COOPER ON SEARCH
Latitude MBO shows fragility of search agency sector
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Last May, following the publication of the nma Marketing Services Guide, I predicted the search agency landscape could look very different in 2010.
Agencies would have had a whole 12 months to deal with life without Google’s Best Practice Funding commission, which in a recession-struck landscape would surely hurt even more.
So the news this week (nma.co.uk 12 January 2010) that search specialist Latitude concluded a second management buyout (following a brief stint in administration) in as many years showed the fragility of what is often perceived as the one of the most lucrative online sectors.
This is a company which has always ranked in the top three search agencies in terms of turnover, managing high-profile clients and producing some very talented search specialists.
Like many companies it has fallen on hard times and has had to adapt. That’s not to say it’s going under − far from it, as it still has impressive clients and this injection of cash from investor Vitruvian will continue to allow it to compete vigorously.
Part of the wider problem, it seems − and not necessarily applicable to Latitude − is that some companies don’t evolve their business models in line with the market. It’s a fact that many search agencies relied on the Google funding to incentivise new business by passing it on directly to clients. Google said this was one of the reasons it was removed.
I hear, though, that there are still agencies which haven’t adapted their charging models to cope without this cash stream. This problem is exacerbated by the full-service media agencies which can bolt search onto a wider offering, often at a knockdown price. Although the question here is always whether they’re adding value.
With the search sector being one of the true success stories of the UK online market, it’s to be hoped that specialists continue to exist in the volume they’re able to at the moment.
But it’s clear that all is not well and it’s a question of when, rather than if, the next big one falls on hard times.
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Readers' comments (2)
Wolfgang Schilling | Fri, 15 Jan 2010 1:41 pm
As and founder and MD of ad agents www.ad-agents.com a German SEM agency I can agree. But Google told everyone one year before what gonna happen. We also see agencies here in Germany struggling by the lost kick backs. We also saw before big officies, high salaries, developer teams and all the rest. A businessplan of a company should not based oon a short time. At least a five year plan should set up. It is poor if SEM agencies have problems in a growing market and it is in my opinion a fault made by managers.
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Tony King | Fri, 15 Jan 2010 1:54 pm
I think this question also relates to the broader question of how many true full-service agencies there are out there - specialist across all areas. It is understandable that agencies want to increase their offering but even small to mid-size agencies seem to be trying to expand beyond their core competencies in a world which is recognising the value of true specialism and expert knowledge to a greater and greater degree.
From a client perspective, it may sound attractive to deal with one supplier, particularly in environments that are overseen by a traditional marketer who has not grown-up with digital. However, are they getting best of breed in each of the relevant disciplines? Until more client-side organisations realise the benefit in having in-house senior digital strategists who can work with a number of *specialist* agencies in order to form and implement strategy, I fear the market will become ever more populated by digital generalists moving away from their true talents.
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