Is there a long term future for PPC management of large accounts?

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.

  1. Business spending 60k per year at 10% management fee = 6k additional expenditure
  2. Business spending 500k per year at 10% management fee = 50k additional expenditure
  3. 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?

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11 thoughts on “Is there a long term future for PPC management of large accounts?

  1. Terry Van Horne

    Yeah… as to spend and exponential growth… IMO, this is not really sustainable. Companies running on thin margins and PPC growth basically adds ROI headwinds since more peeps almost always means higher bids… I was managing a payday loan acct. It eventually shut down cuz the costs made other more costly riskier alternatives seem less risky and cheaper way to generate leads.

    1. robwatts Post author

      @TVH Hey Terry – And yes, ultimately, it’s all passed on to the consumer. How many companies will squeeze others out of the game in order to eventually win? There’s probably a fancy term for it in business speak, but it’s as rife today as it’ll be tomorrow for sure!

  2. TP

    Hi Rob, interesting debate, thought I’d give you a few counter arguments ;-)

    The first things I see as an issue is that you focus purely on the money element. They are plenty of good reasons, other than money, why companies would not do PPC in house. Some companies are just not comfortable with marketing, or they want to focus all their efforts on their core business, and so they externalise. Second issue in your analysis is that you take PPC in isolation. However big companies starts more and more to see the full picture, and get cost benefits into giving their PPC to media agencies already managing other marketing activities for them. Another reason I can think is that on massive accounts there is a massive effort required to put together a big, competent team. And it takes time. Agencies already have (well… that’s what they tell us anyway) the right people and the team ready to handle the big accounts.

    1. robwatts Post author

      @TP Hey TP – nice to see you bud! – Well, indeed I have focused on the £ note element mainly because at some point that is what it boils down to but also kept it relatively open to encourage perspectives such as your own ;)

      So you won’t be surprised to hear that, I get what you are saying and agree completely. That said, I think the level of organisations out there who can handle the whole holistic marketing mix aren’t in the majority and those that do charge handsomely for their services. At some point however, someone has to pay and that’ll usually be mr and mrs consumer, anyhow…I also think that much of the ‘fuller picture’ perspective is to use your favourite word, ‘bullshit’ as many bigger agencies often have a high degree of internal churn to maintain and deliver a full 360 service worth having. I’m also unconvinced that there are enough 360 viewpoint individuals to go around, to services the needs in this way, by this I mean people who can own and assess the whole landscape and ensure that the coordinated effort to deliver the best is maintained – rather than end up outsourcing elements to externals and therefore relinquishing control. Much of this though is perhaps a separate topic ;)

  3. Rob Jackson

    Hi Rob

    Good post containing a lot of questions that the industry has been asking itself more and more over the last few years. Think of it this way:

    - PPC account with say 20k keywords (not anywhere near the largest out there)
    - Potentially three match types for each
    - Potentially three ad variations for each
    - Across three search engines

    20,000 X 3 X 3 X 3 = 540,000 potential variables in your account. You are going to struggle to find one (or two or three) head(s) who can effectively manage that number of variables on a day to day basis.

    The solution? Well that’s for each brand / advertiser to figure out for themselves; personally I think PPC has a place in a well balanced approach containing all the channels. Of course measurement is key ;-)

    I do think however, that %age of spend models are obsolete in the modern digital marketplace. It in no way reflects the amount of work that needs to be done on a PPC account. Eg a travel account can have a million plus keywords but only £10k spend while a car insurance campaign can have 10k keywords but spend in excess of a million punds per month.

    Ultimately the client needs to figure our what their PPC is worth to them and base their investment on overall profitability and ROI. The service providers equally need to evaluate how much work they will need to do make the campaign a success and charge based on that, not an arbitrary cut of the spend.

    1. robwatts Post author

      Hey Rob! Haha, trust you to throw in the 540k variable ;0)

      But in some ways you exemplify my point – it’s insane to expect human beings to be able to process and crunch that data w/out additional help. Hence the Kenshoo thing for starters, but that will inevitably bring that labour requirement down, and therefore the employment costs required to service it.

      Absolutely, it is about marketing of services and demonstration of added value, w/out the aspect of bewildering befuddlement, which when all piled in together, it can quite easily become.

      I’m a segmentation fan, lay it out and look at the overlaps, understand why that impacts that and that interacts with that and…oh hang on, I’m preaching to the converted ;)

  4. Swhittick

    @robwatts Nice post.

    All good points on both sides. We also see there is still a lack of available PPC skills for brands to run their campaigns in-house. The absence of a decent accreditation independent (from the search engines) is not helping this. Obviously as the industry gets older this will change, but still see it as a prevalent issue in the meantime for brands taking hefty spends in-house.

    Also think you’re missing someone off your tech suppliers ;-)

    1. robwatts Post author

      Simon Darling, lovely to see you :)

      I will edit the post to reflect that inadequacy – you touch on an important point – SEMPO could lead the way and be a step in that direction – PPC is far less problematic a thing than SEO for sure!

  5. Gavin

    It is reality that anyone who has a large PPC account cannot manage it completely so It is better to outsource the PPC management account. It will be more efficient and time saving for us. We can complete other important work in the saved time.

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