Swivel Conference Preso

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


Technology Giveths, Technology Takeths Away


Could SEMs be Next?


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


CPC Prices Continue to Rise

Increases in CPCs Reduce ROI (e.g. Value) for Advertisers


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


SEM Marketshare is Declining

Declining Marketshare Reduces the Value of SEM


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


Automation is Leveling the Playing Field

Automation Reduces the Value of Experts


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


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 in-house team

SEM Agencies in 2006

3Q Digital


VALUE

SCARCITY




Hire in-house team


3Q Digital


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


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


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.

Thank [email protected]

@rodnitzky


mailto:[email protected]

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