The proportion of search marketers with annual revenues of $15 million or more has increased from 25 percent in 2005 to 37 percent in 2006, according to the new JupiterResearch report, "US SEM Executive Survey, 2006"; moreover, the proportion of marketers using bid management and web analytics tools has risen from 19 percent last year to 26 percent this year.

"The continued growth in size and complexity of search campaigns will spur search engine marketing (SEM) outsourcing," said Sapna Satagopan, research associate at JupiterResearch and lead author of the report. "More than 50 percent of large marketers outsource at least one of their search marketing services."

Spending on search marketing jumped in 2005. Nearly 24 percent of search marketers spent more than $500,000 on SEM campaigns in 2005, compared with 12 percent in 2004. Moreover, 66 percent of marketers plan to increase search spending; that proportion increases to 72 percent among sophisticated marketers - i.e., those who use bid management tools and web analytics packages.

One of the factors contributing to the surge in spending is the increasing cost of traffic.

"Half of search marketers rank website traffic as their preferred metric for measuring success," said David Schatsky, president of JupiterKagan. "There is an increasing cost associated with this traffic, primarily driven by the rise in keyword prices and the cost of expanding to new search providers."