One tenet taught at most business schools and exemplified by successful corporations such as Wal-Mart is "to gain efficiencies, eliminate the middle man." Your paid search agency is a true middle man between you and search engine media providers, so are there benefits going straight to the proverbial well? With the need for efficiencies in online marketing, should you outsource campaign management directly to major media players such as Google, Yahoo, or Microsoft?
Over the years, I've seen clients leave agencies to be managed by Google, Yahoo, and Microsoft, and I've also personally taken over clients who had previously been managed by Google and the others. Is publisher-managed media a smart move? Is it worth the cost savings? Is this a future trend threatening the agency world? Clearly, being from the SEM agency side, I'm a bit biased, but I think the true costs of going publisher-direct far outweigh the dollars saved.
As I see it, the pros and cons in this debate can be grouped into four categories:
- Data privacy and integration
- Single-publisher focus
- Conflicts of interest
Let's start with the major benefit of working directly with a publisher: You don't have to pay agency fees. Yes, if you are large enough, Google and others will manage your campaign(s) with their vertical or regional teams for free. That's a 10 to 15 percent instant savings. However, I'd argue that the overall ROI from working with an agency will be higher, even after factoring in management fees. Now this is not the case with just any agency, but the good ones will find ways to add value through campaign optimizations and insights to fuel other marketing activities that, when measured and aggregated, well exceed the cost of their services.
Data privacy and integration
There is major concern in Washington, D.C., these days about online data collection practices and general search engine data privacy. At the same time, there's also a belief that integrating data (and the models placed on top of data) is the future of marketing. I suspect Google is working to build an integration portal into Google Analytics that includes a central repository to meet client needs and potentially provide media mix modeling and improved attribution, but it's not available yet. Further, with Google venturing into other advertising media (TV, mobile, ad exchanges), it will have a direct pipeline to feed other forms of media into a data warehouse.
Between media companies or agencies, who do you trust with performance data such as product margins, low performing markets, and future marketing plans? Who can share cross-media performance (i.e., high performing natural search keywords to add to the paid search stable, or DMAs where radio has a high ROI on offline sales)? If you were a media company and knew the value of a commercial or keyword placement was worth double to the advertiser, would you be tempted to raise the price? When a company makes more money with increased competition, can "diamond in the rough" keywords be kept proprietary?
Google's share of the search industry is approximately 65 percent, according to comScore research. Obviously, a Google-run SEM campaign will be focused on Google properties. So what about the remaining 35 percent of internet searches? Bing is growing, and Yahoo is upgrading its technology. What about internet yellow pages, shopping comparison engines, etc.? If you're a global advertiser, Google's 65 percent share doesn't hold up in every country -- just look at Yandex in Russia and Baidu in China. To think search engine marketing and consumer behavior revolves around only Google is quite narrow-minded. As I like to say, paid search is not a one-horse town.
Now, I have not heard of Google, Yahoo, or Microsoft managing paid search outside of their individual respective properties, but what if they added that service? This solves the non-Google targeting question, but I certainly would have a concern with a publisher seeing my performance and media costs across their competitors, as there is potential for it to raise bids (under the shroud of mystery that is Quality Score) where it is more efficient than market averages.
Second, the Bing/Yahoo model is different from Google AdWords (from match types to geo- and demo targeting), so would it be possible for Google account managers to become best of breed on their competitors' tools and vice versa? Sure, you could outsource to all of the engines individually, but that adds complexity and requires manpower on the client's end to centralize communications and reporting.
Conflicts of interest
Many agencies are paid the big bucks for their business strategy, creativity, and innovation. Due to conflicts of interest and exclusivity, agencies are limited to work with one auto original equipment manufacturer, one home improvement retailer, one quick-service restaurant, etc. Agency talent is laser focused to give a single company a competitive advantage to make it the industry leader. Without agencies, would Volvo equal safety, would iTunes dominate online music sales, or would you know which candy melts in your mouth and not your hand?
I'll argue that the search engines also have some of the best and brightest minds in the business world today. But unlike agencies, publishers work with every company in a category, and many times they are managed under the same office roof. While separation is hopefully maintained at the day-to-day level, at some point, management oversees teams working on competing brands. Do these firewalls stop the flow of sensitive information? The situation reminds me of the industry adage of "managing two competing brands is a conflict, but three is a specialty." I'd want to keep my strategy and data far away from my competitors.
Above all, as an advertiser, I'd be most concerned with a publisher's self-interest. I've seen multiple examples of mismanagement in the accounts that I've personally taken over from a publisher-direct model. For one account, we removed the keyword "free music," which was costing the client $100,000 a week and was completely irrelevant to its business of selling electronics.
Additionally, I've rarely seen a recommendation from an engine that didn't involve spending more money (adding keywords, raising bids, expanding match types, etc.). I've also seen keyword lists that are not as focused as they should be, advising appliance companies to bid on the keyword "white," or "Lil' Wayne," and "kid from dentist office" for keyword ads on a video search engine "because that's how to get in front of people there."
Finally, I've seen general keywords like "laptop" with extremely high bids, greatly over-inflating the industry costs. Dropping laptop's target position from first to third saved close to $20 per click, and we were still able to maintain the top position due to a high Quality Score.
The decision to outsource paid search to search engine publishers is not a simple matter of saving some coin. Data privacy/integration, a single-publisher focus, and conflicts of interest are just a few of the areas to assess when considering working directly with a media partner.
At the end of the day, Google, Yahoo, and Microsoft continue to be great partners for clients and agencies because there are checks and balances in place. An agency is simply an agent acting on behalf of a company (with that company's best interest in mind), and media companies cannot replace this. When it comes to paid search, there is a value in the middle man, so think twice before eliminating him.
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