Friday, November 07, 2008

Gasta News: PAID SEARCH: How the paid search industry is killing itself

How the paid search industry is killing itself
It may not be as bad as the banking industry, but SEM could use some help. Here's how paid search can get itself back on track before things get worse.
As the financial markets continue to turn out bleak news, I've begun to think about the many parallels existing between Wall Street and the SEM industry.
Mergers, acquisitions and shotgun marriages
To start with, we're now in the middle of a wave of consolidations that are reminiscent of the successive mergers and takeovers now taking place in the banking sector.
Range Online is the latest independent SEM agency to pack up its tent, as it was folded into iProspect, which was itself acquired by U.K.-based Aegis some time ago. Range follows Outrider (bought by ad holding company WPP, which also owns 24/7 Real Media), Reprise Media (snapped up by Interpublic) and Inceptor (purchased by Verizon).
It's clear that many SEM agencies are having a tough time going it alone, and the shotgun marriage M&A trend will accelerate if the macroeconomic environment continues to deteriorate and the SEM industry -- like the financial markets -- continues to suffer from ills that are largely of its own making.
Search engines enabled this mess
The SEM industry has no direct equivalent to sub-prime mortgages, collateralized debt obligations or over-leverage, but it suffers from structural issues that are largely a product of its ostensibly self-serve nature. Google and the other engines have stoked the fever of irrational optimism by encouraging everyone to believe that all it takes to succeed at search is a credit card and a couple of hours studying the AdWords help file.
The result is a world in which marketers behave like self-medicating patients who believe that watching a webinar on urinary tract infections is equivalent to getting a consultation with an experienced urologist. The fact that a number of people believe they are more qualified to run search than the experts reflects a dismal lack of confidence in SEM agencies. So it's no surprise when expert companies feel that getting swallowed up by a larger conglomerate is preferable to going it alone.
Killing the golden goose
But the search engines aren't the only ones to blame. Like Wall Street's "shadow market," in which trillions of dollars worth of complicated instruments are traded without any oversight, the SEM industry has its own shadow industry -- the conference and trade show business. This business depends on a simple proposition: if you go to enough shows, attend the right panels and rub elbows with the right people, you'll walk away knowing enough to run a competent search campaign. This is as absurd as saying that you can become a qualified mechanic by attending an auto show.
The only reason conferences and trade shows are so profitable for the people who run them is that exhibitors remain willing to buy very expensive booth space. Heaven help the trade show people, however, if exhibitors ever actually read the shows' agendas, which are chocked with seminars on how to succeed without an SEM agency!
Greed may destroy us all
And now let's talk about greed, which is as rampant in SEM as it is on Wall Street. Too many SEM agencies seem to have taken their sales approach directly from Moe's Mortgage Shop. These agencies are commission-driven -- not service-driven -- organizations that don't realize that overselling their services actually hurts long-term revenue goals by disappointing clients, creating client churn and destroying reputations.
Unfortunately, even good SEM agencies get tarnished by the continued operation of the fly-by-nighters. The SEM industry has failed to purge itself of these people and I have zero confidence it will do so at any time in the future. If it turned out that Macy's was filled with pickpockets, don't you think people would stop shopping there? So yes, the SEM industry needs to choose responsible conduct over unrivalled greed, or we're all headed over a cliff.
How to bail ourselves out
I don't think the SEM industry needs a billion-dollar bailout, but I do think it needs to clean up its act. Cancerous companies, much like toxic CDOs, need to be cleansed from the SEM books before confidence can be restored. Paid search practitioners need to be meaningfully accredited, not merely rubber-stamped, before they can run search campaigns. The search engines and the shadowy SEM conferencing business need to stop pushing the ridiculously destructive notion that neophytes can become as qualified as those with years of experience after only a few quick lessons.
Finally, SEM agencies should start thinking seriously about sharing risks with their clients. Hopefully the seasoned, expert agencies will launch programs to limit clients' downside risks and help stabilize the SEM industry once again. After all, the world has more than its share of uncertainty to navigate through on a day-to-day basis, and all the "black boxes" in our industry can be mind-boggling. The least we can do for our clients is present the clarity they deserve when we engage with them.
Mark Simon is vice president, industry relations, Didit.

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