So many companies are positioning themselves in the SEM business. Step back from the sizzle and consider business fundamentals.
At ad:tech earlier this week, it became clear the labels we like to assign to businesses no longer hold true in this evolving world of SEM (define), affiliate marketing, and interactive marketing. Perhaps it was the venture capitalists (VCs) and investment bankers crawling around the conference asking questions about business models. Or perhaps it was the fact that every booth in the exhibit hall seemed to include the words "search engine marketing."
Were all those companies positioning themselves in the SEM business to attract investor and marketer attention? It was hard to tell.
In addition, old business or industry labels didn’t seem to fit because the online marketing consolidation continues unabated. Many publicly traded and private companies’ businesses could easily be described as publisher models (selling impressions, clicks, and/or leads). Those same companies have networks, where they act as publishers’ representatives or brokers. They also act as agencies, managing media on behalf of marketers.
A marketing VP could be forgiven for being confused in the tangle of booths, each one staffed with eager, helpful, and seemingly knowledgeable staff. Expanding conglomerates, such as ValueClick, had various booths for different business units, while other businesses were folded under a corporate shingle.
No matter what kind of media you want to buy, there are plenty of sellers. Impressions, search clicks, contextual clicks, behavioral clicks, affiliate marketing clicks, or banner clicks -- it’s all there. If you aren’t interested in clicks but want a "sure thing," chances are someone will sell you leads or orders. Perhaps the same company will offer all those choices. Marketers visiting the trade shows or exploring online options have more choices than ever.
More choices don’t always make things easier, of course. They often make decisions more difficult, particularly when you haven’t had the chance to delve into the industry and learn the most important factors that distinguish one option from the next.
One thing to remember: even with the VC money flying, industry players are in it for the money. When you choose to shift the media success risk onto a publisher or network, that publisher or network works to maximize return on a limited number of search (or contextual) impressions. Even the PPC (define) search networks (e.g., Google), which bill on a CPC (define) basis, determine whether and where to run your ads (i.e. your ad position), based on their profit level from your ad versus that of other marketers participating in the marketplace.
The same organizations that were considered publishers two years ago now offer agency services. Other publishers have become ad networks; they barely own any of their inventory but instead offer other publishers’ revenue share. Agencies are spinning off publishing or network divisions, tempted by the high revenues that come with counting media as revenue (not just their fee billings). Ad-serving and targeting technology providers are building their own publisher networks. It’s a jungle out there.
With all the new players, emerging marketers have a difficult market to navigate. The sales pitches all sound great (if astoundingly similar). The booths look snazzy, and the salespeople are willing to entertain at the nicest restaurants where drinks flow freely.
As an old-timer who was around during the last burst of explosive growth, I recommend you step back from all the sizzle and think about your business fundamentals. Where do you want your business to be in the next quarter? Six months? Next year? Often, choices require you to trade off growth or market share against short-term profitability. Which are more important to you and your executive team? If profitability is a factor, make sure you know what your most profitable customer’s profile looks like. If you know that, you can have informed, intelligent discussions with the multitude of agencies, publishers, networks, and technology companies to help determine the best way to move your business forward.
Some combination of technology, strategy, and services will help you achieve your goals and objectives (assuming they’re reasonable). Take out your online marketing, overall marketing, and business strategy memos, and compare those directives against what solution providers can deliver.
Five years ago, the industry woke up from a period of excessive sizzle with a major hangover. Let’s hope this time, solid business fundamentals keep the industry humming along on a strong growth patch with no major bumps.
Meet Kevin at Search Engine Strategies in Chicago, December 5-8, 2005.
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Kevin Lee, Didit cofounder and executive chairman, has been an acknowledged search engine marketing expert since 1995. His years of SEM expertise provide the foundation for Didit's proprietary Maestro search campaign technology. The company's unparalleled results, custom strategies, and client growth have earned it recognition not only among marketers but also as part of the 2007 Inc 500 (No. 137) as well as three-time Deloitte's Fast 500 placement. Kevin's latest book, "Search Engine Advertising" has been widely praised.
Industry leadership includes being a founding board member of SEMPO and its first elected chairman. "The Wall St. Journal," "BusinessWeek," "The New York Times," Bloomberg, CNET, "USA Today," "San Jose Mercury News," and other press quote Kevin regularly. Kevin lectures at leading industry conferences, plus New York, Columbia, Fordham, and Pace universities. Kevin earned his MBA from the Yale School of Management in 1992 and lives in Manhattan with his wife, a New York psychologist and children.
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