When visitors benefit from a site search, then I use one - taking care that it gives useful results (not always easy, by the way.) Just make sure that URLs for search RESULTS pages cannot be indexed by the search engines.

hi tedster

Just make sure that URLs for search RESULTS pages cannot be indexed by the search engines.

that interesting. even when you are using google's own custom site search?

I think they disallow custom site search in their own robots.txt

Since many people are citing that time on page and bounce rates are a bigger factor now, doesn't it stand to reason that adding a site search function would reduce time on site? Thereby hurting your potential SERPs?

I would look at it the other way, that site search will increase there time on site.

Option 1 - no site search.
User enters site, doesn't see what they want obviously there or linked and leaves

Option 2 - site search installed
User enters site, doesn't see what they want obviously there or linked, but notes site search, enters terms, clicks to results page, says 'aha!' (hopefully) and goes on and views a third page.

Sounds good to me :)

If they don't use the site search because they can see what they want, or a link to what they want, then the site search being installed makes no difference.

Search is a very big deal for sites, put it on there :D

Site search can be a good thing and it can be a terrible thing. Here are some things to consider:

#1 Why do you want site search?
If you want to give a better user experience then go for it. If you want to give the false impression that your site is large and professional, don't do it. If users enter keywords that return bad or zero results this will backfire.

#2 Why do you need site search?
Do users have a problem finding your content? Is it because your pages are poorly interlinked and organized? If that is the case then you need to fix your internal links which will have the side effect of helping search engines crawl and rank your content. If on the other hand you have 1 million pages that are perfectly interlinked, then go ahead & add a search box to help users deal with the massive amount of great content.

ps: be careful about valuing the bounce rate and time metrics too much

Also (as I have learned through some of my own painful experience) it's probably better to have NO site search than to have a bad one. Because a bad one just pisses people off.