Google to Sell SEM Division of Performics – Will ValueClick be the Acquirer?
By now you’ve likely heard that Google announced that they intend to sell the search division of Performics. In addition to the proposed sale of the SEM division of Performics Google also announced that 300 employees from parent company DoubleClick will be laid off and that the other 1/2 of Performics (the Affiliate Network) will be integrated into Google.
I’m not entirely sure how Google intends to integrate the Performics Affiliate Marketing business into “existing Google operations,” but it’s my guess that there is major disappointment from many Performics clients who were sold on a “full-service,” “integrated” (i.e. search / affiliate) online marketing service that Performics will no longer be able to deliver.
Some of you will remember that I predicted right after the initial announcement of the Google / DoubleClick acquisition, that Google would likely dissolve or sell Performics.
Aside from the disappointment that is likely being registered by existing Performics clients, another potential outcome from Google’s announcement is that ValueClick (VCLK, parent company of affiliate network Commission Junction) becomes the likely suitor (acquirer) of the SEM division of Performics. In fact, according to ClickZ ValueClick has already expressed an interest in acquiring Performics.
To me it would make sense for VCLK to make this acquisition, especially because (no surprise here) I believe a full-service, integrated approach to online marketing is the most efficent approach – the full-service model is what we’ve pioneered and have been providing to clients at Pepperjam for years. In fact, aside from Performics and without the acquistion of Performics by Commission Junction, Pepperjam is the only other major full-service, integrated online marketing agency with an affiliate network option. I like how this sounds, but knowing CJ as well as I do, this is not likely to last long.
Think about it. In light of the recent fallout between Pepperjam and Commission because we launched a competing affiliate network technology, I don’t think CJ is gonna want Pepperjam to be the only real alternative (i.e. full service model with a network) to Performics. I imagine the stage would be set for some fierce competition between Commission Junction and Pepperjam if indeed ValueClick purchases Performics.
Either way, it’s my guess that Pepperjam stands to benefit significantly from the break-up of Performics since currently we remain the last man standing.
April 2nd, 2008 at 10:08 pm
Commission Junction has a Search Marketing Division. It is actually the only home grown division within both Commission Junction and Valueclick. Commission Junction already does offer a full service integrated approach to online marketing. And I do know personally, that CJSearch does very well and is thriving. As you can see from CJ’s website:
http://www.cj.com/advertisers/cj_search.html
April 2nd, 2008 at 10:29 pm
Also, just to add to the previous comment. CJSearch has 4 elements. SEO, PPC, Paid Inclusion and Shopping Feed Comparison engine services.
April 3rd, 2008 at 4:31 am
LA Kid,
I understand, but CJ Search is not a well-recognized or established SEM Agency.
We’ve watched as CJ and Linkshare attempted to introduce search over the last few years, but for the most part this hasn’t worked well, at least publically. These divisions of CJ and Linkshare still represent an insignificant proportion of the overall CJ and Linkshare companies (my guess – less than 5%).
In contrast, search [and online media buying in the case of Pepperjam) represents at least 40-50% or more, including staff and revenues, of the overall Performics and Pepperjam business.
Under CJ's existing model they aren't considered a major player in search like Performics is, or Pepperjam for that matter.
In my opinion, the only way that CJ can become seriously recognized for search is to purchase Performics or a similar large SEM agency.
I honestly don't hope you guys acquire Performics because you would be much closer to the Pepperjam model than you are now.
However, I still expect it to happen.
No disrespect to ValueClick's numerous divisions (i.e. lead gen, shopping comparison, affiliate marketing, "paid inclusion" [whatever hat is these days], etc.), but CJ is not considered a full-service agency in the eyes of the industry and therefore you do not compete on the same level for search business as Performics and Pepperjam does.
I believe it is much more difficult to start out as a network and then attempt to become a full-service agency, unless you acquire the agency.
