A raft of search engine marketing specialists, including Latitude, The Search Works, Bigmouth and Ambergreen, have recently become acquisition targets for media networks and venture capitalists and have appointed corporate financial advisors. The interest in the sector has raised questions over the future of the specialists in the digital marketing world.
As search becomes an ever larger part of an integrated advertising mix, will there be a role for these specialists as independent companies or is consolidation into mainstream agencies just a few contracts away?
Nick Hynes, chief executive of The Search Works, insists that search specialists can stay independent and succeed, and cites I-Level as a good example of a digital agency staying independent despite attention from possible buyers.
The specialist knowledge within the search agencies is what will make the specialists thrive, he says.
Hynes also cites the recession of 1993 as a lesson as to why the search specialists could prosper. During that hard time for advertising, direct marketing was the only business doing well and the direct marketing core of search will ensure the same will happen during a new advertising recession, Hynes argues.
Convergence of media too could help keep the search specialists independent. He adds: "Coming down the pipe we have local search, mobile search and multi-media search. We have to drop the idea of a scheduler deciding what we watch on TV.
"With IPTV, we have to find a way to fund it and pay for it and we can have a pretty good crack at delivering multi-media advertising wrapped with relevant advertising."
The skillsets to cope with the oncoming world will lie with the search specialist, Hynes concludes. "Everything will be available through broadband - any TV, film, music or concert - and people will be finding it through a search engine interface.
"And the delivery of advertising will come through different platforms, such as the mobile phone, in different environments, at different pricing. This will all happen in search and I have no confidence a media planner/buyer will able to cope with this new world."
Whether search specialists will exist independently, long-term, could depend on the types of clients they service. Richard Firminger, Yahoo! Search Marketing sales director for Northern Europe, believes there is a strong demand for search specialists and gives the recent UK launch of American specialists, Efficient Frontier, as an example of a growing market.
He believes there may be a role for both media agencies and specialists in search. "The media agencies offer different types of solutions with their offline and online expertise, and as long as they've got that capability they will get clients who want a one-stop shop".
In conjunction with this, in response-driven markets like travel and finance, clients may seek a singular, specialist approach. However, belief that the search specialists will continue in their current form is not so evident among media agencies.
Robert Horler, managing director of Diffiniti, says: "The landscape of specialist services within 18 months to two years will be gone. They will either organically grow and affiliate with another company or they will be bought."
He adds: "When Web 2.0 really kicks in we will see search permeate all media and we are only just beginning to see the impact other media has on search volumes." The advantage will lie with media agencies when it comes to convincing clients that they can best optimise return on investment, Horler asserts.
Group M managing director of direct and digital David Kyffin says search agencies cannot live in "splendid isolation", when there are so many external factors affecting search volumes. Kyffin feels there is still plenty of market growth to come, with some clients still fully to get to grips with how search can help them.
However, when it comes to the sales of these companies to the media networks, Kyffin highlights the importance of being a first mover. If consolidation does start, options for the search agencies will narrow very quickly.
Some may ask why a major acquisition has not happened to date and the consensus is that so far these companies may have been overvalued. But with convergence and "multimedia" search fast approaching, the next two years could see a flurry of activity.
SEARCH MARKET SPECIALISTS AND THEIR KEY CLIENTS
The Search Works
First Choice, Lastminute Group, Carphone Warehouse, Eurostar
Best Western Hotels, Confused.com, Kiddicare, SN Brussels Airlines
Smile Bank, This is Money, Britannia Hotels, Auto Direct.
MyTravel, Marks & Spencer Money, Bradford & Bingley, Boots.com
Legal and General, HMV, Expedia.co.uk, Lloyds TSB.