U.K. SEM Spend Slows, Signaling Market Maturity

U.K. search engine marketing spend is set to slow considerably this year, according to research conducted by E-consultancy.

The firm’s 2008 search engine marketing buyer’s guide, released this week, predicts that SEM spend in the U.K. will rise by 24 percent in 2008, down from 58 percent year on year growth in 2007 and 65 percent growth in 2006.

Total spend is therefore predicted to reach around £2.75 billion ($4.9 billion) this year, up from a £2.2 billion ($3.9 billion) spend in 2007.

Speaking with ClickZ News, Chris Lake, editor in chief at E-consultancy, said, “We’re predicting noticeably slower growth this year than we saw in 2007 and in previous years,” but did not imply that this was a consequence of the current economic climate. Rather, he suggested the slowing spend signals a more mature and developed U.K. search market.

“Although there is significant room for further growth in spending, the sector is now becoming more established and, as such, cannot keep on such a steep curve indefinitely,” the report states.

“While there remains strong growth in the market, the upward trajectory of search has begun to flatten as the industry has become more mature, as has happened in the United States,” it continues.

Of the predicted £2.75 billion ($4.9 billion) spend, paid search is expected to account for the lion’s share, representing £2.42 billion ($4.3 billion), or 88 percent of total spend, and leaving search engine optimisation (SEO) with a £330 million ($586 million) spend and a 12 percent share.

However, SEO spend is set to experience year on year growth of 32 percent in 2008, with paid search achieving just 23 percent growth in comparison, the report says.

“The last few years have seen increasing spend and competition as people came to market,” said Lake. “The big players are now using methods such as algorithmic bidding, which is contributing to reduced paid search spend,” he added.

The report also includes a number of predictions for other online channels in 2008. The market for online ad networks is predicted to grow by 60 percent to a value of £385 million ($683 million), e-mail marketing spend is expected to grow by 24 percent to around £274 million ($486 million), and the combined U.K. usability and accessibility markets are set to grow by an estimated 20 percent, reaching a value of £200 million ($355 million).

The report predictions are based on the total amount spent on search engine marketing in the U.K., including media spend and money spent on agency services such as paid search management.