The SEM CEO’s Predictions, Part 1

Of all the topics I address in this column throughout the year, this is my favorite subject on which to write. Only as one year ends and another begins can I look back at the informed guesses (otherwise known as “predictions”) I made the previous year and offer new thoughts about what might come to pass in search engine marketing (SEM) in the coming year. This year, I’ll increase the risk of getting egg on my face by recapping my 2004 predictions in part one and unveiling my 2005 predictions in part two, when everyone’s back from their holiday vacations.

I was reasonably successful at avoiding the egg-on-face syndrome with my 2004 predictions. Let me recap some of them.

Google’s IPO will fuel acquisitions of SEMs.

Business media were aflutter predicting Google’s post-IPO valuation. The most courageous projected the market cap might reach $25 billion. I guessed that number was low and they’d surprise everyone. At the end of the first day of trading, Google’s value stood at $27.2 billion. At last check, it was around $50 billion.

Prediction 1: A winner.

Three to six SEM firms will be acquired in 2004.

I also predicted the “Google effect,” created by the homerun IPO, would make 2004 the year of SEM firm acquisitions. I estimated between three to six companies would be acquired. The acquisitions of Performics, Marketleap, Traffix, and Decide Interactive (present columnist excluded) certainly speak for themselves.

Prediction 2: Another winner.

Agencies will fight harder to get into the SEM game.

Any SEM firm will tell you that, over the past six months, they competed with a digital or traditional agency for their clients’ or prospects’ SEM budgets. Sometimes, SEM firms end up competing with the incumbent agency after beginning work on a campaign when that agency extends its service offerings to include search. Sometimes, the SEM firm competes with the search arm of a digital agency for a prospect’s request for proposal (RFP).

Several high-profile announcements heralded larger agencies forming dedicated search divisions. More will come.

Prediction 3: I’m three for three.

SEM will learn branding.

Several studies made a case for the connection of search and branding. Most hoped to drive more branding dollars to search, but research by the Search Engine Marketing Professional Organization (SEMPO) demonstrates marketers had responded.

The new SEMPO study states, “Brand awareness was overall the #1 objective advertisers set for search marketing programs, just beating out sales and lead generation initiatives.”

Prediction 4: I’m on a roll.

Some affiliates will be turned away.

I also predicted paid search services such as Google and Overture would turn away affiliate advertisers who advertised on branded search terms. This one’s not true… yet. The rumor mill is running over with gossip about this possibility.

Some companies forbid their affiliates from bidding on branded terms expressly because of the brand experience. They believe when a user searches for a brand name, she wants to find the actual brand site in the results, not a site that may lead to the “official” site.

Between pressure from marketers and pressure from search engines, bidding on branded terms just doesn’t look good for affiliates. Although Google, Yahoo, and MSN haven’t yet forbidden the practice, it could be coming.

If it is, Google will be first, sparking a firestorm of controversy. Branded keywords are the bread and butter of affiliate pay-per-click (PPC) campaigns. Affiliates won’t let any search engine get away with such a change without a bitter fight. If 50 percent of your revenue hinged on a single strategy, you’d fight hard too, right?

Prediction 5: Perhaps this prediction will ultimately come true, but not within the predicted timeframe. Does it count in my “win” column if I’m a little late?

2005 Predictions

Some of you are wondering if you should duck as I pat myself on the back for last year’s predictions. Full disclosure: I only listed the ones that either came true or still seem likely to come true. I missed a couple and am not too proud to admit it.

Now that I feel validated (by myself, at least) as a visionary genius (down, ego, down!), what will next year hold? Lots of good stuff — but you’ll have to wait until part twp.

Here’s a preview:

  • Search will be tightly integrated into the broader traditional marketing mix.
  • Search will move “upstream.”
  • Vertical search will trump personalization.

If you have your own predictions, actual guesses of things that you believe will transpire in SEM in 2005, please email them to me. I may include your brilliant prediction and give you the credit you deserve.

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