Introducing the Newest SEM Agency – Google?

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.