Consolidation is consequence of sector maturity

Mergers and acquisitions in the search sector have long been predicted
but until recently there has been relatively little major activity. The
trends behind these predictions are hard to ignore and the recent deals
involving Big Mouth Media and Spanner…

Paul%20MeadMergers and acquisitions in the search sector have long been predicted but until recently there has been relatively little major activity. The trends behind these predictions are hard to ignore and the recent deals involving Big Mouth Media and Spannerworks may be just the beginning.

The online advertising market continues to expand as more advertisers realise the potential of the medium. Search marketing is the driving force behind this growth and with more than 50 companies offering search engine marketing (SEM) services in the UK alone, the sector is highly competitive and would seem ripe for further consolidation.

Many pundits considered the most likely activity to occur between the major ad networks and the independent search specialists, but the two recent deals involving Big Mouth and Spannerworks both involved consolidation in the SEM sector. In fact, apart from the Aegis acquisition of iProspect in 2004, there has been very little activity between advertising agency networks and specialist search agencies. This has been primarily due to valuations. Fast-growing independents in a fast-growing market will often have very different ideas as to their company value than their potential suitors, and this has prevented a number of major deals bearing fruit.

Put off by what they see as uneconomic valuations, many networks have decided to grow their digital teams organically by recruiting the best talent in the industry – often from independent specialists.

At VCCP, we are part of a larger group but are structured as a specialist agency within the network. In this way we can offer the depth of expertise and proprietary technology of a specialist with the resources of a plc and the benefits of working as an integrated part of the strategic brand team.

Search marketing is moving further up the ladder strategically as agencies such as VCCP start to integrate brand and communications objectives into a search marketing strategy. This goes well beyond the usual direct response work which most search agencies are involved in and, while it’s not right for everyone, it tends to be the right approach for larger brands.

Consolidation has been slower than expected so far but I expect to see more of it as the medium matures and advertisers demand a more joined-up approach to their digital strategy and its execution.

Paul Mead is managing director of VCCP Searchnetwork VIEWPaul Mead VCCP Search

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