The 2004 acquisition of SEM firm iProspect by the advertising network Isobar marked a turning point in the search marketing industry. Various reports pegged the total value of the deal at about 50 million dollars, including potential earn outs. iProspect founder Fredrick Marckini stood to be a very wealthy man.

The iProspect deal wasn't the first or last acquisition to happen. But the valuation of the deal (together with an earlier Performics/DoubleClick deal) set a new high water mark for the expectations of the owners of other search shops. Suddenly, it looked like there was a very lucrative exit possible. After years of struggling in the search space, we found that we might just be holding the winning lottery ticket. Up to this point, there was a bit of a taboo about talking of acquisition in SEM circles. We all routinely professed our love for search and how we just couldn't see ourselves doing anything else. But hey, a $50 million dollar check can change your thinking somewhat. Suddenly, the SEM community indulged in a little day dreaming and started frequenting the Jaguar website and checking out property prices in the Hamptons.

But the flood of acquisitions that was predicted never happened. It was more of a trickle, and when we were privy to details about valuations, they were significantly under the iProspect deal. There are a number of reasons for that (perhaps the topic of a future column). But the fact is, the owners of search shops have had their appetites whetted and the window may have passed by. Here's why.

Tactically, We're Awesome

Search marketers are brilliant tacticians, whether they work on the paid or organic side. It's what we excel at. The biggest show in the SEM industry, ironically titled Search Engine Strategies, is really 3 or 4 days jammed packed with tactics, not strategies. We myopically focus on page position, always shooting higher. It's all about rank. It's all about being number one. What we're not particularly good at is stepping back and looking at the big picture. The how's and why's of search, and most importantly, the who's. While this is true across the search space, it's most apparent with the organic optimizers. Virtually no one in the SEO world has given a hoot about messaging, user experience or intent. It's all about crawling your way to top spot. In the last year, I've seen a few SEO's starting to change their thinking, but the vast majority is still obsessed with blowing holes in the ranking algorithms.

Rank Becomes Irrelevant

However, we're rapidly approaching the day when being number one ceases to have any meaning. That's a view that is tied to the concept of a universal results page. A user searching for 'bass' in Seattle sees pretty much the same results page as someone searching in Salisbury or Saskatoon. In this context, rank not only has meaning, it's the magic bullet.

Currently, the engines are rolling out personalization of results in a number of flavors. Soon geo-targeting, demographics and personal histories will be bigger determiners of the results and the order you see them in than the skill of a search optimizer. An aspiring musician in Seattle searching for "bass" may see the biggest selection of bass guitars in the Pacific Northwest in the number one spot. An angler in Saskatoon will probably see the top bass fishing spots in Western Canada. And the person using their laptop and wireless connection to search for 'bass' in a Salisbury pub could well see the official site for Bass Pale Ale.

A New Rulebook

On the organic side, this dramatically changes the rules of search. The hyper-developed technical skill set of SEO's suddenly need to be rounded out with a deep understanding of the target user. The optimization tactics we felt were going to guarantee us an early retirement, while still valuable, will take a back seat to the ability to segment and understand our target prospects. More importantly, we have to understand the online paths they're likely to take, and help our clients intercept them with effective messaging and successful interactive experiences. These are the skills that will be in high demand in the future. There will always be a place for a talented organic optimizer, but it will be as a rather well paid employee, not a multi-million dollar acquisition.

Where do these new skills exist? Well, they're more evident on the sponsored side, as new platform enhancements have allowed the best paid search practitioners to start to segment demographically and geographically. It's forcing us to do our homework on who our prospects are. And unfortunately, our potential acquirers, the large agencies, believe they have deep bench strength when it comes to segmenting and profiling prospects, certainly deeper than the average SEM shop. I still don't believe they're done a particularly good job of porting traditional market research skills to the new consumer empowered online reality, but I suspect I'd have a hard time convincing them of that.

You know who's really honing these skills? The behavioral targeting practitioners. Search marketer should start paying a lot more attention to what's happening in the BT camps.

A Chronic Itch

So where does that leave the average SEM agency? Is a profitable exit still an option as our 7 Year Itch demands to be scratched? I your valuation depends largely on tactics that gain higher rankings and concentrates on the 'where' (on both the organic and sponsored side) rather than the 'who' and 'why', your window has passed. But if you're up for the change and not only embrace the inevitable reality of personalized and integrated search but pioneer the understanding of it, a new market will emerge. That's the good news. The bad news is that there's a lot more hard work and learning that has to happen to position yourself in that market, and this time we're not the front runners. The truly passionate will persevere and adapt. The rest will find themselves with some pretty good job opportunities, but the summer house in the Hamptons and the Jag XKR convertible are long shots.

Discuss this article in the Small Business Ideas forum.

January 30, 2007

Gord Hotchkiss is President and CEO of Enquiro, Canada's leading search engine marketing firm and one of the top firms in North America. His articles are regularly published in both on and off line newsletters, including Marketing Monitor, SEOToday, Marketing and many other trade journals. Enquiro's own information portal is

With an extensive 20 year background in the marketing and advertising business, Gord has been working to increase client's search engine visibility since 1996 and has specialized in search engine marketing since 1999.

Search Engine Guide > Gord Hotchkiss > SEM's Seven Year Itch, Part Three