Ad Agencies & Search Engine Marketing Firms Beginning to Play Together

Advertising agencies are spending more on search engine marketing, with one in five marketers buying in excess of 1,000 keywords, according to Jupiter Research.

A special report from the Search Engine Strategies 2004 Conference, March 1-4, New York City.

“A lot of brand name products, consumer package goods, automotive, financial services those are the sorts of verticals we are seeing moving into this space,” said Jupiter Research Senior Analyst Gary Stein, kicking off the Search Engines and Ad Agencies panel. “With them come agencies that are already attached to them as well as a specific set of needs. Percent of ad agencies and interactive agencies providing search engine marketing say 46% are claiming to provide ‘full’ and better than a third outsource to search engine marketing specific agencies either totally or in part.”

However, many search engines that sell paid listings, as well as search engine marketing (SEM) firms, feel that ad agencies have yet to fully tap into one of the best ways to gain qualified traffic. Many SEM firms feel that agencies understand media buys but still do not comprehend the search industry as a whole. In contrast, many agencies feel they have a better grasp of search engine marketing than SEM firms give them credit for.

This session addressed the topic from two perspectives: the ad agency and the SEM firm.

The ad agency perspective

“An advertiser has 3 choices,” stated Kevin Ryan, Director of Market Development at Wahlstrom Interactive. “They can staff up. They can hire an search engine optimization (SEO) firm. Or they can force their agency to adopt.”

Jason Shulman, Senior VP of Business Development at Carat Interactive, had to make that decision. “Do we staff up, hire an SEM or just ignore it,” he said. “Challenged with building a search practice for ourselves, that probably tells you what we decided to dowe decided to build our own.”

Shulman felt that the search industry is a confusing landscape. “I still think that is the case that people, by and large, don’t know the difference between paid inclusion and an XML feed and a cost per click engines and natural search,” he said. “We try not to frame it in that way. Technology tends to confuse the higher up marketing people. But over time they can understand it and that is what they look to an agency for – understanding.”

In fact, one of the legitimate criticisms ad agencies have about SEM firms is the use technical jargon. “SEMs tend to hoard technical knowledge and use technical jargon to protect their turf,” said Dana Todd, Executive VP of Sitelab International. She also felt that many SEM firms are short-sighted, not looking at the big picture of branding and marketing goals.

Another common pitfall Ryan sees is lack of client stewardship. “Client stewardship leads into the secondary, which is quibbling over budgetary real estate,” Ryan said. “Everyone wants a piece of the pie. On top of that, everybody is fighting for a piece of the interactive pie. What you end up with is a huge frappe of anger.”

“Agencies live in a fee environment or commission environment,” Ryan continued. “Search engine firms largely build their fee structure on value-added or flat fees. People often refer to search engine marketing as the ‘Wild, Wild West.'”

By the time the SEM firm marks up a click and the agency marks up a click, the return on advertising spend is difficult to achieve, said Todd. Additionally, hiring an SEM can be too expensive for the value provided.

“At the end of the day, the people I talk to want one vendor,” concluded Shulman. They don’t want to be talking to a ton of vendors.”

The SEM firm perspective

One of the biggest criticisms that SEM firms have about ad agencies is the lack to technical knowledge. With optimization, particularly with large database-driven sites, technical expertise is a must.

“When talking about search and organic search in particular to a bunch of ad folks, you see the eyes glaze over and their heads kind of nod,” said Chris Copeland, Partner and Managing Director at Outrider. “It is not a pretty picture. They don’t understand it.”

“SEM isn’t just media buying,” said Todd. SEM includes advertising as well as optimization.

“Some online agencies do not consider SEO as advertising,” said Ryan. “It is often viewed as an afterthought or a necessary evil.” With SEM firms, optimization and pay-per-click (PPC) advertising are an integral part of the online marketing mix.

“Agencies require a great deal of hand-holding and support, from sales to implementation,” Todd continued. It can result in high project management costs to SEM firms.

So what is the solution? Are ad agencies and SEM firms destined to be at odds with one another? Todd felt that ad agencies need to evolve — they need to understand the intricacies of both optimization and advertising. She also felt that SEMs need to stop operating in a vacuum. “If you want the ad agency money,” she said, “you have to play the agency game.”

Ultimately, she said, both agencies and SEM firms need to work together for the benefit of their customers.

Shari Thurow is the Marketing Director at Grantastic Designs, Inc. and the author of the book Search Engine Visibility. She has been designing and promoting web sites since 1995 for businesses in a wide range of fields.

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