IProspect Deal Could Ignite Agency Buying Frenzy

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The purchase of iProspect by Isobar Communications could begin a long-awaited consolidation of the hundreds of mostly small search marketing firms.

Despite search marketing accounting for upward of 30 percent of all online advertising spending in the first half of 2004, many traditional ad agencies have avoided the area, which requires a data-intensive skill set at odds with the creative focus of most agencies.

Instead, agencies typically outsource the bulk of search services to third-party search engine marketing service providers.

"I think it will happen more and more," said Richard Hagerty, CEO of Impaqt, a Pittsburgh-based search engine marketing firm. "The agencies are starting to see the importance of search. We're two years into dramatic growth. The agencies are seeing they need to bring it in-house. It's difficult to build yourself."

According to a JupiterResearch report, search marketing firms control 51 percent of search advertising spending. However, fewer than one in three marketers use such firms for their search marketing, JupiterResearch said. The market researcher expects this to change as search grows increasingly complex.

Some ad agencies have begun building search expertise in-house. Avenue A/Razorfish in October formed a search division that would let it offer clients fully integrated online marketing campaigns, building on its acquisitions of Razorfish and eonMedia.

"You can track the impact of search on other media and other media on search," said Harrison Magun, general manager of Avenue A/Razorfish Search. "Part of this is helping us understand the effect search has higher up the funnel."

A study by comScore Networks and Overture found that 92 percent of search conversions occurred offline for a batch of consumer electronics marketers.

Magun said the challenge Isobar faces is to not dilute the specialized expertise of iProspect during its integration within a larger set of marketing services.

"If you sacrifice that expertise for integration, your acquisition won't pan out," he said.

Overture has recognized that ad agencies probably will play a more prominent role in search. In October, it began admitting ad agencies to its Overture Ambassadors program for certified resellers of its paid listings. Overture has certified several agencies, including Agency.com, Carat Interactive, Digitas, Tribal DDB and Avenue A/Razorfish.

As a further impetus for brand-focused agencies to bolster their search marketing services, recent research shows that marketers already use search to boost their brands. In a survey of 288 search advertisers and agencies released last week by the Search Engine Marketing Professionals Organization, 61 percent said building brand awareness was an objective of their search marketing programs.

Brian Morrissey covers search marketing for DM News.com. To keep up with the latest search marketing news subscribe to our free e-mail weekly newsletter Search Engine Marketing by visiting http://www.dmnews.com/cgi-bin/newslettersub.cgi

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