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Ad agencies find SEM challenging

Traditional advertising agencies find that search engine marketing is really difficult. Not only is it more complicated than it would appear, but it's also difficult in making it profitable.

Companies offering keyword bidding tools have lulled some agencies into a false sense of confidence. "Our bidding tool will make search engine marketing effortless," they were told.

What these companies didn't tell the agencies was that they still needed search engine marketing expertise to use these tools effectively to maximize their clients' results.

As a result, many big, traditional ad agencies-and even interactive agencies-hate search engine marketing. Here are the top five reasons why:

1. Achieving profitability in managing clients' paid search advertising is extremely difficult: If you don't use a bid management tool, and if each of your customers doesn't spend in excess of $50K per month on paid search advertising, you won't make money. Period.

Trouble is, even many of the large client companies who employ agencies cannot justify spending more than $3K to $10K per month. The conversions aren't there; the keyword query frequency is not there. Charging a service fee of 20 percent (a typical pricing model for PPC management) on top of a monthly PPC spend of $3K is peanuts for the time necessary to do a good job. But ad agency clients are clamoring for search marketing: they know it works; they know they have to be in the game; and they want their agencies' help. But trying to do SEM is breaking the agencies and they know it.

2. A shortage of skilled SEM practitioners: Employees with even a few years of search engine marketing experience are hard to find and expensive! Most are groomed at search-engine-marketing-only firms. Without experienced staff, an internal training program won't succeed. Without an in-house training program, you won't develop experienced staff-presenting a catch-22.

3. Even "poaching" experts cannot produce superior results: If an agency lures away a few ex-SEM-firm types, they join the agency ill-equipped to deliver results. Much of the intellectual property and knowledge that made them successful were contained in the tools that the SEM specialty firm developed in-house. Most, if not all, of the tools that made these employees efficient, speedy, and successful are not commercially available.

SEM firms have spent the last six to seven years building proprietary tools that provide enormous leverage to staff. These tools evolve and grow with the organization, and because they are enterprise-based application suites, they don't leave with the employee.

4. SEM is so complex it requires singular focus. Performing effective SEM requires practitioners to deal with 10 or so search properties who are always changing database partners, algorithms, PPC bidding rules, and paid inclusion programs. Keeping up on it all requires a dedicated focus. There's a significant learning curve every month. Most agencies are not built to manage that much change, that much data, and constantly evolving best practices, strategies and tactics.

5. SEM requires a commitment to research: The biggest breakthroughs in process improvement come through data intensive research and analysis of linguistics and search engine user behavior. This requires collection of data and results for millions of visitors in a variety of verticals with a variety of online marketing objectives for their sites.

In the same way that most agencies didn't build direct marketing capabilities in the 1970s, because the practice was too data dependent and mathematically based, most agencies do not want to be bothered with the ongoing research and analytics necessary to make SEM effective.

With all this being said, some agencies have decided to partner with SEM firms and are letting the SEM firms have direct client contact. Why? Because there is too much education required for the agency to deliver the work required and yet the agency wants to successfully meet the demands of its clients.

But most agencies still hate search engine marketing. So they can curse the wind or adjust their sails.

Source: Mediapost

Posted by nakul at June 30, 2004 09:14 PM | TrackBack