Breaking Down Search Advertising's Winners and Sinners

As Industry Evolves, Who's Getting What?

By Published on .

Kevin Ryan
Kevin Ryan
The business of search advertising is about to undergo a series of big changes and the driving factors might just surprise you. There are few stones left to be unturned in the search-advertising industry. Most of the big dollars are spoken for in highly competitive and crowded tool and service providers.

The small- and medium-size category of search and online advertising represents the unobtainium of interactive marketing. No one is really sure of its genuine worth or how to get it, but financiers are dropping buckets of cash without really understanding where the money is going.

The core of this misunderstood and overestimated segment of the advertising marketplace lies in the potential reality that it's not one segment, it's at least two. While it's possible that vast amounts of undiscovered payola exist in the small advertiser category, confusion and disarray still dominate the space.

Yet, the industry continues to evolve. There will be a few winners and plenty of sinners.

Class System Defined
If you torture the data long enough, it might just tell you what you want to know. So the saying goes and the search marketing industry has seen its share of speculative data, accidental categorization, segmentation and glorified projections. The SMB sector is either worth trillions, billions or hundreds of millions of dollars depending on who you ask.

March 2010 survey data from eConsultancy says that only about half of those in the search-marketing category are using third-party tools. Not surprisingly, of the 1500 companies included in the survey, the largest advertisers are more likely to use paid search tools. Large in this instance, are advertisers with revenue in excess of $1 billion.

Let's see if we can simplify search advertiser categories. There are at least three distinct groups and the first is the wealthy ruling class. Simply put, the wealthy ruling class is anyone spending enough money to receive something other than an automated e-mail from Google. Nothing but top-tier agencies, tools and talent. Velvet ropes part, champagne flows, and life is good.

No. 1 in the "Number 2" Business
Number two on the search list leaves advertisers in a cozy little place I like to call no man's land. No man's land is defined as any advertiser spending enough to be frustrated that they can't afford to engage an agency or tool provider. Think $10 to $50K in monthly spending. The no-man's-land folks rely largely on spreadsheets and blog posts for intelligence. Even if they had a tool, chances are they couldn't allocate resource for its proper use.

A third category of search advertiser is the coveted small business; the white whale, the fountain of youth, the pink elephant. You get the picture. I call it online advertising's 3rd world. This advertiser who knows he wants and needs to be on "The Google" but has no idea how to get there. He has virtually no money to advertise, he's still faxing things to people, has never heard of Twitter, and thinks Facebook is a fad. He's got no time to figure out online advertising and would rather leave it to someone else.

Trickle down
If the wealthy ruling class dictates trickle down evolution for the masses, the weapons with which we arm ourselves rule the world. Search marketers are armed with intellectual capital and technology to help them work smarter. More money (in theory) then equals oodles of brains and technical brawn.

The latest unobtanium quest for SMB money reminds me of the heady days of getting almost anything funded in the search-advertising tool category. Confused and awkward early third-party party tools were often placed in the scalable asset category when they were really better served as professional services entities. Millions were invested in tools with little or no control over standards and protocols.

Those days are long since gone for anyone seeking to serve the ruling class.

White Whale Syndrome
We've moved on as a more educated and aware industry segment in the few short years that have passed since the search bust of 2005. We saw natural consolidation in acquisitions like Google buying a search marketing firm (Performics later sold to Publicis) and Reprise Media's sale to Interpublic Group.

In the early days of building a search marketing tool, bandwidth wasn't a concern. It became a big concern when Google decided to implement bandwidth constraints.

Google controls access to its audience and third-party applications (along with its market share dominance) extremely well. This level of control over the industry had one or two folks concerned, but the guidelines persisted.

Mainstream marketing didn't notice the bust because it was a tempest in a tea cup for a relatively small sector of the business building third-party search party applications. The changes prevailed largely because they actually made sense. Well, the stage has been set for another big change.

End of Days
The recently rumored shut down and subsequent rebirth of Google's AdWords reseller program is a signal not to be ignored.

At the moment, the small business white whale's advertising interests are served by a confusing array of consultants, tool providers and bundled service providers they may already work with like a utility company. In other words, their worlds haven't changed much.

Small businesses get bombarded with opportunities to advertise online. Many of these "offerings" center around being found in search sites. The banker, software provider, domain provider and telephone company want to sell (or resell) them advertising.

Since they really don't know any better, small advertisers often fall prey to carpet baggers promising top listings in Google via overly aggressive telesales tactics. They promise the world while delivering basic websites and margin fattened clicks. They then focus on making it difficult or impossible for inevitably disillusioned advertisers to fire them and call it smart retention.

Google's probable intention to re-evaluate the relationships it has with small business or local advertising resellers is a sign of big change in the space. This shift is eerily reminiscent of the "relationship change" that turned the business of building search advertising management tools upside-down.

If the last series of changes occurred as a result of bandwidth abuses, one has to wonder what abuses might be motivating the latest change. Stricter controls and better representation of product offerings are in order. Once again, in the absence of an ethical compass many resellers have to be told what to do by a virtual parent figure.

The Sun Also Rises
While you can argue that your local mom-and-pop shop may never understand advertising, success in providing services to small businesses shouldn't include deviant retention and misleading sales tactics. Several factors in the marketplace indicate that better days lie ahead.

Changes in Google's policy will certainly have an effect on trickle down evolution for smaller advertisers. Our economic downturn is also over and along with it, the panic induced absence of funding for new tools and applications. Google's earnings are up 37%, and a Wall Street Journal headline this week noted a tech sector hiring drive.

No man's land advertisers are getting access to a more affordable and intelligent generation of tools. Landing pages, search campaigns and social media (well, Facebook) are finding their way into the self service universe. Ruling class intelligence has trickled down and no man's land is rapidly disappearing.

Every year is the year local search, the mobile web and small business advertising on the web will hit it big. The near term smart money should be focused on transparent tools that provide real solutions over expensive clicks and crap websites. The only X factor that remains is how long it will be before the next generation of intelligence trickles down to your local business owner. For the sake of not being evil, I hope its sooner rather than later.

Kevin M. Ryan is CEO of the strategic consulting and project management firm Motivity Marketing. He tweets at @KevinMRyan.
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