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A recent New Media Age cover story titled “Search agencies feel the heat as media agencies muscle in”, which outlines recent big account wins by media agencies (like Carat Digital, Diffiniti etc.) at the expense of specialist search agencies, has excited much debate.
So which is right? Why would you go with a media agency, or a search specialist? Is paid search just a media buy, or something more?
Below I’ve outlined some of my thoughts on the various angles of this debate – any comments welcome!
1. What are the key drivers for clients / advertisers?
Rumours are that a lot of the recent account moves have been price-driven. Everything from Moneysupermarket.com’s alleged quarterly account moves to benefit from a discount via Google’s Best Practice Funding rebate, to media agencies allegedly heavily discounting their search fees in order to win the business or to shore up spend in other channels.
For some businesses you can see that a price-driven approach could make sense.
Perhaps they are looking to sell themselves so in the short term just need to focus outright on profitability (e.g. some of the banks rumoured to be up for sale) and just want to cut costs?
Perhaps if you are in a mature, sophisticated and competitive market (e.g. insurance) where the vast majority of business comes from quite a limited number of ‘head end’ keywords, then actually you now have little left to optimise in terms of revenue growth so you’d look to cutting costs?
Maybe if you are more of a ‘tail end’ proposition (travel, publishing, retail etc.) then you’d be better off with a search specialist but if you’re a ‘head end’ business you should go with a media agency?
An Integrated Marketing Strategy?
I don’t think anyone would argue that an integrated marketing strategy (integrating all online marketing approaches, but also integrating offline with online) isn’t the right way to go. But it’s a question of who, and how exactly, this should work. Consolidate with one agency or “integrate best of breed” – a similar challenge as it happens from a technology point of view where the latter approach seems to be winning out.
Once again, if you are a ‘head end’ type of business then there seems to be increasingly less room to optimise your search performance in isolation. This becomes even more true as paid search rankings are a factor of more nebulous ‘quality’ scores – certainly click through rate is likely to be one of these, so if you can use offline advertising to improve your online click through rate then you will rank higher, for the same click cost, thereby improving performance.
Supposedly more organisations are spending money on paid search for brand reasons. (I say supposedly because we can’t find a single published case study of this yet – nor can any of our contacts at Google, Yahoo!, Dynamic Logic etc.)
If the KPIs of a paid search strategy are about reach, demographics etc. then, once again, you could see how this might be more the natural domain of a media agency, co-ordinating reach across the media in an optimal way.
Of all the people I’ve talked to who are running ‘branding’ campaigns online, however, they are all doing it for one reason only: to drive sales. It is good to recognise that “brand” activity does indeed drive hard metrics likes sales, and online may be the best medium to prove this. But still the end result is arguably not one that is the natural domain of media agencies. (Interestingly Dell have just appointed AKQA to do a big ‘brand campaign’ for them online – I struggle to believe that isn’t really about driving sales).
1.4 Corporate Structure / People politics?
This one is probably actually behind a lot of these account moves. The client restructures, there are new people, the e-commerce team is becoming ‘part of marketing’ etc. etc… There are any number of internal upheavals currently going on at big brands and these ‘people politics’ will inevitably lead towards account moves.
Surely the media agencies will be whispering to the Marketing Director about the strategic case for consolidating all his/her spend with them (including online)? Possibly even the Head of E-commerce wants to build his/her power base by branching out into other media via a media agency rather than the search specialist?
2. What are the key drivers for the agencies?
2.1 The media agencies?
Well, they just HAVE to get into it don’t they? Listen to Sorrell, Gates, read the press, read the stats. They’ve left it a bit late but they really can’t NOT be there now, can they?
So, strategically, they surely need to win business, and big names, at almost any cost? They can afford to discount in the short term. So they can compete on price as well as play the integrating marketing card.
2.2 The search specialists?
Well, they are all quite small. So it depends a bit what the owners want to do. There will always be room for the specialists, or for regionally dominant players as the market matures.
But many of them have an eye on making a sale (quite probably to the media agencies, or a full service digital agency, or a venture-backed group) while the market is hot. So you’d imagine these search specialists are still interested in big accounts and big names but they must be profitable as this will be key in any valuation? So they’d be less inclined to discount at any cost.
Recruitment / Resourcing?
Ask anyone about the key challenge they face and recruitment almost always tops the list.
Reportedly the media agencies are struggling to recruit adequately skilled and experienced search specialists fast enough to meet demand. Arguably the search specialists, though still facing a challenge, are in a better position with resources as they’ve been doing this for longer. But can they retain their staff with headhunting rampant?
The splitting of media buying and creative / production.
In the offline world it has become commonplace for media buying to be separate from the creative idea and execution. However, online is helping challenge this separation. A lot of ad agencies are now recruiting skills to create branded content and many are realising that the media planning is often dependent on the creative idea and execution, so perhaps the two need to be much more closely ‘under one roof’ (as they used to be)?
Think about an online ‘advert’ (and below may well become true of paid search ads in the future as well as display ads) for a moment:
- It can capture data
- It can be browsed, searched
- You can even transact via ads
- Its ranking and positioning may well depend on the ‘quality’ of the experience AFTER the click
- The customer can go from brand experience to point of sale seamlessly
- The ad can present itself in infinite ways depending on context and data feeds
- It could, for example, be real-time integrated with stock-control or inventory systems
- Etc. etc.
Do these things above sound like they are entirely within the remit of a media buyer who has no real notion of the entire “customer experience”. I don’t think so. But then that’s true of search specialists too.
And lo, you have the argument for giving your paid search to neither a search specialist nor a media agency but to a full service digital agency that can architect the whole experience?
What about the DM and data people?
It still amazes me that the DM industry seems to be so inactive when it comes to online. Only a handful show even a passing interest in online catalogues, e-mail, data analytics – all things you’d think they should easily migrate into online given their skillsets?
Indeed, why is paid search not an area they are getting involved in? Why are we only talking about media agencies or search specialists (or possibly full service digital agencies) and not about the DM guys?
For many of the biggest e-commerce sites out there, paid search, and its optimisation, is all about data. Lots of data, with dynamic feeds, self-optimising. Big US paid search companies, like Efficient Frontier, are coming to the UK market with a proposition based on Wall Street currency trading algorithms and exploiting the huge inefficiencies in the opaque market place that is paid search.
Of course, there are no one-size-fits-all answers to what is right, but there are plenty of reasons why one business might choose one route versus another. But I feel the debate so far (media agency vs. search specialist) has a) missed out a lot of the key drivers in the debate and b) missed out a lot of the potential players.
What do you think?