Google's Performics problem

Bundled in Google's DoubleClick acquisition came Performics: a search-engine marketing and optimization service

Companies that provide services for improving Web sites' search-engine rankings and running effective search-engine ad campaigns have a new competitor: Google.

Bundled in the DoubleClick acquisition came Performics, which provides search-engine marketing (SEM) and search-engine optimization (SEO) services.

This has created concern for SEM and SEO service providers, which now face Google, a key partner, also as a rival.

"It puts us in the awkward position of competing with Google's own [SEM/SEO] agency for client accounts," said Lance Loveday, CEO of Closed Loop Marketing, an SEO and SEM firm.

Over the past seven years, as Google's popularity with advertisers and end users has boomed, so has the SEM and SEO business. Marketers began spending significant amounts to advertise on search engines, primarily Google, and they realized that they needed help from SEM firms to design, fine-tune and track the effectiveness of those campaigns. At the same time, those marketers recognized that they also had to make sure that their companies' Web sites ranked well on search engines when users entered keywords relevant to their businesses, which is what SEO service providers specialize in.

Before the DoubleClick acquisition, SEM and SEO firms saw themselves as providers of complementary services to Google, but now that Performics is part of Google, things have changed.

For starters, there is a concern that Performics will get special access to inside information about Google's search-engine algorithms, allowing Performics to provide SEO services that are more effective that its competitors'.

Then there is the worry that Google will push its in-house Performics SEM services at highly discounted prices, or maybe even free, in direct competition with SEM service providers.

Due to these and other clash points, SEM and SEO providers say their relationship with Google will inevitably get strained. This will likely be bad for Google, considering that SEM providers have a lot of influence over how their clients allocate their search advertising budget.

But there are other reasons why holding on to Performics could be bad for Google, and they have to do with perceived potential conflicts of interest that could spook Google advertising clients.

For example, Performics is supposed to help its clients get the highest return on investment (ROI) from their paid search campaigns by recommending they spend what's necessary -- and not more -- in order to get their desired results. But Google's business is to sell as much advertising as possible, said Scott Buresh, CEO and owner of SEO/SEM firm Medium Blue.

Closed Loop's Loveday also foresees Performics clients worrying whether Performics will now have an incentive to increase their spending on Google advertising for the benefit of its parent company. "Now, the reality is that Google has the dominant [search advertising] platform and in most cases Google probably should get most of a client's search campaign budget, but there's definitely an appearance of a conflict of interest," Loveday said.

US companies spent about US$10.2 billion in search advertising in 2007, and Google grabbed 79 per cent of that pie, followed, distantly, by Yahoo with 12 per cent and Microsoft with 6 per cent. Search was the most popular ad format last year in the US, accounting for 40 per cent of the overall online ad spending, according to IDC.

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Juan Carlos Perez

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