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Google’s investment in Trada, a company that uses crowdsourcing to manage SEM accounts, raised some eyebrows in the SEM community this week. Is this part of a grand conspiracy to crush 3rd party SEM agencies? Is this an acknowledgement of Google’s failings internally at providing quality advice to clients?

My sense, simply put, is that it is not the former, and probably not the latter either. Let’s start with the first theory: Google wants technology/outsourcing companies to replace agencies. This is the classic “man versus machine” debate that has occurred since the dawn of the industrial revolution. What we’ve seen over time is that machine beats man when it comes to rote processes and man beats machine when it comes to ingenuity and thinking. The Model T production line replaced hand-building cars, but strategic consulting firms like McKinsey and high powered law firms and lobbyists continue to thrive despite great technical innovations.

Crowdsourcing may well be a way for top consulting firms to improve efficiency by outsourcing some menial tasks to the masses, but crowdsourcing cannot replace good strategic thinking and advice. Just as black box bid management algorithms cannot operate independent from a smart operator, crowdsourcing of keyword creation, bidding, and the like will always be beaten by crowdsourcing combined with smart management.

OK, theory #2: Google thinks crowdsourcing can outperform their internal teams. I doubt this one as well, mainly because I don’t think Google has enough self-awareness to realize that a large part of their AdWords support organization is largely useless to SEM experts. If they did, they would lay off about 90% of their staff in this department and use Trada to help clients, or just come up with more instructional videos.

My theory on the Trada investment revolves around the myriad of ‘local’ SEM companies out there – companies like ReachLocal, Yodle, and Orange Soda. These companies emphasize “quantity over quality”, meaning that they do an average job for thousands of clients, rather than a great job for dozens of clients. Inevitably this means that many clients end up pretty disappointed. Disappointed clients – especially SMBs just dipping their feet into SEM – may decide that the problem was not with their local agency, but rather with the very concept of SEM. As a result, they may decide to not only fire their agency, but give up on SEM entirely.

That’s a big problem for Google, since SMBs collectively can drive huge revenue and are still largely untapped. Moreover, Google definitely does not want to serve these companies through their AdWords support team, as this would not be cost-effective. The answer may well be a company like Trada, which can displace the poor service of local agencies without breaking Google’s support infrastructure. That’s a win-win for Google.