A report released by Nielsen/NetRatings indicates that growing demand for search-engine advertising is outstripping the supply of available advertising space. This scarcity is pushing the cost of popular keywords upwards. If the escalation continues, it could make search engine advertising cost-prohibitive for all but the largest advertisers.

“Conversations with several advertisers reveal that, even with recent increases in price, search engine advertising is still cost effective,” said Ken Cassar, director of strategic analysis for Nielsen//NetRatings in an official statement. “However, if prices continue to rise, this will not indefinitely be the case. The low hanging search opportunities are nearly picked over.”

Rising prices threaten the future of search advertising. However, the report identified several growth areas that could expand the available search-advertising inventory. These include improved relevancy of search results, increased personalization allowing for more targeted and localized results, and specialization enabling search results to be narrower in scope.

“The future of search is dependent on advertisers’ continued refinement and understanding of their own valuation metrics and of search providers’ continued innovation — which will be principally driven by localization, personalization, and specialization,” said Cassar.

Although search remains extremely popular — it is estimated that search engines are used for basic Web navigation by approximately 85 percent of Internet users — with 77 percent of Americans online the rate of growth from new Internet users should begin to slow.

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