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Will Google’s Smart Ads Kill the Reseller Channel?

Local Search

I was in the airport this past weekend and I ran into someone who runs a company that is involved in selling paid-search to the small business (SMB) market. After some personal conversation I asked what this individual thought about Google’s Smart Ads and Local Ads for SMBs.

These products, if you’re not already aware, substantially automate ad campaign creation, management and optimization. They seek to fulfill the promise of AdWords Express, which never quite delivered.

This individual remarked that the technology (machine learning) was impressive and that the products had a good chance of meeting the expectations they’re setting — although that remains to be seen. Then the following remark came: “Google wants to get rid of resellers but there’s a thing called churn.”

There have been lots of discussions in the past six months about how agencies and resellers of paid-search and other ad products should respond to automation and machine learning. There’s something of a consensus among those I’ve talked to that it will impact their businesses but they won’t be driven under because there’s still an important role for service and humans.

So the “what me worry?” response is: resellers can use these new technologies (Smart Ads) to reduce their costs and focus on doing a better job of servicing accounts and increasing their margins. The more nuanced response is that some larger number of SMBs will DIY online marketing with simplified tools from Google and Facebook. However, a substantial number of SMBs still want humans to service their accounts at some level — someone to pick up the phone and talk to, in other words.

But that doesn’t speak to margins and lifetime value.

On the enterprise side, many believe that selling ads on Facebook and Google has become a kind of commodity business with limited margins. This is partly driving local media providers and others to expand their portfolios into other areas (e.g., SaaS) to boost margins and retention. Churn will likely remain a challenge with ad products because SMBs don’t need to advertise all the time at equal spending levels.

I’d like you to weigh in on the following:

  • Is reselling AdWords and Facebook a “commodity business” in fact?
  • Will automation, machine learning and simplification significantly disrupt existing agency and reseller (and third party technology) models?
  • Should agencies and resellers working with SMBs turn to SaaS or cloud-based non ad products for better margins and retention?

What do you think?

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