored keyword listings is also likely to gain steam in Europe.
Search engines will respond with search types and business models that combine the best of display ads and search. For example: personalised search marketing linked to e-mail conversations and content page viewing histories; comparison search engines and vertical search; and video-based search for branding purposes.
As a result, says Forrester, there will by hyper-partnering between search engines, media sites and retail sites to create networks of hybrid search marketing models.