Jupiter Predicts Paid Search Could Slow Down

Ed Palomar
DARIEN, Conn. — JupiterResearch has issued a new report that predicts paid search activity will decelerate. By 2009, the rate of growth of web advertising for paid search results will be only about one-sixth of what it was in 2003, according to the forecast’s projections.

JupiterResearch states that in 2004, online advertisers will spend $2.6 billion on paid search. This figure will more than double by 2009, when $5.5 billion is expected to be spent on paid search services. However, the growth rate for paid search will sharply decline within five years, JupiterResearch predicts.

Paid search delivers targeted ads that are linked to the keywords used in Internet searches on search engines such as Yahoo and Google. The Reuters news agency reports that the JupiterResearch forecasts cast a shadow over Google as it prepares to issue its Initial Public Offering. The IPO could reportedly yield more than $3 billion.

However, Google – which is reportedly valued at more than $30 billion – earns a substantial portion of its revenue from paid searches. Since 2002, Google has posted double-digit sales growth in every quarter. However, in the quarter that ended in June 2004, Google’s revenue grew by only seven percent.

JupiterResearch analyst Nate Elliott told Reuters, “Google clearly thinks that they need to diversify," adding that Google has ventured into other fields such as Froogle, its comparison shopping site, Gmail electronic mail service and local search advertising.

According to JupiterResearch, local search spending will grow from $502 million in 2004 to $879 million in 2009. Local marketers – from doctors to eateries – use local search.

The JupiterResearch report also projected that total online ad spending, including display ads like banners and search, will almost double to $16.1 billion by 2009. In addition, it forecasts that the increase in search prices per click will also slow down.

JupiterResearch is a division of Jupitermedia. According to its website, Jupitermedia is a leading global provider of original information, images, research and events for information technology, business and creative professionals.

In related news, on Aug. 9 Google again boosted the number of shares it plans to sell in its IPO, according to Reuters. It will issue 2.7 million shares to Yahoo to settle a lawsuit over technology used to display ads.