Hitmetrix - User behavior analytics & recording

Why do big agencies even bother with search?

I want to counter the idea that big ad agencies should be taken seriously when they claim they know how to run search campaigns. The question “Do big agencies get search?” was settled a long time ago. They don’t get it, they can’t get it, and they shouldn’t get it.

In fact, the real question that people should be asking is “Why do big agencies even bother with search?” Because from an agency perspective, the negatives associated with providing search services vastly outweigh those favoring it.

1. Search isn’t a huge cash cow
Ad agencies make much of their money marking up the media they buy for clients. Buying media in big chunks, the way that print, broadcast, and outdoor media is bought, is easy and it’s profitable. Buying search media is hard, less profitable, and the spend is a tiny, single-digit percentage of any account’s overall media budget. The reason that agencies have ignored search for the past seven years is dead simple: there isn’t enough money there to warrant their attention, and no amount of obfuscation can conceal this basic economic fact.

2. Search is labor intensive
Search media is granular, the auction marketplace is dynamic, and campaign management is a complex endeavor, whether you’re running campaigns manually or using an automated tool. Big agency advocates love to talk about how agencies excel at strategy, integration, and persuasion, but none of these competencies matter unless they’re translated into operational search campaigns. Being able to do this means fielding teams of hard-working, technically trained people. Agencies love to brag about how they’ve hired 50 people here and 100 people there to run search campaigns internally. What they don’t mention is that these folks constitute less than a fraction of a percent of their overall headcount (for example, WPP has more than 22,000 employees in the US alone). What kind of commitment to search is this?

3. Search isn’t creative
Agencies pride themselves on delivering great creative, creativity is what ultimately distinguishes them, and it’s the main reason clients pony up the big bucks. Search is at core not a demand-building, creativity-driven media, and there is no way for an orthodox advertising agency to leverage its traditional strengths against it. I’ll change my opinion when I read the news that a major ad agency holding company has hired 10,000 statisticians.

4. Google and the other SE’s offer no agency discount
Agencies would have flooded into search years ago if Google and the other engines had provided what other media owners traditionally offer them: an agency discount. But Google and the other engines have no economic incentive for doing this, and the negation of agencies’ traditional pricing advantages puts them on the same playing field as everybody else.

5. Ad agencies can’t afford great technology
Ad agencies do not have the internal capabilities to build the kind of technology required to manage complex digital media buys, nor do they have the financial ability to acquire any significant technology players (because of the high valuations of such companies). The only course they can pursue is to license technologies from those ISVs willing to do so. Unfortunately, best-of-breed technology companies do not typically farm out their “crown jewels” to 3rd parties. Consequently, the only technologies which ad agency holding companies can use are those that are inadequate.

So why are big ad agencies even bothering with search? To put it bluntly, they’ve realized that unless they can check off the “Search” box on a client’s RFP, they won’t be considered “full service” and will lose non-search business to agencies able to check off this box. In other words, search is being provided as an accommodation, not because it’s a core agency competency. This is why big ad agencies are building internal search teams, buying external SEM agencies, and trying to defend how they handle search in public forums.

Unfortunately, as I discussed in the column “Single Dashboard Approach May Simplify But Not Enhance,” what’s good for big ad agencies is often not so good for clients. While integration is a noble value to pursue, it’s useless if obtaining it means sacrificing the equally important values of flexibility and choice. And whenever clients put all of their eggs into one agency basket, they’re taking a huge risk, because they’re forced to “make do” with whatever quality of search service happens to be under the same umbrella.

Some might call this a rational strategy; I call it buying a pig in a poke.

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