Thursday, April 24, 2008

The NMA Marketing Services Guide

The NMA have released their marketing services guide for 2008. The list charts the largest search agencies in the land. Once again The Search Works tops the list - congratulations guys. We came third.

The NMA list is a bit of a vanity exercise. The size of an agency is their total turnover - and this includes pass through revenue. Pass through revenue includes the money that simply comes in from clients and goes out to Google (or Yahoo or MSN).

In the US you'd never include pass through revenue as a meaningful measurement metric.

As a result PPC agencies (The Search Works) have a much higher turnover because the're passing client money on to Google. As I glance down the list and spy the likes of iCrossing (8th), Propellernet (15th), Tamar (18th), Neutralize (28th) or Site Visiblity (34th) I think to myself… wait a minute, these guys all have significant influence in the UK search marketing scene. I'm just naming a few too as there are other agencies in the list who "move the needle" in my opinion.

I should note too that the NMA points out that Efficient Frontier and Site Visibility exclude search spend from their figures and I respect that.

Here's the challenge. Is there a better metric? Up here in the North the media magazine The Drum had a go. First they required agencies to get enough recommendations from clients to qualify in the first place. Then they looked at revenue divided by staff - so an agency that made £10m a year with 50 staff was doing better than an agency that made £10m a year with 100 staff.

There's a problem with that too. What about those agencies who outsource? Do you count the outsourced staff (are they cheaper?) and how do you do it? If the £10m agency with 50 staff outsource to 150 people as well then perhaps they're not so good.

Perhaps profit is a better metric? After all; you can have a huge turnover (especially if you include pass through revenue) but do you manage to keep any of it? I've seen rival agencies drop their knickers when it comes to prices just to win a contract. I doubt they make a profit.

Agencies aren't going to share their profit figures though. The only time you get to peak at them is when the agency goes on the market and you're large enough to buy them. Even then it's pretty dull reading.

I think a much better way to 'measure' agencies is simply to talk to them. Meet the staff. Visit the office. Go listen to them speak at SMX or SES. Do you like what you hear?

2 comments:

kelvin newman said...

We at SiteVisibility def agree that including media spend from clients is a little flawed.

It skews the PPC agencies up, and your not comparing apples with apples.

I hope potential clients would judge agencies based on how they communicate and demonstrate their ability rather than how much they bill though...

Jonathan Beeston said...

Agreed Andrew that lists like this are just a chest-beating exercise. Billings leagues have been around for ages in the offline world and they tell you nothing about the agencies' work or people.

Don't forget that TSW are part of Tradedoubler, which is listed on the Swedish stockmarket, so you can find out a fair bit from their quarterly statements. They have c.6.5% margin on their turnover.