Will Google soon be judge, jury, and executioner of SEM campaigns?

Will Google soon be judge, jury, and executioner of SEM campaigns?

As Google continues to look for new monetization opportunities outside of its core AdWords and AdSense traffic, might it consider entering the SEM agency space? Though it sounds preposterous, history suggests that it might not be as crazy as it sounds.

But let’s put history aside for a moment and talk about money. Google’s total advertising revenue in 2012 was $43 billion! I’m not sure how much of that was managed by agencies, but I’m going to guess about 25%.

And let’s assume that those agencies on average charge 10% of spend for their services. Those two numbers result in around $1.1 billion in revenue, and this, of course, doesn’t include any managed spend on Bing/Yahoo. Not too shabby and certainly annual revenue that any company — even Google — would find enticing.

Google’s Recent Moves Into The Agency Space

And now for the history. Over the last few years, Google has made several acquisitions and entered into strategic partnerships that place it in a position where it is already reaping revenue from agency services. Here’s the history, presented chronologically:

  1. Google Acquired Invite Media. In June, 2010, Google acquired Invite Media, a demand side platform (DSP) for buying media on ad exchanges. (Google has since changed the name of Invite to DoubleClick Bid Manager.) In addition to licensing the Invite Media technology, Google also offers a full-service solution — agency services and technology — to clients that want it. (Note: I could find no reference to this service anywhere on Google’s DoubleClick site, but I am certain that this has been offered in the past and believe it is still offered today.) Agency revenue via display advertising — check.
  2. Google Ventures Invested in Trada. In July, 2010, Trada — an agency that combines crowdsourcing and technology to manage SEM – received almost $6M from Google Ventures. So if Trada gains traction with its model, Google directly benefits from their success. Agency revenue from SEM — check.
  3. Google Acquired Wildfire. In July 2012, Google acquired Wildfire for around $250 million. Wildfire — not unlike Invite Media — is part technology and part service provider. Unlike Invite, Wildfire focuses on helping clients amplify earned media campaigns on social media. Agency revenue from social media — check.
  4. Google Partnered with Revana. At some point in 2012 (or earlier), Google struck a deal with an agency called Revana. Google allows Revana sales reps to use a Google email address and contact AdWords advertisers for optimization help. If an advertiser consents to the help, a Revana rep goes into their AdWords account and makes changes. Agency revenue from SEM — check.
  5. Google Acquired Channel Intelligence. In February, 2013, Google paid $125 million for Channel Intelligence, a feed management solution. As with Invite and Wildfire, this was another acquisition that combined technology (feed management) and agency services (optimizing your feed). Google has been contacting advertisers pitching Channel Intelligence as a full-service solution for Product Listing Ad management, a rapidly growing line item for e-commerce SEM advertisers. Agency revenue from SEM — check.

Let’s review. Google is now in the display media agency business via Invite; the social media agency business via Wildfire; the Product Listing Ad business via Channel Intelligence; and has an investment in one AdWords agency and a partnership with another. Beyond opening an SEO shop (which would be awesome if for no other reason than to read the reaction from the SEO blogosphere), it doesn’t seem so far fetched to me that the next step for Google is to start directly offering SEM agency services.

The Case For A Google SEM Agency

Of course, there would be many advertisers that would never entrust Google to manage their AdWords accounts (some might feel like it would be analogous to the IRS filing your taxes for you). A Google agency, however, would still be beholden to the greater agency market. If Google’s agency team gained a reputation for bad service or self-interested ad spend increases, customers would have numerous third-party agency options to consider.

But Google could make a compelling case for why you might want to consider at least testing its agency solution. After all, Google has more data about search behavior than anyone on the planet, and they have the smartest search engineers in the world. Combine data and superior tech, and Google’s agency team would have a huge advantage over third parties.

Where I find this concept to be most compelling is in the small business segment — customers spending less than $5,000 or $10,000 a month on AdWords. While I am sure there are some agencies out there that can provide incredible service and results to small spenders, my personal experience suggests that many small businesses are getting terrible and often non-existent service from their agencies.

A Google solution (again, combining a healthy dose of technology with agency services) could give this under-serviced segment of advertisers a much-needed leg up. And it’s worth noting that this is the segment that Google is already using Revana to help (but not as full agency support, more as outsourced agency consulting) — it’s also a large part of Trada’s business.

Would this be a conflict of interest for Google? Perhaps, but given that most SEM agencies are already compensated more when their clients spend more on AdWords, Google would be no more conflicted than any other agency that charged on a percentage of spend. And Google already offers automated optimization via Conversion Optimizer and Display Campaign Optimizer, so Google is already making decisions that impact customer spend.

The Case Against A Google SEM Agency

Putting aside the aforementioned concerns about conflicts of interest, the biggest challenge for a Google SEM agency would be delivering quality results, especially for larger clients. SEM management is complex, and it takes a combination of execution, SEM knowledge, and knowledge of your customers to truly provide great results.

