There are conflicting predictions on how SEM spending will grow. According to JP Morgan, they predict that growth in US paid search ad revenue (currently the largest segment of US online ad spending) would fall to 31.9% in 2008, down from 36.8% in 2007. Unlike JP Morgan, eMarketer expects growth in US online ad spending growth to rise slightly in 2008.

“David Hallerman, senior analyst at eMarketer, predicts that online ad spending will grow by 28.5% in 2008, compared with 26.8% in 2007. eMarketer also projects that US spending on paid search advertising will increase by 27.5% in 2008, compared with 26.8% in 2007.”

eMarketer predicts a growth in online ad spending, specifically pay-per-click. They see it reach its peak growth in 2008 with 27.5% increase. It then dips in 2009 to 17.6% until in 2011 to 11.3%. Other online spending areas included video, referrals, classifieds, display ads, sponsorships, and email. All peak this year and suddenly drop next year and continue.

I believe this shows the SEM industry is leveling and normalizing.

But, hold on there, ZenithOptimedia predicts a much sunnier horizon. They are predicting record growth. They are saying…

• Online ad spend will overtake radio by 2008;
• online ads will make up a double-digit share of all advertising by ’09
• it will surpass magazine advertising by 2010.

I don’t agree with the first and last predictions, as Google has added their new advertising segment within adWords, advertising on the radio and print. I do agree with item #2 but still believe that the spending will normalize over the next couple of years as interest in quick-results advertising and conversely frustration over managing it grows.