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Advertisers spent $5.75 billion on search engine marketing in 2005, a 44% increase compared with 2004, according to a report from the Search Engine Marketing Professional Organization.

The nonprofit group projects search marketing spending in North America will increase to $7.19 billion this year and reach $11.0 billion in 2010.

The findings in SEMPO's report, "The State of Search Engine Marketing 2005," are based on a survey of advertisers, agencies and affiliate marketing firms conducted by Radar Research and Intellisurvey. The global survey generated 553 responses, 70% of them from North America.

According to the report, the majority of search funding is poached from other marketing channels. SEMPO said the biggest shares of budgets for SEM are being shifted from affiliate marketing, Web site development, print Yellow Pages advertising, e-mail marketing and direct mail.

"Marketers are taking a closer look at media consumption patterns," said Kevin Lee, chairman of SEMPO and CEO of Did-it.com, a SEM company. "Search really shines, and that is hard to replicate in other media."

Bryan Brickley, director of business development at Searchfeed.com, said pay-per-click's effectiveness has motivated advertisers to invest in search. "Pay-per-click offers a way to control spending and pay only for users that visit their site," he said. "These types of factors cannot be as easily controlled and monitored with other advertising methods."

The report tallied payments to search engines and search-related media companies, search marketing agencies and in-house expenditures in support of search. The programs included paid placement, paid inclusion, organic search and search marketing technology.

Paid placement accounted for $4.70 billion, or 83%, of the total spent on SEM last year. Most advertisers use organic search engine optimization, but that accounted for just 11% of spending. Paid inclusion accounted for about 4% and SEM technology for less than 2%.

Google AdWords remains the most popular search advertising program, used by 95% of respondents.

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