Is there a downturn in the Search Ad market?

I was sadden to read last week that the Tokyo based SEO firm Sozon announced it would be closing down. I have a professional relationship with Sozon that goes back several years with the original founder of the company Amir Ayalon. In 2005, Sozon was acquired by affiliate marketing giant ValueCommerce as a way to add search engine optimization to its list of special services. Over the last two years, Sozon’s focus shifted from organic search results to paid results. The move proved lucrative as Sozon was able to tap into ValueCommerce’s fat client list to sell it’s services. The details behind Sozon’s demise are not clear to me, finance could have been part of the reason, or perhaps it was a strategic move on the part of ValueCommerce and its major shareholder YahooJapan.  One thing I am sure of is that the company’s closing is not indicative of the state of SEM in Japan. Japan is the biggest slice of the search market ad pie in all of Asia. Search ad spend is projected to be about $1.7 billion this year alone. And the future of paid search looks brighter than ever from where I’m standing here in Japan. Traditional advertisers are beginning to understand the importance of search in brand building and maintenance. Japan is still in the middle of a huge shift in terms of ad spend and retailing from brick and mortar to web & mobile. The market is still growing, thus the need for SEM services will continue to grow. How much will search ad spend grow over the next fews years in Japan? By 2011 search will represent 36% of all web based on-line ad spending and 40% of all mobile ad spending.  The Japanese market is huge. There are over 88.9 million Internet users and 90 million mobile users in Japan. 92% of Internet users use search engines to find information on-line. In fact, search ads influence 20 -30% of all purchases made at retail locations! Does this sound like an industry on the downturn? The measurable effectiveness of search marketing will play a big role over the next few years as offline advertisers  move their spending away from print and TV and demand higher ROI for their ad dollars. It’s sad to see Sozon close its doors, but judging from the relative health of the search market, I predict that the smart people at Sozon will continue to have a future in search ad industry.