In a sign that major advertising agencies are continuing to recognize the long-term profitability of search marketing, Publicis Groupe bought Performics from Google today.
One of the largest search marketing agencies, Performics will join Digitas and other Publicis entities as part of VivaKi Nerve Center (no, I am not making this up) the new strategic collective cobbled together to serve Publicis clients world-wide.
3 Reasons Why Publicis Bought Performics
1. Search marketing is entirely mainstream now, and represents a “must do” tactic for essentially every Publicis client
2. Search marketing is projected to grow (by JupiterMedia) at a minimum of 12% annually through 2012, and there’s not many other marketing tactics (maybe social media and mobile) that are likely to achieve that level of compound growth
3. Search marketing is a “forever” tactic. Once you start, you can’t just stop doing it, because all that hard work will be washed away quickly. Thus, search marketing for major brands can be a $1-3 million per year, every year service fee, with extraordinarily high profit margins of 25% plus.
Note that Publicis has stated that they want 25% of their overall revenue to come from digital by 2012, and this acquisition will help make that a reality. There’s not that many serious search marketing agencies that have the scale necessary to fit in with Publicis, it’s still a very fragmented market, so the Performics acquisition makes sense.
Plus, Google and Publicis have a long-standing cross-functional relationship, including sharing of executives and intellectual property.
Interesting that many smaller, traditional agencies totally eschew search marketing as “too complex” and “not worth it”. I wonder if this acquisition will change some minds in that regard?
Why Google Sold Performics
It always seemed a bit strange for Google to own a search marketing services company. Performics was acquired as part of Google’s purchase of display ad network pioneer DoubleClick. The DoubleClick purchase was strategically imperative to close the gap between Google and Yahoo! in the display ad business, but the Performics search and affiliate program unit was always an extra appendage.
Rumors about Google selling off the search marketing component of Performics were confirmed on the Google Blog in April of this year.
Certainly, it’s a conflict of interest to have Google own a huge search marketing company, when they are the dominant vendor/partner of that company, and their ownership of Performics surely made iCrossing, Did-It, and other large search firms nervous.
But ultimately, Google got rid of Performics because they learned what they needed to learn about how search firms work, and they got out. I predict that you’ll see a whole new suite of paid search tools from Google, based on their learnings from Performics. That’s the Google way. They bought Urchin, looked inside its guts, and PRESTO you get Google Analytics.
What do you think about this deal? Does it portend a new round of acquisitions by traditional agencies, scooping up search marketers? Is iCrossing the next to sell? Or is it just one company trying to make a splash to drive awareness of the VivaKi Nerve Center? Also, if you can coherently describe what a VivaKi Nerve Center is, please leave a comment!