With advertisers attracted by search marketing, firms will absorb spending from other media
Los Angeles, CA (PRWEB) July 05, 2012
The Search Engines industry has cemented itself as one of the most innovative businesses in the United States. Over the five years to 2012, industry revenue is expected to grow at an annualized rate of 3.4% to $17.4 billion. “Although most search engines are entirely dependent on advertising revenue, the industry emerged from the recession relatively unscathed,” says IBISWorld industry analyst Kevin Boyland, with revenue contracting only 3.0% in 2008. As consumer spending declined and advertising expenditures plummeted, advertisers scaled back their search engine marketing campaigns without completely cutting them. In 2012, the industry is expected to grow 2.4% as search engines continue to pull revenue away from other advertising media due to the lower costs and quantifiable efficacy achieved through search engine marketing.
Over the past five years, the market dominance of industry giant Google has prompted cooperative agreements between its next largest rivals, Yahoo and Microsoft. In 2009, the companies signed a 10-year agreement that replaced Yahoo's search and ad-serving technologies with Microsoft's. In exchange, Yahoo will receive 88.0% of the resulting ad revenue through 2015. According to Boyland, the agreement has largely tied Yahoo's success to that of Microsoft's search engine, Bing, and vastly expanded the amount of data that Microsoft has available to analyze and use to better the technology behind it. In fact, in 2012, Bing market share surpassed Yahoo for the first time. Competition in the industry is quickly evolving into a battle between technology giants Microsoft and Google. The Search Engines industry naturally tends towards higher levels of concentration. Concentration has increased steadily during the last five years, primarily driven by Google's growth and the decline of smaller search engines like Ask.com and AOL. A large user base attracts advertisers and provides a large data set that can be analyzed and used to improve search results. As the quality of search results improves, a search engine's user base tends to increase, creating a cycle that reinforces the dominance of large, well-established search engines. Consequently, IBISWorld expects industry concentration to remain high over the next five years.
Over the five years to 2017, advertisers are expected to increasingly turn to search engine marketing because of its cost effectiveness and accountability advantages over traditional media. With proper analytics software installed, marketers can track which terms, ads and websites are the most effective, allowing for incremental improvements in advertising campaigns. As mobile devices with broadband internet connections continue to proliferate throughout the United States, the scope of the industry is rapidly expanding. Although Google currently dominates the mobile search engine market, innovation from Microsoft could take away market share from Google in the future. For more information, visit IBISWorld’s Search Engines in the US industry report page.
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IBISWorld industry Report Key Topics
This industry includes enterprises that operate search engines and other types of search-based websites that display advertisements. These search engines typically provide search services for free and earn income when a user clicks on an advertising link, known as a "paid click." Websites may attract users to their search engines by offering a range of additional free services, such as e-mail, news, social networking, entertainment and other information.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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