Search engine marketing (SEM) agencies direct the bulk of paid search spending, but marketers' expectations of their agencies is high - and loyalty is low.

Almost half of all search marketers outsource to agencies; and nearly one-third will switch if agencies fail at expectation management, according to a JupiterResearch vendor evaluation report, "Search Engine Marketing Agency Constellation." JupiterResearch found that although an agency's technology is important, client service is increasingly critical.

"Forty five percent of search marketers are using agencies for one or more of their campaigns, and marketers are increasing their overall spending on search," said Zia Daniell Wigder, vice-president and research director at JupiterResearch. "The keys to their success will be in engaging an agency that combines strong tracking tools with extraordinary service."

"An increasing number of marketers are diversifying and intensifying their use of search agencies. However, only 21 percent are completely satisfied and have no interest in switching agencies," said Sapna Satagopan, research associate and lead author of the report. "Search agencies must begin to differentiate themselves and build loyalty through higher levels of client service."

JupiterResearch evaluated 15 SEM and SEO agencies on market suitability, overall business value and agency size. Agencies that emerged as leaders include 24/7 Real Media, iProspect and Did-It in the SEM space, and IMPAQT, iProspect and Reprise Media in SEO.