SEM Immaturity Threatens Industry Future

The search marketing industry is immature. I’m not just referring to the fact that nearly all the companies engaging in search marketing are less than 10 years old. The industry is also immature in the way “partnerships” are created and maintained.

Successful brands and successful marketers, be they manufacturers, retailers or catalog merchants, nearly always manage offline marketing by establishing long-term partnerships with their agencies, suppliers, and even media providers. These relationships don’t always work out, of course, but there generally exists a mature understanding that in order for the company to thrive and grow, an investment in success requires both sides of the relationship to work hard to achieve agreed-upon goals and objectives, many of which will not be easy to deliver. Some initiatives take time to bear fruit; others rely on aggregation of experiential data, as well as learning by both organizations.

My hope is as search engine spending becomes more material and as senior management begins to fully understand the true value of attracting search visitors to their sites, an increased level of maturity will manifest itself on both the agency and marketer side of the equation. Unfortunately, strong relationships between SEMs and clients currently seem to be the exception, not the rule. Both marketers and agencies seem to display an alarming degree of immaturity in regard to what it takes to forge a successful partnership.

This malaise can be partially explained by the fact most PPC search spending continues to be managed in-house without the benefit of any kind of partnership at all, according to surveys conducted by both SEMPO and Marketing Sherpa. Of the 3,000 marketers served in Marketing Sherpa’s PPC Survey (a larger sample than the SEMPO survey), “73 percent say they’re using in-house staff for PPC paid search.” The SEMPO study (conducted by Radar Research) broke results down by company size, using number of employees as the gauge. Sixty-three percent of companies with fewer than 500 employees manage paid placement search in-house; for companies with over 500 employees, this number drops to 39 percent.

There’s hope in that there’s a 24 percent difference in the in-house/agency ratio between small and large advertisers. It may be larger, more mature companies have developed a firmer understanding of what their competencies are, and can therefore better determine the correct share of search tasks that should be outsourced. But the story doesn’t end there. While senior management may correctly understand the missed opportunities typically associated with in-house management of a non-core function, those at lower levels of the organization tasked with managing external relationships report they’d prefer to bring SEM (and SEO) in-house. This dichotomy in outlook between strategic thinkers and tactical implementers may explain why there’s a high level of SEM provider churn, even among larger advertisers.

The SEMPO survey went on to delve into satisfaction with paid placement SEM services and found “just one-third of respondents said they were happy (“moderately” or “very”) with their SEM agencies for paid placement campaigns. More than a quarter of respondents are unhappy (“moderately” or “very”) Two out of five advertisers report “mixed results” when asked for their satisfaction level.”

Why are so many advertisers unhappy? One could be tempted to blame SEM agencies for providing poor service. Perhaps these agencies are indeed providing service levels insufficient to help their clients compete in an increasingly-competitive marketplace. One cause of this may be that SEM agencies face the same labor shortage issues that plague the marketers attempting to staff qualified in-house search teams. The result is that many agencies simply cannot deliver the level of service required to hold onto an account.

But SEM agencies don’t bear all the blame. Like serial daters or serial divorcees, marketers who report being disappointed after trying numerous SEM agencies must own up to their own mistakes, which include:

1. Poor Agency Choice Marketers rarely have a mature decision process capable of truly evaluating SEM agencies based on the underlying business needs of the organization.
2. Unreasonable Expectations Paid placement search is complex, and also hinged to the competitive set and how rational or aggressive the competitors are in the auction marketplace. Battles waged in this environment are both offensive and defensive. “Standing still” may require considerable effort and expertise to defend against competitors seeking to capture market share, ROI, profit, or other success metrics. Unless marketers approach this environment with a thorough understanding of its peculiar features, the result will be disappointment and SEM agency churn.
3. Unwillingness to Pay an Equitable Price Success in paid placement search may take more work that a standard discounted fee structure will support. Sure, marketers naturally seek to keep these fees low, and many agencies go out of their way to secure new businesses by meeting such demands. But low fee structures may preclude the partnership from evolving because they prevent the SEM agency from supporting the strategic needs of the client.
4. “Dating Mentality” and a Short-Term Horizon Depending on the state of an existing campaign, it may take time to lay the foundation of change to extract maximum value from it. Doing this requires a longer-term horizon than many in the industry currently use when evaluating campaign performance. In addition, changing SEMs or moving SEM responsibilities from in-house to an outsourced basis is a process that must be carefully managed.
5. Unwillingness to Communicate The time for marketers and agencies to communicate is when things aren’t going well. When marketers give their agencies “the silent treatment” while waiting out the terms of their contracts, valuable opportunities are lost on both sides of the equation.

I hope and expect that as the SEM industry matures, agencies and advertisers will take a deep breath and approach their relationships as partnerships. It may take some healing time to bring this situation about. Many marketers I speak with tell me they consider themselves “burned” by their prior SEM agencies. Relationships between marketers and agencies are like personal relationships: bad experiences and bad memories can poison them and limit one’s chances of finding a successful new relationship. But with maturity, one can see good relationships can provide fulfillment, adding up to a sum greater than the constituent parts.

It’s taken decades for this level of maturity to evolve in other industries, and paid placement is only now finishing its first 10 years. Much healthier, more productive relationships lie ahead.

Nominate your choice of technologies, companies, and campaigns that made a positive difference in the online marketing industry in the last decade. Nominations end August 3 at 5:00 pm (EDT).