Should large PPC advertisers outsource their PPC management?
I thought I’d ask the question, and see what others think..
My 2 cents is that I think there’s a bright future for the management of SME accounts as many SME’s will seldom have the experience or expertise to manage their accounts effectively. The whole set up and learning of the adwords system and marketing in general, makes it an almost no brainer for the non experienced SME to go with a specialist agency charging reasonable fees.
There are of course tools out there like Kenshoo and Marin which make the process a little easier, but ultimately as a piece of software alone, lack the marketing nous and understanding that a human being can impart.
In order to broaden understandings for the less than familiar, it’ll be useful to take a quick look at a hypothetical scenario of spend, and adjust it against a reasonable agency fee and throw in a PPC management and exec salary that includes employer contribs, holiday cover and associated expenses of a modest 75k per annum.
Granted, many of the models offered in the marketplace are a whole lot more sophisticated than what I’m using to illustrate ( management fee plus lower %, performance fees + management fee, pure performance, set up fees etc) but I think it’s still worthy of discussion.
Figures that are in green show a net benefit of using an agency, figures in red show the opposite.
- Business spending 60k per year at 10% management fee = 6k additional expenditure
- Business spending 500k per year at 10% management fee = 50k additional expenditure
- Business spending 5million per year at 8% management fee = 400k additional expenditure
Some might say, ah but Rob it also depends on the size of the account, how many ad groups, keywords, reporting required etc and yes indeed, that all counts too, but in my opinion a good PPC person abley assisted by a competent executive should have all those tools in the box, assisted by tools like Kenshoo, the efficiencies gained are only increased.
Options 1 and 2 for me, show that it makes little economic sense to go out and employ someone. However, go above a threshold (80k) and it begins to get a little different.
It’s useful to look at the leak Google spend for a selection of US brands in June 2010 from http://adage.com/digital/article?article_id=145720 demonstrating that PPC spend levels for some companies are pretty impressive
- The University of Phoenix $6.67 million
- Expedia – $5.95 million
- Amazon – $5.85 million
- eBay – $4.25 million
- Hotels.com – $3.30 million
- JC Penney – $2.46 million
- Living Social – $2.29 million
- ADT Security – $2.19 million
Other interesting features are that sub 200 spent > 500k per month, 350 spent between 100k and 500k per month, 1,356 spentbetween 10k and 100k per month. All in all pretty big numbers. As a commenter notes, 7% of spenders account for 60% of spend
26% of spenders account for 84% of spend.
And that’s just the tip of the iceberg, ad spend is expected to grow at continued rates as competition and awareness increases, moving companies and spend further up the numbers chart.
Ok, I’ve digressed slightly. Getting back to my point, at those levels, for the bigger spenders, why would you continue to increase your cost base, when you could reduce it through setting up in-house?
The days of smoke and mirrors are coming to an end, the mists of obscurity are being blown away by the simplification of process and the proliferation of tools designed to increase efficiency and simplify bid management and reporting.
What is the future of PPC management? Does agency have a future? Maybe the tools will marginalise the SME pot too, perhaps some other disruptor will come in and change it all again even, what say you?