Unlike PLA management — which is mainly a technical challenge — SEM is still a human-driven art. Google likes to solve problems programmatically, not with humans. Unless SEM technology improves dramatically, I’ll bet on an expert SEM with average technology over an average SEM with expert technology.

My other concern relates to expectation-setting. Clients of a Google SEM agency would demand the latest Alpha and Beta products, direct access to Google’s AdWords policy team (and resolution of any concerns), consistently awesome Quality Scores, and, of course, incredible results. Failing clients on any of these points would be a PR disaster for Google. Agencies have a hard enough time as it is pleasing clients; for a Google SEM agency, this task might be unattainable.

The Crocodile Bird

I’ve always felt a bit of tension between SEM agencies and Google. Don’t get me wrong, I love my agency team at Google and the various folks on the product team with whom I interact. I’m speaking more about Google, the Company.

Sometimes I feel a little like the mythical crocodile bird — the bird that a crocodile allows to enter his mouth to clean out parasites. Sure, the crocodile could eat the bird and have a tasty snack, but then he’d be left without his bird helper. In the long run, this may be the biggest reason that Google stays out of the SEM agency game — it’s tough work that Google just might prefer to avoid.

That said, one recent acquisition I’ve yet to discuss is worth noting. That Revana company — the one that Google uses to outsource agency services to small AdWords customers — just acquired WebMetro, an SEM agency that works with big advertisers.

Outsourcing enterprise agency services — that’s somewhere between eating the crocodile bird and continuing to tolerate its presence; maybe that’s the happy medium that gets Google more of an agency presence without having to actually be an agency. Time will tell, but if history is an indicator of future trends, it’s not an impossible outcome.

Opinions expressed in the article are those of the guest author and not necessarily Search Engine Land.

Related Topics: Channel: SEM | Paid Search Column

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About The Author: is founder and CEO of 3Q Digital (formerly PPC Associates), a position he has held since the Company's inception in 2008. Prior to 3Q Digital, he held senior marketing roles at several Internet companies, including Rentals.com (2000-2001), FindLaw (2001-2004), Adteractive (2004-2006), and Mercantila (2007-2008). David currently serves on advisory boards for several companies, including Marin Software, MediaBoost, Mediacause, and a stealth travel start-up.

Connect with the author via: Email | Twitter | Google+ | LinkedIn



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  • Matt Van Wagner

    So how would Google decide which competitors win and which lose? This is intrinsically anticompetitive.

  • http://www.adamdince.com/ Adam Dince

    Imagine if…Google decided to encrypt AdWords keyword referral data (like they’re doing for organic) and use it as their “agency” advantage. Imagine if Google horded all of the data and kept everyone else on the outside. *Twilight Zone theme song kicks in*

  • Hit Search

    Worth remembering that Google built a significant amount its early revenue through its agency discount model / Best Practice Funding. Working with good agencies can be good for both parties.

  • Pat Grady

    “the biggest challenge for a Google SEM agency would be delivering
    quality results”
    Yup. When they do bring in “experts”, the ROAS looks otherwise. SEM is a details game, the issues agencies face regarding scale (not to mention truly understanding attribution and client goals) tell me there will always be room for lots of agencies – imo, paying for the analytical attention needed to get optimized, client-specific results won’t be going away. I surely sound biased and conceited, but the results I’ve seen from G-built PPC tells me they can’t replace us… [insert car makers vs NASCAR drivers analogy here]. They’ll need to buy a 100+ agencies to make inroads, and I just don’t see the value for them in that.

  • Art Davis

    Where do you see ReachLocal fitting into Googles plans

  • David Rodnitzky

    Matt, that’s the same issue that agencies grapple with all the time. The solution is generally either a Chinese Wall or some other assurance that information won’t be shared between clients.

  • David Rodnitzky

    Adam, I believe Google already keeps some data for themselves that is used for DCO and CPO tools that is not shared with advertisers/agencies!

  • David Rodnitzky

    No doubt there is a lot of value to agencies. That said, there is no reason that a Google agency and outside agencies couldn’t co-exist. Consider Google Analytics and Omniture, Google Tag Manager and Tealium/TagMan, DoubleClick Bid Manager and Marin, etc

  • David Rodnitzky

    I generally agree Pat. That said, I never underestimate Google – they are super smart and have figured out a lot of things that I would never have predicted they could (ex: Android phones).

  • David Rodnitzky

    Art, that’s a good question. ReachLocal and business like that are very important to Google as they help thousands of small businesses get exposure to AdWords. The Google-Revana relationship is similar to ReachLocal already, so I’m not sure they really need to do anything with ReachLocal at the moment.

