What makes an Online agency unique

For those who notice, I haven’t been writing much lately. I have spent considered amount of time exploring the reasons why an investor should invest or a business owner would set up an Online agency.

The Online world is changing too fast, way too fast from both technology front and the way new technology is being adopted/used by millions of people worldwide.

What i am after are answers to the following questions:

  • Why would institution investors/big network invest or set up offices to provide Online Marketing services to advertisers?
  • What is/are the potential returns from an Online Marketing agency compared to old money like commodity products, oil & gas etc…
  • What makes an Online Agency unique? and how can it keep its clients from changing to another agency?
  • Which form of Online market service is most profitable? is it Search Engine Marketing (paid Search or Search engine optimization) or Display Media (whether it is arbitrage or being an actual media owner) or technology provider (Omniture/DoubleClick) or search engine/service provider themselves (Google/Yahoo/Twitter/Facebook etc…)
  • How to actually make a profit out of the service provided? Well being able to provide good service to client is not enough, agencies/companies obviously need to have a working model to be able to churn out profit from those sales

If there is a unanimous conclusion with regards to which company/service will do best in the long run, should we all put money or work for that company or trying to provide that service?
Clearly the answer is No to the question above. We haven’t YET reached the unanimous verdict on which company/service will be the most profitable in the long run. And if we haven’t been able to make that decision in the past 10-20 years since the popularity of the internet, what then gives us the confidence that we will be able to make the decision now or in the next 5 years?

Is it because of the inherent nature of the fast changing Online world? Are we trying to predict the unpredictable?

  • Microsoft recently introduced Bing and it has been receiving quite a lot of attention, more good critics than bad. But can Bing challenges Google from a consumer standpoint and agency standpoint?
  • How about Social Media Optimization (SMO), Mobile Marketing, Online Consultancy Services?

If i apply Phil Fisher, Warren Buffett, Charlie Munger, John Burr Williams, Robert G. Hagstrom teachings then i should only follow:

  • Online services/technologies that i understand.
  • Look for company with consistent operating history, managed by capable managers with strong integrity
  • Evaluate to see if the company has “durable” long term edge. What is an Online agency “moat”?

Or are we approaching the problem at hand from the wrong angle? Stop trying to predict where the industry as a whole is going but rather focus on individual company/niche vertical?
Will looking at top 10 agencies/companies in any 10 years duration help? Top 10 in 1970s, 1980s, 1990s and 2000s?

Ok sorry for jumping around, i tend to do that a lot…

Back to “What makes an Online agency unique”

First let’s start with why i want to answer this question?
It’s because it matters in the long run regarding:

  • How you decide which Online niche you want to work in?
  • Which company to work for?
  • If you want to start your own firm, what services to go into?
  • If you want to invest your money, which network should you explore? or you’d better off invest in other industries (old money) or invest in service provider/Media owner (Google/Yahoo)
  • and well it’s fun for me to try to answer these questions 🙂

I recently contributed an article “How to Choose an SEM agency” to iMediaConnection, in which i put a great emphasis on Human Resource (Staff turnover rate to be specific)
Then i wrote another piece on this blog titled “Challenges of Running a SEM firm in South East and North Asia“, in which i briefly touched on the gross profit difference generated from Paid Search and SEO activities.

I think there can be a lot of factors that make an agency unique (being a survival in the long run):

  • The breadth of clientele? No doubt it’s one very important factor.

Being able to keep existing clients (this will largely be the job of account managers and operation/production team) and bringing new clients (the strength of sales team). However, the current trend with household brands is consolidation, budget cut and low profit margin for agencies.

Should an agency then focus on the long tail and services hundreds of smaller SMEs? The hopefully increasing size of clients is part of the “moat”

  • Expanding to services with higher profit margin to avoid commoditization?

It, however, takes time to build a team to be able to offer a particular Online market service properly. In the mean time agency needs to demonstrate to clients that this new service can actually be a more cost effective solution to reach the client’s objective/target audience.

Also which service? There are so many of them….

  • Expanding to hot, buzz technologies/services? Social media optimization, online reputation management, mobile marketing/targeting
  • Having the most talented, respected team? It’s not easy to find and keep a group of talented team members working together in harmony though.

Company culture definitely comes to play here and older/more established agencies may have an edge if they have good culture to begin with.

  • Focusing on operating profitability by streamlining processes, cutting cost?

Long term i guess the bulk of an agency cost will be employee salary/executive remuneration
Working process/model is not easy to build either because it’s different from region to region. It again takes leadership/time to at least customize a successful working model to a particular region. APJ for me presents great challenges because of the inherent diversity

  • Competition/copycat: there is little doubt that whatever makes an agency unique short term will be copied/tried to copy from other agencies. It’s no difference from any other industries where products are being copied, talented executive being “stolen”…

So the trick is really to find an edge, a fundamental comparative advantage that can last long term, being the leader in something worthwhile.

I personally haven’t found answers to many of the questions above yet. This is, by no small portion, the result of my lack of clarity in questions that i raise.
I, however, firmly believe that our industry is a people business.

Alrighty, enough “nonsense” from me… if you have anything to share, as always you are welcome to email me at chandlerblog@gmail.com

Have a nice weekend everyone
P.S: There are approximately one billion people who need food on our planet so it’s truly a privilege for me to wake up early on a Saturday morning, enjoying a cup of Vietnamese coffee and mumble about these stuff 🙂

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