Good News, Bad News

Google declared unusually strong earnings last week, resulting in a collective sigh of relief among all who work in the so-called "search ecosystem." Google is of course more than a bellwether for the health of this industry: love it or hate it, it is the marketplace itself (a fact not lost on anti-trust regulators), and if it catches a cold, the rest of us get pneumonia. So, yes, it was cheery to hear that Google racked up an 18% increase in paid clicks over Q3 2007, a 31% increase in revenue, and showed evidence that its costs are being reined in. It was also encouraging to hear mainstream media pundits declare that "search will be the last marketing channel to be cut" on the eve of what looks like a long recession ahead.

The bad news isn't in Google's 8K; it's in the finance section of the newspaper you read every day. An epidemic of wallet-shutting will likely make this holiday season the worst retail environment in decades. Many marketers spending significant amounts on paid clicks are already on thin margins, and it won't take much consumer retrenchment to push ROIs into the negative zone. Even big e-commerce players are running scared: they, like Google, will survive whatever the next few years can dish at them, but it's no secret that lots of search spenders are Mom and Pop mainstream types, and I'd be very surprised if a fair share of them don't go under in the next several months.



So where's the good news? I found plenty of it in a new Jupiter Research report surveying the operational profile of about 100 search advertisers spending upwards of $50K/month. This report made headlines because it showed that nine out of 10 of them were willing to spend up to 22% more on search, but were hamstrung by their own obsolete internal processes, which include an almost stone-age approach to managing search campaigns (a quarter of them are using Excel to manage their bids), overloaded in-house teams, and a general frustration with the robustness of campaign automation tools. Remember, folks: these firms aren't newbies dipping their toes into search: they're investing heavily, and yet a sizeable percentage of them are way behind the curve in terms of best practices. If you're competing against one of these firms in search, and have your act together, you can outmaneuver them. If you're with an SEM agency, you can seize the opportunity of providing help to these spenders. They've got the money to buy clicks, but what they lack is what we provide: a way to translate those clicks into orders, leads, and other success metrics.

Despite this obvious and very real opportunity, I do remain doubtful about whether we in SEM, especially in the SEM agency sector, are doing a good enough job of reaching these spenders and convincing them of the value of outsourcing search to a specialist firm. Frankly, I think that many advertisers have had enough of our pitches, don't believe that there's any difference between agencies, and have basically thrown up their hands and turned inward through in-sourcing.

You really can't blame these people, who are reacting rationally to the "fool me once, shame on you, fool me twice, shame on me" scenario. The onus is on us at SEM agencies to prove our case, realistically, free of jargon, hype, and especially over-promising. We need to start acting less like salespeople, and more like serious business consultants. If we can't be honest and forthcoming about what we can -- and can't -- do for our clients, and can't find a way to make all the complicated moving parts of search comprehensible to plain people who don't know or care who Danny Sullivan is, we shouldn't be surprised when these people slam the door in our faces.

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