The reason I believe this is because once you build relationships and hire hundreds of employees based primarily on technology (automation) the client comes to rely on you for just that. For other services, such as search and online media buying, most advertisers tend to favor companies with an established presence in these areas – CJ (and Linkshare for that matter) does not have an established presence, while Performics and Pepperjam does.
Thanks for your comments.
April 3rd, 2008 at 6:01 am
The key there is you don’t think they have an established presence. The affiliate side and search side work together through Commission Junction, and the majority of clients with CJSearch also have Affiliate programs through CJ. I personally believe that Commission Junction will be able to become a major player in the search industry without acquiring Performics. Their brand recognition and resources are strong enough and they have a rather large Affiliate client base to sell their product to. I think you are underestimating other companies of being “full-service agencies with an Affiliate network” to toot your own horn. The bottom-line is that Linkshare and Commission Junction both offer a more recognized and secure full-service offering than Pepperjam at this point in time. No offense, but you say that Linkshare and CJ have just started their SEM programs in the last few years, well you just started your Affiliate network 3 months ago. I know you have done Affiliate management, but you just became a full-service agency. The market for full-service agencies is not as feeble as you make it out to be.
April 3rd, 2008 at 9:48 am
LA Kid,
Thanks for your response.
Pepperjam has been a full-service internet marketing agency for nearly eight years.
The launch of Pepperjam Network makes us a full-service (search, affiliate management, media) internet marketing agency with an affiliate network component.
Besides Pepperjam and Performics who else is there that has those two things (full-service agency & network)?
I agree that CJ and Linkshare are the juggernauts here and have an extensive list of clients to also sell SEM or related services to.
The difference is that you can’t just turn network managers into professional PPC or SEO managers let alone media buyers. At the same time, you can build a staff of professional SEM’s or Media Buyers but it can take several years.
BTW – my argument is based on the debate that’s been going on at the Search-Engine Strategies (SES) conferences for the last two years (buy, build, or white label). White labeling is a short term solution. Building an internal team can take years. Buying is expensive, but it’s the only real solution for companies the size of CJ and Linkshare who are competing with agencies the size of iCrossing, iProspect, and Pepperjam. Note that PJ is the only one with the affiliate marketing network component.
The fact that SEM / SEO / Media Buying represents less than 5% of CJ’s and Linkshare’s business (correct me here if I’m wrong) suggests that they need to acquire a company to be a true full-service player or build a staff internally, which will take them some time.
That’s it. My point is simple. You can not just build an SEM agency overnight because you have a client base from your network technology. However, it is much easier to take your existing agency business and introduce them to a next generation affiliate marketing technology – that’s what Pepperjam did and that’s what differentiates us (among other things) from CJ, Linkshare, and the other networks.
I appreciate the dialogue here.
It’s nice to have CJ’s side of things.
Kris
April 3rd, 2008 at 10:16 am
My understanding of things is that CJ has begun building out the SEM side of things internally. I know that CJSearch has been around for about 3 years now, and they have a decent amount of clients and dedicated staff handling the clients. And you can see if you look at their career opportunities they are staffing SEM personnel out of 2 offices, Boston and Los Angeles. So they must have a decent amount of employees working in their SEM division.
As per the SEM division more or less than 5% of overall revenue, I don’t have a clue. But it seems like CJ is moving in the right direction
April 3rd, 2008 at 11:17 am
LA Kid,
I agree.
It just appears that there is disagreement on how CJ gets there.
Building internally will take them several years.
Acquiring an established SEM Agency like Performics gives them instant presence and credibility.
Again, I hope that CJ doesn’t acquire Performics from a competitive standpoint, but it’s gonna happen. At the least, VCLK will make a bid as they should.
For the time being, in my opinion, Pepperjam is the only true full-service agency with an affiliate network.
BTW – according to my sales team, in the 8 years we’ve been doing PPC & SEO for many top tier clients we’ve never once competed with CJ for search business. In fact, to the best of our knowledge we only competed with Linkshare once and we ended up winning that client.
In my opinion, Linkshare and CJ would be better served by just acquiring an SEM or media buying agency.
Kris