  • jnffarrell1

    Google has built an efficient, two sided market with users hungry for info on one side and advertisers hungry for info on what interests users. Why would Google intentionally reduce the efficiency of a market (supported by millions of Google processors) by taking a market that is 99% efficient and making it 98% efficient. Or…. looking at it another way, why would Google take a market that is growing by a factor of three every two years and slow it to a factor of 1.5 every three years.

    It is only a zero sum game when the Mine, all Mine mind-set rules.

  • LukeAlley

    Quality score.

  • Kevin Wu

    I do like the case being brought up here. Vertical integration within Google has existed for an upwards of a half decade. I would expect them to swallow up firms when no one is making moves. Monopolizing is their end goal so expect them to act in a way that wold help pave a smooth road to that goal.

  • http://www.swydo.com/ jeroen maljers

    I don’t think Google will enter the agency world. Google is primarily a software company. They make great software, that’s in their DNA. Software is scalable, self service and creates intellectual property. The only goal of Google is to make it very easy for people to use their products and to eliminate the need for manual labour as far a possible and reduce complexity. That’s why they created Adwords Express, Dynamic Search Ads, the Display Ad builder and other tools. Surely this takes away business from agencies that service the SMB’s, but for high end consultancy for large accounts, or scalable automated services for SMB’s will alway’s be room, is my opinion.

  • Pablo Silvio Esquivel

    Google has to be fair to all Adwords participants, agencies don’t.
    Agencies do their best to benefit their own customers. Google can’t.
    I think a scenario with no agency competition will be bad to Google, agencies and customers.

  • Hit Search

    Totally agree; Google has been squeezing agencies for a number of years yet want move into its space. Ultimately results for the consumer will determine whether Google’s venture into AgencyLand will be a success and the Independence of an agency who work on that basis is still a strong incentive for clients.

  • Dan Perach

    agree jeroen

  • Joey Altherr

    You just killed my motivation for the day. I’m now watching fascinating videos of crocodile birds

  • http://www.davidnrothwell.com/ David Rothwell

    Thanks for a thought provoking article David.

    Would you let Google manage your AdWords account? Some of my clients have regretted it.

    I’ve posted a full response here:

    http://www.davidnrothwell.com/google-as-a-sem-agency-11062/

  • http://www.venturemarketing.com/ John Fox

    My spidy senses that this is not going to end well for Google. It just feels like they’ve finally jumped the shark. I’m old enough to have seen this play out in other industries where the company was, like google, judge, jury and executioner,all in one. Eventually greed takes over, a few insiders can’t resist the temptation and do jump the Chinese wall and people lose confidence. Do I think it’s going to happen today, no. In five years, will this become a mess they wish they hadn’t invited upon themselves, my bet is, yes.

  • David Rodnitzky

    I don’t think it is a zero sum game, in the sense that Google could co-exist with other agencies. At the end of the day, it is up to the advertiser to decide if they want to work with Google or a 3rd party agency.

  • David Rodnitzky

    But what about the acquisitions of Channel Intelligence, Invite Media, and Wildfire? They are *already* making agency revenue.

  • David Rodnitzky

    They aren’t real!

  • David Rodnitzky

    I personally think that the Google brand is so strong that it could overcome sub-par agency services.

  • http://www.swydo.com/ jeroen maljers

    Agree, but my guess is that Google want’s to get rid of those services as soon as possible. The acquisitions were for the technology or the people (acqi-hire), not for the services revenue. Running an efficient services business is a completely different ball game, than running a software business. I respect agencies very much, since services require manual sales, pitches, consultancy hours, quality checks, billing, complaints etc.etc. and I guess Google does not want to enter that game, since agencies are specialized in that.

  • Shelley Ellis

    I think if Google could speak candidly they would say that in many ways “Agencies” are holding back potential revenue for them and that’s a frustrating problem to have. I’ve watched Google try to sneak into my client relationships through the back door but there were times when I’ve also headed that off by offering to work WITH Google to do client proposals for expansion opportunities that Google was trying to push (a few years back it was YouTube video ads). That approach has actually worked well for me in the past. Clients felt good that Google was directly involved in their account but clients were also more comfortable with my agency overseeing a new project (as opposed to Google).

    My point is that instead of seeing Google as the “enemy”, it’s better for everyone (Google, agencies and clients) if agencies are more open to Google’s ideas and proposals (at minimum to learn from them); if Google will respect our knowledge of and relationship with the client; where ultimately we both (agency + Google) combine our resources to benefit our mutual clients.

  • Rajesh_magar

    Sorry for the question but could you please elaborate what’s DCO and CPO thing? Thank you!

  • http://www.cmsearchmarketing.com/ Patti Fousek

    Hey Dave. A client of mine was recently contacted by Google regarding a search program offering that my client described as a “three-part “package” deal that
    includes AdWords as one part of the program.”

    I have had clients tell me before that Google contacted them regarding managing their local AdWords campaigns, but never a national campaign until now.

    Have you heard of such a ‘program’ that Google is pushing?

 

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