SEM Agency Differentiation (or the Lack Thereof)
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Written By Peter Hershberg | December 12, 2006 | Share This
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I had the opportunity to share some thoughts on Business Issues for the Big SEM Shop at last week’s Search Engine Strategies conference in Chicago. While other panelists discussed pricing models and human resource challenges, I chose to focus on SEM agency differentiation - or the current lack thereof.
In just a few years, ’search marketing’ has from gone from the bid management of text ads, to running campaigns across multiple ad networks - content pages, display ads, even radio. Search marketing spend grew 44% between 2004 and 2005, and will likely accelerate as the search engines develop new ad channels (print, audio, mobile, etc). Naturally, the number of agencies offering search services has also grown. Today - in addition to traditional SEM firms - interactive agencies, direct marketers, analytics companies, independent consultants, ad networks, and the engines themselves all claim to “do search”.
Recently, a friend asked me for advice on choosing a search marketing solution. He asked specifically about the search capabilities of company called Eyeblaster , to which I was fairly taken aback. ” Do they have a core competency in search engine marketing?” I told him, “Absolutely not. Is Eyeblaster a leader in the area of rich media advertising? Perhaps, but I know far too little about that market to say they are with any degree of certainty.”
It struck me, though, that if the customers cannot make the distinction for themselves, then perhaps these questions are irrelevant. As a founding partner of one of the largest SEM firms in the market today, I (like my colleagues) have experienced first hand the difficulty of describing my company amongst the clutter of ’search’ options. There are three real reasons why search marketers have a hard time differentiating themselves.
- Quality of work isn’t obvious
Generally speaking, we’re talking about three lines of text - 25 characters in the title and 70 characters in the description. Paid search ads are not designed to make consumers laugh or cry - they’re meant as a bridge between a search term and a related landing page. Thus, search ads don’t strive for difference, they strive for relevancy and similarity to other key terms on the page. While some ads will undoubtedly outperform others, advertisers may not be able to identify the quality of work without seeing backend performance metrics. - Search is used in Combination
Search is often only one part of a cross-media campaign. As a result, most companies dealing with online marketing offer “search”, though few specialize in SEM. Eyeblaster, for example, is known for rich media, but describes itself online as a “one-stop shop for all aspects of paid search marketing.” - The Search Market is Young
Lastly, because search is a young market, there’s an excess of parity. The industry is wrought with buzzwords – “full service,” “integrated solution,” “proprietary technology,” “campaign management,” “best-of-breed,” and “portfolio management.” SEM’s use the same vacant terms to describe what makes them different from their competitors and in the process of doing so, they’re all saying the same thing. As Forrester wrote in their recent WAVE report, “Search Agencies are immature overall.”
How Can SEM’s Differentiate Themselves?
Despite the challenges highlighted above, there are a variety of approaches search marketing firms can take to set themselves apart.
- Take a vertical approach
Rather than trying to be all things to all people, SEMs can choose to focus on a specific industry. Page 1 Solutions, for instance, targets lawyers, plastic surgeons, dentists, and lasik practices. It’s presumably easier for them to establish credibility within these categories because they position themselves as specialists. - Focus on a specific market segment
There are millions of businesses in need of search marketing services. Pursuing a smaller segment of the broader market can create differentiation. WebVisible, for instance, has created a set of solutions exclusively for the “local” market. - Create a partnership or become part of a larger entity
A good partnership can lead to an incremental sales channel for the search marketing firm. For example, in addition to servicing a variety of direct clients, Outrider - Focus on a limited geographic region
While this strategy would never work in major cities like New York and San Francisco, many SEMs have benefited from servicing the businesses in their specific regions. - Work in Emerging Markets
In addition to developing a more specific focus, search companies need to give consideration to how they can continue to stay ahead of the curve. As mentioned earlier, the definition of “search” has expanded over the past few years. Companies that develop a competency in some of the “emerging” ad formats, including mobile, print, video, and audio are likely to stand out from their competitors. - Promote depth of expertise, not breadth of service
With Yahoo’s expected launch of Panama in Q1, the search marketing platforms offered by all 3 major search engines will cease to be completely transparent. Successful search marketing campaigns will be less about “bid management” and more about “campaign management.” SEM’s that understand the strategies required to effectively optimize all variables involved in the search marketing process (keyword identification, creative copywriting, landing page optimization, etc) will be rewarded with lower minimum cost-per-clicks. And the results they subsequently produce on behalf of their clients should help them prove that they have been able to evolve with the market while some of their competitors can’t.
*Disclaimer: I am not endorsing the above companies in any way, but merely using them as examples for this post.
Where is it all headed?
There’s no question that by the time the next SES show rolls around in 4 months, much will have changed. It seems that some of the trends we saw in Chicago last week should give us some insight into where the industry stands as a whole. It appears as though search is moving in two different directions at the same time.
- Mergers & Acquisitions
- Greater Niche Focus
SEMs will offer increasingly niche-focused services. Already at SES Chicago, we saw numerous firms exclusively focused on keyword generation, creative optimization, competitive intelligence reports, and landing page optimization. As I mentioned above, look for Geo-specific, vertical, and emerging market search agencies as well.
Because the search industry lacks a clear category leader, and because an increasing number of ad agencies want to become competent in search, there will be more company acquisitions in the months ahead. I predicted that this would happen around the time isobar acquired iProspect (December, 2004). This past week, iCrossing’s bought out Newgate - a signal of more to come.
In sum, the search marketing world will soon be made up of a smaller number of large full service shops, and a greater number of small niche players. If executed properly, both strategies could prove to be extremely profitable.
Topics: Featured Item, Investment, M&A, Reprise Media, SEM: Firms, SEM: Paid Search |
Hi Peter, I enjoyed your post. And congrats btw to Reprise for your awesome callout in the Forrester report.
Agree with your statement that there is going to need to be specialization to differentiate among agencies. I think that a lot of SEM agencies want to be “all things to all people” - so differentiation among some of the bigger firms will be hard. (especially as they get more visibility and are required to meet higher revenue goals. They won’t necessarily want to specialize because that may cut out other potential revenue streams.) Or they’ll just acquire to get the specialization.
but that begs the question, why did iCrossing acquire NewGate? iC always touted their bid mgmt technology, but NewGate had their own technology too - rumors have flown that it was to acquire their clients. And that’s probably a scenario for future acquisitions too!
Probably gonna happen soon when the big companies will demand exclusivity in verticals from their sem agencies, just like the big traditional agencies.
Peter,
It was a pleasure meeting you last week, and I enjoyed your comments in both the Big SEM session and the partnering with ad agencies section. I know as a growing SEM firm, we face just the challenges you speak of — should we verticalize? Should we localize? It is tough to differentiate, and as the market grows, it will become more difficult. SEMs who stake their claim to a particular market segment now will probably be better poised for the future.
Ironically, another friend of mine in the industry, SmartSearch Marketing, is exhibiting at a show in February — specific to Pharma SEM. It’s the first industry show I’ve seen that is both industry-focused AND SEM-focused. As SES becomes bigger and bigger, I wouldn’t be surprised to see more of that.
google
I think there needs to be a stronger focus on performance among SEM agencies. In a tough economy where everyone is watching their ad budgets closly, it’s the pay for performance search engines that stand to do really well.
Most companies don’t even realize that Performance SEM’s exist.
I good Performance SEM Agency will pay for 100% of the ad costs and only get paid based on a pre-negotiated percentage of sales or cost per lead, so they only make money when the client makes money.
That is the true win-win SEM Agency Model!
Adam