Last week’s acquisition of search engine marketing (SEM) firm iProspect by the UK-based Aegis Group may jump-start a trend of larger agencies investing in SEM. It’s a reflection of search marketing’s increasing power and importance, industry watchers say.
“The agencies understand that search is inextricably intertwined with their other marketing initiatives. They have awoken to the reality that their other marketing expenditures — from email to banners, from radio to TV ads — drive online searches,” said Fredrick Marckini, CEO of iProspect, now part of Aegis’ Isobar network. “They have a huge hole in their funnel, and these leads that escape are finding competitor’s brands in search; in the one medium that has the highest conversion rate. They are literally dropping off soon-to-be buyers at their competitors’ doorstep, and they know it needs to stop.”
Just about any SEM of significant size has been approached as a potential acquisition. Suitors include publicly traded holding companies, traditional and interactive agencies, and also ESPs, direct marketing and database marketing firms. According to various SEM executives ClickZ News interviewed for this story, performance-based ad networks, like ValueClick and FastClick, are among the most likely acquirers, outside the big three holding companies.
There are hundreds of SEM firms, but most industry watchers agree less than a dozen are large enough to have developed the practices and technologies to make them worth acquiring. SEM firms Did-It, Fathom, Impaqt and the foundering DoubleClick top the list of attractive targets.
Some larger agencies have some kind of in-house SEM practice, but many currently outsource at least part of their clients’ SEM activities to a specialist firm. If agencies want to develop an in-house practice, options at this stage in the game are limited. They can try to lure away search marketers, who are in short supply, from SEM firms, or acquire the firm itself.
“To do search well, you have to have been doing search for years, and to have done little if anything else,” Marckini said. “Search is data- and technology-intensive. You won’t drive value without both, and you won’t get data and technology from a standing start.”
Cultural issues prevented some traditional agencies from embracing search marketing early on. These are being overcome by agencies prepared to survive and grow in this new “era of advertising accountability,” said Dana Todd, EVP at interactive agency SiteLab.
“The core agency model is to outsource most non-core activities, so they’ll probably continue to partner out. But they’re getting smarter, so that they can manage the projects better and mitigate their risks. The larger agencies have actually been building in-house teams for a while, and they’re gaining some traction and respect in the industry,” she observed.
Aegis picked up iProspect as the foundation for search practices throughout its worldwide Isobar network of interactive agencies. It’s not the first acquisition in the search space, but at $50 million, it’s certainly one of the largest and most significant.
“It’s a milestone in terms of a larger agency holding company recognizing both the importance of search, and then an agency’s role within it,” said Niki Scevak, JupiterResearch analyst. “Search is a very attractive advertising market that’s growing faster than any other, and agencies’ role within that industry is growing very fast as well.”
Anecdotal evidence shows search is steadily moving into the mainstream marketing realm: earning budget priority, garnering attention from VPs instead of just Webmasters, and dominating the attention at marketing industry events. It’s also attracting more ad dollars from larger advertisers. Many agencies are seeing a surge in RFPs from Fortune 500 advertisers.
Recent reports from JupiterResearch and SEMPO confirm SEM agencies now control more spending from an increasing number of clients. Both found larger advertisers are more likely to outsource more of their budgets.
Several interactive marketing players made SEM acquisitions in the past year. In December 2003, interactive agency group aQuantive picked up Go Toast for its Atlas DMT advertising technology arm, creating a dedicated search division in October 2004; ad technology provider DoubleClick acquired Performics in May; email service provider Digital Impact acquired Marketleap in July; and interactive marketing and technology company 24/7 Real Media acquired Decide Interactive in August.
Speed can make more of a difference to the success of your online business than anything else, yet very few people talk about it.
Automation is the number one area for email innovation and focus in 2016 according to this year’s Email Marketing Industry Census. However, ... read more
Marketers' spending on social media has tripled in the past seven years but falls way short of where marketers expected it to be when they peered into their crystal balls in 2009.
Advertisers have been flocking to Snapchat, which now has more daily users than Twitter and is increasingly seen as perhaps the biggest threat to Facebook's dominance in social.