in Digital Business

Will 2010 be tough for UK SEM agencies?

How many SEM agencies in the UK have a sustainable business model? That may seem like an odd question given that search is undoubtedly the most successful advertising medium of recent years, but it would seem that the agency sector isn’t necessarily sharing in the medium’s growth.

Last week saw the adminstration then MBO of Latitude. Less widely reported, but no less relevant, was Tradedoubler’s completion of a rights issue that essentially paid for the write-down of The Search Works acquisition in 2007. While I understand that it’s business as usual at both firms, this has led many people to ask just how robust the sector is.

Will Cooper posed this question on Friday on the NMA web site. It’s his opinion that despite Google’s Best Practice Funding subsidy ending over a year ago there are still some agencies who haven’t adapted their business models. Will sounded confident of that opinion when I spoke to him on Monday. Unfortunately, I think he’s right.

I first raised my concerns on this blog back in September 2007. One post highlighted a firm blantantly using discounts as a hook to gain new clients. Selling on price instead of value like this rarely has a happy ending in the long run.

It would seem there are more agency administrations, restructurings and buyouts to come.

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