Via Threadwatch, I came across MarketingSherpa's report on the SEM industry's growth over the past two years. While it appears that SEM is on the up and up--staffing for top SEM firms has increased 75% from 2005, and "six firms [reported] more than $10 million in SEM revenues, plus two more reporting more than $20 million in SEM revenues"--there is apparently a considerably smaller growth (or even a decline) in the number of clients hiring SEM firms:

...year-over-year growth in terms of total client accounts for 104 surveyed firms is slowing considerably. The number of clients who are willing to pay for top-of-the-line services is still increasing, but smaller clients are not increasing.

We suspect smaller clients may not be educated enough to realize SEO exists or that it's as important (if not more so) than PPC ads for their sites. The SEO industry is not investing in educational efforts the way the Googles of the world are.

The accompanying chart shows a 20% increase in client growth for "top of the line pricing" SEO/SEM firms, while "economy & mid-level pricing" firms actually saw a 1% growth decrease.

I'd like to know how many firms MarketingSherpa researched in order to come up with the figures in their charts--I'm not sure if I overlooked the excerpt, but I didn't see it reported in the article. Obviously, if they took a small sampling, the numbers do not accurately represent the industry as a whole.

SEOmoz has had a steady increase in clientele. What about you guys? Have you noticed a decrease or a stagnancy of the number of clients your firm has? If so, to what do you attribute the slow growth? Lack of awareness that SEM exists? Company ignorance of the fact that they actually need more visibility online? And how come there hasn't been a Gremlins 3?