Search Ad Sector Surges

NEW YORK Google's stunning growth as an advertising engine continues to lift the search marketing industry from backroom obscurity to a key role in digital marketing. The latest evidence: an $18 million round of funding received by iCrossing, expected to be announced today, which brings its financial backing to $50 million. The money is earmarked for acquisitions and expanding its services into new areas.Shops like iCrossing, which in the past have focused on increasing Web sites' search engine profiles and managing text-ad campaigns, are expanding their services to clients to include social media, auction-based media buying and mobile offerings. The agencies are betting their expertise in heightening a brand's profile online will only grow in importance as search engines jump from Web pages to mobile phones and even TV.We have the broadest definition of search," said Jeff Herzog, iCrossing's CEO. "We see search as the way consumers engage all new media."Last week, the Search Engine Marketing Professional Organization reported search-related ad spending in North America neared $10 billion in 2006, growing 62 percent over 2005. As the largest search agency in the U.S., iCrossing has been a big beneficiary, taking in about $63 million in revenue in 2006, according to sources, on double the sales of the previous year.The nine-year-old shop is charting an ambitious growth strategy, backed by big bucks from venture capital firms. It's dipped into its VC funding to buy search agencies that bring new expertise, and recently closed the purchase of Spannerworks, a search agency based in the U.K. This follows its acquisition of paid-search specialist NewGate Internet two months ago.ICrossing execs plan to buy more search agencies and related specialists to consolidate its scale in search marketing and spread into new sectors of the digital landscape like social media, an area in which both NewGate and Spannerworks have practices, because link-happy blogs have considerable influence on search rankings. As Googling a brand becomes common, search agencies see a role in reputation management by making sure negative blog posts don't show up at the top of rankings."Social media and search are incredibly related in terms of having the right type of visibility" in search results, said Don Scales, iCrossing's president.The agency is also building landing sites, and began a mobile division a year ago that helps clients like PR Newswire develop content specifically for the medium. Scales said the company's backers are ready to pony up more money for future purchases.Scales came aboard last April to lead iCrossing's expansion, leaving his post as CEO of Agency.com after he clashed with Omnicom over the shop's strategic direction. ICrossing now has 350 employees, adding 35 people with NewGate and 70 with Spannerworks. The agency has six U.S. offices and one in Brighton, England. It counts clients like Coca-Cola, General Motors and Lego.Driving much of the growth and ambitions of search specialists like iCrossing is the expanding tentacles of Google, which took in $10.5 billion in ad revenue in 2006, up 75 percent from 2005. While the Internet giant still derives nearly all its revenue from text-ad search results, it's pushing its auction-based, targeted ad system into several forms of media, online and off. That could provide a route for experts in its bidding system to grow along with it into new forms of media360i, a New York search shop, has expanded its services for entertainment clients like Scripps Networks to use consumer search behavior to build brand ad campaigns through ad networks and other Web media. It ran an awareness campaign for HGTV's Living With Ed that raised its position in search results through a blog outreach program and promoted the show on blogs through Google's AdSense network. It's buying media on Google's network of sites for one-third of its clients, said Bryan Wiener, 360i's president."That's a natural evolution that leverages a search firm's core competency of managing the auction-based media," he said. "That's very different than traditional media, which is negotiated over lunch."Future developments in search technology will likely open even more doors. "Search will become important on mobile very soon," said Richard Rosenblatt, iCrossing's chairman and a former CEO of MySpace parent company Intermix Media. "Search will become important in different channels, even TV."The goal, according to Herzog, is to build iCrossing into "a new kind of digital agency" in the mold of aQuantive or Digitas.That ambition could bring iCrossing into competition with interactive agencies that have added their own search expertise, which for some raises doubts about its future successes. Avenue A/Razorfish has one of the largest search practices and shops like AKQA are building their capabilities."I know this is iCrossing's ambition," said Shar Von Boskirk, a Forrester Research analyst, "but they just haven't demonstrated to me that they have the skills or resources to compete with incumbent interactive agencies."

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Search Ad Sector Surges

Brian Morrissey

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