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Search firms move toward full service

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Search engine marketing services are the latest darling of the online world—and everyone wants in on them.

The industry currently consists of Web site optimizers, interactive agencies and affiliate marketers, and search engine companies such as Yahoo! are on the brink of entering the business, too.

But most of the specialist companies of the past are moving toward offering a full range of services, and the industry has increasingly come to be dominated by "full service" companies that handle all of a marketer’s search needs.

Such search engine marketing providers offer search engine optimization (SEO), paid placement and paid inclusion, as well as sophisticated analytics to track the return on investment of search campaigns.

Search engine optimization, also called algorithmic or natural search marketing, was the original form. Next came paid search. More recently, companies have offered analytic tools to measure search placement effectiveness.

Because these techniques are complex and labor intensive, most marketers prefer to outsource them. But that can mean dealing with multiple providers, which causes other problems.

"Most marketers feel overwhelmed by the number of distribution partners available and the options they offer," said Nate Elliott, associate analyst at Jupiter Research. "They want a solution to help them manage and report on all of their paid search marketing in one location."

Affiliate marketing companies like Performics, which was already familiar with the "pay-for-performance" model, got in on the act. Traditional interactive ad agencies have also entered the search marketing services realm. For example, interactive agency 360I currently derives 80% of its revenue from search marketing services.

And the search engine companies themselves have begun to enter the market.

Overture’s entry

Overture later this month is expected to be the first search engine to announce a new bid management product that competes with the search engine marketing companies.

Overture said that toward the end of November it plans to debut Marketing Console, a service it describes as an "ROI product" that will allow marketers to track online spending across all search engine providers.

Not surprisingly, Overture’s entry has not been welcomed by these providers.

"There are some pretty serious channel conflicts right now," said Barbara Coll, CEO of Webmama.com, a search engine marketing agency that provides SEO, pay-per-click program management, paid inclusion program management and back-end analytics.

Webmama.com’s clients spend about $100,000 to $150,000 a month with Overture and about the same amount with Google.

Robert Murray, president of iProspect, another search engine services provider, said: "[Overture] is out responding to RFPs [requests for proposals] and that has a lot of search engine marketers concerned," he said. "They’re trying to manage a channel and compete at the same time, and that’s a tough road to walk."

Others contend it was only a matter of time. "[SEM providers] Did-It and GoToast are collecting money Overture would like to collect on their own," Jupiter’s Elliot said.

Still, many search marketing providers are confident there will still be room for plenty for their services. "There’s always the need for an agency," said Bryan Kujawski, president of 360I. "This is what they eat, drink and sleep. They’ll extract efficiencies [for their clients] through experience with the 50 other campaigns they’re managing."

Dan Boberg, director of strategic alliances at Overture, said the new product would also be available to search engine marketing partners on a reseller basis. He disputed the notion that the new product would compete with these partners.

"SEMs and agencies in general represent an important channel for Overture," Boberg said. "We’re trying to develop choice in the marketplace. It’s hard to say that’s competitive because we’ll just be another company providing that."

For its part, Overture competitor Google said the company would take its various constituents into consideration.

"The tools we’ve developed or would develop in the future would always consider our advertisers, our partners—including agencies and SEMs—as well as our users, and we’re confident that trend will continue," said Chris Theodoros, director of worldwide agency relations at Google.

As a result of so many companies clamoring to enter the search marketing services arena, the landscape is highly fragmented.

"This industry is a mess, and marketers are left to figure it out," Elliott said. He added that lack of standards for things such as paid placement add to the complexity.

"You’ll see a lot of consolidation," said Webmama’s Coll, adding that this inevitable trend will solve some of the issues regarding search that now confront marketers.

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