I understand the CONFLICT OF INTEREST argument, but that might not hold for all of the advertisers. Google's business strategy is that if the advertiser does well, Google does well. Now, according to the CONFLICT OF INTEREST theory, in the short term Google might do better at the expense of the advertiser but over the LONG TERM Google does better if the advertiser does better (Good ROI for the advertiser means returning to Google with more money, bad ROI means going bust and not having any left). This explains Google offering free analytics, which could also have been bad for Google, potentially. Personally, I feel there is nothing that stops them from OFFERING free optimization and they may be working on it as I type.
Having said that, there are 3 reasons that I can think of that might keep SEMs alive (from conversations with industry folk and scouring the forums):
1. Obviously, Google Optimizer won't work so well (if at all) on Yahoo!, MSN and other sites. Thus, if Yahoo! and MSN can pull up their socks, SEMs might still have a business. But if Google gets 90%+ marketshare...
2. The big players probably will not use Google's optimizer for a variety of reasons - do not want to share data, trust, Google is a competitor, etc. So they might still rely on SEMs. After all how many big advertisers use Google's analytics?
3. There is no guarantee that Google's solution will be any better than SEMs who have been toiling for years (vs. Google's relative inexperience).
But clearly, the smaller "tail" clients who can't afford SEMs will lap up Google optimizer (much like Google analytics). To compete for those clients SEMs will have to offer similar free services, which we can't afford (or can we?). Thus there will only be a handful of big advertisers left to compete for. Will their dollars be enough to sustain the SEM industry? It seems the only answer is to root for MSN and Yahoo...
Please share your thoughts.
Hi! All. I recently joined the SEM industry (and the forum) and was looking for an answer to a question that has been bothering me:
Welcome to WebmasterWorld!
What prevents Google from making their own bid optimization technology (or buying it) and offering it ~free to advertisers, thus largely killing SEMs?
Google relies on 'less than smart' bidders.
Google's business strategy is that if the advertiser does well, Google does well.
This is only true if all bidders are smart and there is only one bidder for each term. As soon as there is competition bidders risk more and Google makes more money. As soon as one bidder runs out of money along comes another. Just like a casino will never run out of people who 'know' they have a sure fire method of winning :-)
JAG
nothing will stop google from rolling out their own bid optimizer. in fact, the early stages of one are already visible: position constraints are a rudimentary form of bid management, no? as 2007 progresses, i would not be surprised if a CPA marketplace and additional bid management features emerge out of the googleplex. i would further predict, as others have, that google, in addition to analytics, will eventually come out with its own landing page optimization product, ad copy suggestion tool, and other products that help advertisers negotiate the complex search-to-conversion marketing funnel. (remember, yahoo already has a bid optimizer in its "search optimizer" product).
google's products are definite value adds for small advertisers - the long tail that google monetizes so well. however, to add on to your reasons as to why SEMs will remain alive for some time to come yet:
0. mid sized and larger customers need SERVICE. google is a technology and media company (which comes first is unclear) - it is not a company that builds out armies of implementation consultants. search agencies, landing page optimization firms, and analytics vendors, all have implementation expertise which provide high end features and solve point specific problems.
1. as marketplace complexity grows, the requirement to manage all of them in-house will become harder, though not impossible. as a result, being able to optimize bids and budgets across platforms will become increasingly more important.
2. ongoing analysis of online marketing behavior in an increasingly competitive environment requires expertise that google may not be in a position to provide. remember google's algorithm changes last april? how did those impact the performance of advertisers' keywords and the traffic to their websites? how does one handle yahoo's panama migration seamlessly? do we really need to advertise on ask.com? these are questions that require seasoned expertise, outside of the googleplex, that many advertisers are willing to pay for.
3. integration of SEM into other forms of online marketing, including banners, emails, etc. as well as advertisers' own internal tools (atleast the large ones). some cutting edge SEMs are working on integrating landing page, adcopy, & keyword bidding, but this is an area that has received little attention till date and merits lots of thought and development. testing, copy development, re-testing, and optimization is not always an automatable process. some human expertise and learning is important.
there is no doubt that some SEMs will be hurt by google's entry to other areas of online marketing. however, the companies with real value add, in terms of product development as well as intellectual capital, will always stay ahead of the curve and find ways to deliver higher conversion rates to their customers.
remember, smart people live outside of the googleplex too!
Startups tend to go after the higher end of the market, while established companies branching out tend to go after the lower end as Google has done with its analytics product (I'm not saying it *is* a low-end product, only that the smaller advertisers are primarily the ones using it). That keeps the two from butting heads too early, and I suspect that'll be the case with keyword management systems.
Lastly, I predict a startup search engine to come out of nowhere in 2007 and take 10-20% marketshare by end of 2008 - there's just too much market cap on the table for ingenuity not to be fruitful. If that happens, incumbent SE plans to extend dominance upon a secure home base will in retrospect sound quaint and naive.
I honestly have no idea what Google does with all the brain power they say they have and given their track record of new products I certainly would never use any SEM tools from them.
JAG
