One could argue that search advertising is "inferior" to brand advertising in the sense that it produces low-margin transactions and builds no brand loyalty. Companies do it because they have to, in the meat-and-potatoes sense. In the long run, loyal users created through a brand are more valuable.
Also, the increased spending on SEM does come from a limited marketing budget, so there is a definite income effect.
Finally, Google keeps changing the SEM rules in ways that that result in price increases, in addition to the auction effect.
Thus it would seem that all the Giffen good conditions are met.
But still, search advertising isn't an inferior good in the traditional sense. All else constant, if a company gets an additional dollar of revenue, they won't spend less on search advertising in absolute terms.
Also, the increased spending on SEM does come from a limited marketing budget, so there is a definite income effect.
Finally, Google keeps changing the SEM rules in ways that that result in price increases, in addition to the auction effect.
Thus it would seem that all the Giffen good conditions are met.