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There’s been some recent discussion about the long-term viability of the search marketing firm. A quote from analyst Jay MacDonald of DeSilva & Phillips last week particularly ruffled our feathers, when he predicted that the search engine marketing (SEM) business “won’t exist in three years.” Thankfully (for the sake of rational thought), that turned out to be a misquote, or at least an overstatement.

The fact is that we’ve had a lot of similar conversations at trade shows and meetings in the last few months: ‘Are the SEMs all going to get acquired by interactive agencies?’ ‘Why would I ever want to buy from you, when I can go direct to the engines?’ and our personal favorite: ‘Is SEM as we know it doomed to obsolescence?’

SEM? Obsolete? Say it ain’t so! If we’re hearing these questions correctly, they all seem to be based on the theory that SEMs firms will fade away as the engines begin to offer the same services for less money, effectively cutting out the middleman.

OK, we guess that’s a reasonable enough opinion. After all, the search engines already offer some “agency services” (Google’s Maximizer program, and cross-platform ROI tracker come to mind). But even though they’ve successfully built direct relationships with some of their advertisers, they won’t be able to replace SEM’s now or in the future.

Why, you ask? Good question.

There’s the obvious reason: No matter what tools each offer separately, advertisers simply don’t want to deal with the multiple contacts, different interfaces, standards, and invoicing procedures involved with working with multiple engines. When it comes down to it, would you rather spend all your time pulling together and organizing data from 10 sources or analyzing a comprehensive report? Thought so.

Beyond the time-saving aspects of working with an SEM, there are lots of nuances associated with planning and managing an SEM campaign. For simplicity’s sake, let’s say search marketing work can be broken down into the following categories:

• Keyword list development


• Search engine selection


• Creative development


• Bid management


• Reporting & analysis

Let’s take a look at how the search engines handle (or fail to handle) each area:

Keyword list development:

We’re all familiar with the various keyword suggestion tools offered by the engines. They’re a great starting point for expanding a list of search terms, but if they’re the only tool you’re using, you’ll find them somewhat lacking.

These lists are created in a vacuum, based on search history and past advertisers – the recommended keywords are supposed to be “related” to an advertiser’s business, but are usually offered with no real knowledge or regard for an advertiser’s unique content, site structure or goals.

As a result, the list you’re getting is the same list your biggest competitor gets. And if you’re both bidding on the same words? Costs are going to go up.

Search engine selection:

Well, this one seems fairly obvious, no? If you work at a search engine, you have an incentive to get your clients to spend as much money as possible with you. Period.

SEMs don’t (or shouldn’t) maintain allegiance to any particular engine. Dollars should allocated to where they can most profitably be spent.

While Google and Overture collectively represent about 92% of paid listings distribution (total clicks) across the web, Reprise Media allocated a greater proportion of money to Tier II and vertical engines in 2004, because they helped us achieve better overall ROI for our clients.

Do you think that the engines themselves would go out of their way to spend their client’s money with direct competitors? Not a chance. The engines are inherently biased and while they may not have bad intentions, they are acting to make the most money for their corporations – not to maximize a client’s ROI.

Creative development:

This is probably the one thing the engines can effectively handle on behalf of the advertiser. Even so, because there are no industry-wide creative standards each engine only has expertise in what works across their own network. Learning isn’t transferable.

Bid management:

As previously stated, SEMs have no loyalty to the engines - they simply spend more on what works. For that to happen, they need access to consolidated performance data at all times. That means combining keyword-level click and cost data from the search engines with keyword-level conversion data from a data collection source and making adjustments accordingly. What makes for cost-effective ROI for one engine might not mean so on the next.

Reporting & analysis:

SEM is a complicated business and select major engines should be applauded for their willingness to develop tools that make the reporting process easier and more efficient for advertisers. Included among these tools is “free” ROI tracking that, in the long-term, is anything but free to the advertiser.

It goes without saying that that the most successful marketers and firms in search marketing have been able find the lowest-cost, most effective keywords. These ‘tail terms’ can often be bought at the $.05 and $.10 minimums on Google and Overture respectively, allowing marketers to bid on higher priced keywords (that may convert outside of a client’s allowable CPA) in order to meet volume goals.

Once the search engines understand the effectiveness of these keywords they will undoubtedly recommend them to their client’s competitors, setting off small bidding wars. And once the price goes up, the effectiveness will almost inevitably go down.

Some marketers take for granted that keyword auctions will last forever. Perhaps they will, but wouldn’t it be easy for the engines to implement bid minimums across certain vertical categories – particularly if they knew that companies could still buy profitable traffic at those levels?

And guess what? It’s already happening. Check out our recent post about Shopzilla’s recent changes in bid minimums.

In conclusion, this is not about some nebulous, unquantifiable “value add” that SEMs provide. This is about the a number of clearly defined services SEMs offer, as an unbiased third-party, that search engines simply cannot. The debate will undoubtedly continue, with both sides pushing their agenda forward in an ever-changing landscape.

And speaking of continue, we’ll be talking more about another element of this debate - why the interactive agencies can’t do the job of SEMs - in an upcoming post. Stay tuned.