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The SEM Agency is Dying (And How You Can Survive)
David Rodnitzky, CEO
May 3, 20233Q Digital
3Q Digital Does a Lot of SEM . . .
Who is 3Q Digital?
• $500M+/yr media spend; 150 clients• 190 team members; 7 offices• Google’s largest independent agency• SEM, Paid Social, SEO, Mobile,
Display, CRO, Analytics, Native Advertising, Content Marketing, Wiki, Strategy
May 3, 2023
3Q Digital
So Why Am I Predicting My Agency’s Death?
3Q Digital
Some SEM Agencies (like 3Q Digital) Will Survive!
Source: http://skeptics.stackexchange.com/questions/7912/can-cockroaches-survive-a-nuclear-war
3Q Digital
This Presentation: Helping You Survive
May 3, 20233Q Digital
Technology Giveths, Technology Takeths Away
May 3, 20233Q Digital
Could SEMs be Next?
May 3, 20233Q Digital
SEM Has and Continues to Change2006
Low CPCs
8-10 Ads Per Page
SEM Marketshare
Growing
Few Alternatives
to SEM
Few SEM Pros
Limited Automation
2016High CPCs
4 Ads Per Page
SEM Marketshare
Declining
Lots of Alternatives
to SEM
Lots of SEM Pros
Lots of Automation
May 3, 20233Q Digital
CPC Prices Continue to Rise
Increases in CPCs Reduce ROI (e.g. Value) for Advertisers
May 3, 20233Q Digital
Declining Inventory Creates a Zero Sum Game
AdWords Four Pack Eliminates Right Rail Ads
Who Wrote These Awesome Articles?
Decreases in Inventory Reduces the Number of Advertisers Who Rely Heavily on SEM
May 3, 20233Q Digital
SEM Marketshare is Declining
Declining Marketshare Reduces the Value of SEM
May 3, 20233Q Digital
Plenty of SEM Pros Today
Source: https://docs.google.com/spreadsheets/d/1RbzSeiREfX7YFazCllecJvvohKP5EVT4xqxg9XRwdjM/edit#gid=0
Increasing SEM Experts Reduces the Need for SEM Agencies
May 3, 20233Q Digital
Automation is Leveling the Playing Field
Automation Reduces the Value of Experts
May 3, 20233Q Digital
Key Takeaways
• SEM is less valuable today because:• It costs more (less profit)• Less inventory on the page (zero
sum)• Marketshare is declining• It’s not the only game in town
• SEM are less valuable today because:• There are a lot more experts• Automation has leveled the playing
field
What This Means . . . For Agencies
David Rodnitzky, CEO
Existential Question: Why Do Agencies Exist?
3Q Digital
*This assumes that agencies do in fact think
VALUE
SCARCITY
Hire the best agency, regardless of price
Hire an agency, largely based on price
Agency or in-house, whatever is cheapest
Hire in-house team
Agencies Only Exist if They Provide a Scarce and Valuable Service
3Q Digital
Source: http://searchengineland.com/sem-agency-dying-249223
VALUE
SCARCITY
Hire the best agency, regardless of price
Hire an agency, largely based on price
Agency or in-house, whatever is cheapest
Hire in-house team
SEM Agencies in 2006
3Q Digital
Source: http://searchengineland.com/sem-agency-dying-249223
VALUE
SCARCITY
Hire the best agency, regardless of price
Hire an agency, largely based on price
Agency or in-house, whatever is cheapest
Hire in-house team
SEM Agencies in 2016
3Q Digital
Source: http://searchengineland.com/sem-agency-dying-249223
VALUE
SCARCITY
Hire the best agency, regardless of price
Hire an agency, largely based on price
Agency or in-house, whatever is cheapest
Hire in-house team
SEM Agencies in 2019
3Q Digital
Source: http://searchengineland.com/sem-agency-dying-249223
Conclusion: The SEM Agency is Dying
3Q Digital
If Not Dying, Becoming Commoditized!
3Q Digital
SEM Agencies Have Reached the . . .
3Q Digital
Some Options
3Q Digital
• Retire!• Become an
SMB Expert• Go Beyond
SEM (Enterprise Digital Agency)
Option #1: The SMB Route: Lots of Clients, Small Budgets
3Q Digital
Google Often Gives Preference to Local Businesses
The SMB Route: SWOT Analysis
3Q Digital
• Google loves SMBs• Enterprise Agencies don’t!• Competitor agencies are
often weak
• Spend is lower• SMBs demand more service• Conflicts often arise• Difficulty to build brand
• Become a best-of-breed SMB service provider
• Find a way to scale without sacrificing quality
STRENGTHS WEAKNESSES
THREATSOPPORTUNITIES• Google automates SMB
listings entirely• Market becomes too
crowded (too many agencies)
Option #2: Go Broad (The “Moat” Strategy)
Enterprise SEM – By Itself – Is Dead
Big Companies Like “One Throat to Choke”
Option #2: Go Broad – Beyond SEM
Digital Media Buying
Technology Integration
Strategy Creative
SEM
May 3, 20233Q Digital
What If . . . We Just Became Performance Marketers?
2012
• SEM
2014
• SEM• SEO• Paid
Social• Display
2016
• SEM• SEO• Paid
Social• Display• Mobile• Analytics• CRO• Strategy• Native• Wiki• Content
Marketing
2018?
• DRTV• Radio• Direct Mail• Digital
Billboards• Email• VR/AR• IoT• Connected
Cars
The Big Moat – Beyond Digital?
Revisiting the Agency Value Chart
Option #2: Go Broad (Build Your Moat)
3Q Digital
• Win big clients• Diversify your channel
concentration• Offer scarcity and value
• Hard to be an expert at everything
• Competitors get bigger and tougher
• Need to continually pivot swivel!
• Be an AOR that truly gets digital marketing
• Bring accountability to offline marketing
STRENGTHS WEAKNESSES
THREATSOPPORTUNITIES• Big Agencies disrupt
themselves and actually compete
• Automation takes over
What This Means . . . For Individuals
David Rodnitzky, CEO
The SEM Expert is Not Dead Yet
3Q Digital
SEM Expertise is Still Vital
3Q Digital
• SEM still drives great ROI• SEM is still the largest channel online• SEM expertise is needed by both in-
house teams and agencies• Experience matters• Complete automation is years away• Google continues to expand AdWords
into new channels (video, email, mobile, maps, etc)
Just because SEM agencies are in trouble doesn’t mean SEM
experts are!
But . . . Do You Have a Moat?
3Q Digital
• Expertise beyond SEM helps with promotions
• It’s always a good idea to future-proof yourself
• New channels/tactics always have the greatest need (scarcity/value)
Choose to Survive!
3Q Digital
• Agencies – go small, go broad, or go home. Generic SEM agencies won’t survive.
• Individuals – create your personal moat. Run toward the fire.
• Anyone – change happens. Standing still is moving backwards.
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