MarketingSherpa has put out its “State of the Search Marketing Agency Industry 2006 — 10 New Charts” for 2006. In it, we find a maturing SEM industry with some challenges head.
I cant review the whole report tonight, but here’s some excerpts followed by commentary:
SEM Industry Overview
This year, expert staffing sizes have roughly doubled, client accounts have risen by roughly 50%, and there are now six firms reporting more than $10 million in SEM revenues, plus two more reporting more than $20 million in SEM revenues. (Note: these revenues do *not* include costs of actual media buys paid to search engines. These are solely services fees, which is where all the profit for agencies comes from.)
In 2006, the SEM services industry is at last coming of age, turning into a more stable, corporate group of firms. Most have been in business for years — the majority more than four years.
However, along with growth, there are some significant warning signs about the industry’s future. New client growth is not what it should be — especially for SEO firms — given the economy and marketers’ appreciation of the importance of search traffic for their companies. (emphasis mine)
Commentary: I dont think its a warning sign rather than a sign of a maturing industry. Eventually, there will be a saturation point and eventually something more hip and cool will come along. Maybe it’ll be word-of-mouth/viral or true behavioral/demographic targeting.
Hitting an SEO Saturation Point?
year-over-year growth in terms of total client accounts for 104 surveyed firms is slowing considerably. The number of clients who are willing to pay for top-of-the-line services is still increasing, but smaller clients are not increasing.
We suspect smaller clients may not be educated enough to realize SEO exists or that it’s as important (if not more so) than PPC ads for their sites. The SEO industry is not investing in educational efforts the way the Googles of the world are.
Commentary: As mentioned, I feel that we are simply reaching an SEO saturation point. PPC is scalable, flexible to budgets and can be broken up to multiple campaigns. In contrast, SEO tradtionally has its limits: 1 website = 1 SEO campaign with an SEO campaign taking usually 4-12 months.
Clients’ view of Agencies’ Expertise
Many clients told us anecdotally that most SEM firms provide about the same level of expertise. The key differentiator is no longer secret tactics, extra-training or unusual analytics, but rather the amount of man hours and service-level provided.
Commentary: I think there’s still differences between agencies of the type of PPC and SEO services offered, though it coming closer to being on-par across the board. This too is a sign of maturity. More than anything I think its just very difficult for clients to decipher between them. What clients can tell is good, attentive and helpful service from an agency. Relationships is one of the biggest part of the consulting business, so I’m not surprised by this.
Shifting Towards Greater Specialization
Another tremendous shift was the focus on specialization. Last year nearly every single firm we profiled offered both SEO and PPC services. This year, the majority have reversed this position, choosing to offer one or the other.
We’re heartily in favor of this change because it’s always been MarketingSherpa’s contention that SEO and paid search advertising require, for the most part, extremely different skill sets. Unless a firm is willing to staff up to offer fulltime specialists for each, they should not offer both.
Commentary: This is something I’m confused by. As MarketingSherpa notes, clients prefer a one-stop shop and I’d venture to say clients better appreciate agencies that take an integrated and strategic approach across all online marketing activities, not just search, viral, banners etc. Additionally, being pigeon-holed into just PPC and SEO leaves the firm vulnerable to shifts in the online landscape. Budgets and priorities will shift and so will it be for PPC and SEO.
SEO Firms Training In-House Marketers
In recognition of how tough it is for client-side marketers to hire search marketers, a full 76% of profiled SEO firms reported to MarketingSherpa that they offer training services for marketers’ in-house staff. Very smart move we say.
Commentary: This is a smart move by many SEO Firms: 1) Make a quick buck to do 1-2 week training sessions; and 2) “up sell” the client on additional SEO services and additionally consulting fees later on. Win-Win all around.