Live Issue... Search engine margins an issue for media agencies

“We’re seeing good returns for the client and we’re really in the business to run better campaigns and help them market their products,” says Rosemary Lising, GroupM search director, Asia-Pacific. “In terms of returns for the agency, it’s going to take time in how we see those returns happen.”

A key issue on this front, is the fact that search specialists — either pure play search agencies themselves or qualified individuals — don’t come cheap. Demand for services is growing strongly and there are simply not that many of them compared with their traditional media counterparts.

Current revenue models don’t help either, with most tending to favour the advertiser over the agency. Most agencies will charge a fee, but it will be included as part of a larger retainer, similar to a value-added service. There’s also pay-per-click and pay-for-performance, which reward the agency with a set fee for each actionable event or promise a revenue sharing deal.

All of these, though, notes Mark Newton, vice-president, digital media, Qais Consulting, and former Starcom IP business director, make it difficult for agencies to be properly rewarded for their work. He says the best model, which is beginning to be used by the most savvy digital shops and progressive agencies, is a separate fee structure, which allows the agencies to charge for the actual work done.

“There needs to be an education process for clients so that they understand the amount of work that goes into an integrated and effective digital campaign, which will ultimately allow the agency to charge more money. It’s suicide for agencies to be doing campaigns for free,” says Newton.

But it hasn’t stopped larger agencies from absorbing smaller competitors to create a more enhanced offer for clients. Global Strategies International, for example, was acquired by Neo@Ogilvy earlier this year; Quisma was brought into the fold by GroupM Interaction; and previous years have seen buying sprees from Zenith, Media Contacts and, again, Isobar. “The potential is huge,” says Lising. “We’re focusing on it because we absolutely believe it is a viable business model, and we’re really offering what our clients are asking for.”

Lising points out that there are at least 25 GroupM search specialists across the network in Asia-Pacific and more on the way, and iProspect has more than 50 staff undergoing internal training currently. But how long will investment continue without seeing the returns?

Newton agrees that while agencies are heading in the right direction in terms of investing in talent and placing a greater emphasis on agency revenue, it’s not fast enough. Many are wondering in fact, just how viable search is in the short term.