I was reading an article over at SEMGeek.com today that posed the question - Should Google Be Worried About The Plethora Of New PPC Management Software Companies? The argument that SEM Geek makes centers on the concept that PPC software companies are designed to optimize bids to pay the least amount to acquire the highest number of customers. Over a broader period of time, this could lead to less money spent/wasted with Google.

While I think SEM Geek gives a lot to think about, I tend to disagree with most of the potential issues and here is why:

The BIG Concern: AD DOLLARS

We are coming out of what has been one of the worst economic periods that many of us have seen and it hasn’t been kind to the advertising industry. Despite that fact, spending is still expected to be up in online ad spend, growing from $23.4 billion in 2008 to $24.5 billion in 2009 (a 4% increase YoY). In this slow online market, Google still grew 7% in Q3 ‘09 when compared against Q3 ‘08.

How was this accomplished? Clicks were up 14% while costs per click decreased 6%. This only goes to show that Google’s model doesn’t rise or fall by advertisers pushing for more efficient spend. Google’s model rises or falls on their ability to provide relevant results to users. As they do, users continue their use (clicks and impressions). If users can find relevant results to their queries, advertisers will compete for consumer eyeballs/clicks/money, which will keep cost per clicks high.  All the bid optimization that PPC companies do won’t eliminate the relevancy that users have come to expect and that drives customers through to advertisers from highly relevant advertisements. Of all places advertisers could reduce spending, search is the bottom of the list.

What are the Risks for these Software Companies?

While one might argue that Google could make a more robust version of Adwords editor that would make these tools obsolete, that won’t happen. Not only is it not a focus for Google but they service such a broad group of advertisers that there are nuances that they will never quite be able to fill. Furthermore advertisers save time and money by being able to leverage a single platform to manage search across the three big engines. Not only does this save time and money but with the way most advertisers manage Yahoo and Bing – copying Google keywords and ad groups – it allows advertisers to quickly and efficiently leverage learnings across engines.

The real risk these software companies face is to continue to leverage data across search platforms (Google, Yahoo or Bing won’t ever do this) in more granular and actionable ways than Google has the time to focus on.

In Conclusion: What Does the Future Hold for PPC?

As the market continues to move to 3rd party tools, and it will because people want control for themselves and are tired of black box inputs (though they will permit this while results come at acceptable acquisition costs), advertisers are the big winners. Advertisers win because they have more options on how to spend their money. Advertisers win because they can more easily reduce wasted spend and reallocate it to more efficient keywords. Advertisers win because they only survive when they make more informed purchasing decision. Google is a winner. The more informed their advertisers are the longer they can purchase advertising from Google  and the more they’ll invest in higher margin keywords. Google also wins because they essentially begin outsourcing their client services or reducing the number of agents needed to manage client services with their only cost being upkeep of API services.

Don’t get me wrong here. Paid search software companies are definitely winners here too.  They get to take a slice of the ad pie. The belief that I hold, as most PPC software companies do as well, is that paid search software companies are making the pie bigger than they are making it smaller.

Tags: agency, marketing, paid search, sem, software, tool

This entry was posted on Thursday, November 19th, 2009 at 1:07 am and is filed under paid search. You can follow any responses to this entry through the RSS 2.0 feed.