When sourcing web services makes sense

I was a bit reticent to take on this topic, considering what I do for a living. There are the obligatory points, particularly for smaller companies, of focusing on their core competencies, et cetera et cetera. But the truth is, we live in a world of dollars and cents, and that's where the best argument is made for looking outside for web services Market shifts, changes in technology, creative destruction - these all tend to lead to reactive movements in business. Management at most small and mid-sized companies run into these situations at some point. When responding to drastic shifts outside of existing skill sets and available resources, decision makers are faced with a few clear options. First, they can choose to try to adapt existing resources. Depending on the familiarity and adaptability of those resources, this can either be a major cost saver, or anexpensive foray into uncharted territory. As a second option, firms may elect to acquire the necessary resources to bring them into their existing infrastructure. The third and final option (aside from outright neglect) is to seek an external provider to add the necessary skill sets and/or resources to remain competitive.

Putting this into the context of web services (web hosting, search engine marketing, pay per click management, affiliate marketing, web analytics, etc.); the options can be viewed more specifically. Taking the Internet marketing examples of search engine optimization and PPC management, we can look at some sample scenarios.



Scenario 1: In this scenario, a company which has utilized traditional marketing channels such as direct mail, television and radio advertising, unloads these responsibilities on someone in the marketing department. Unfortunately, if the company lacks a strong internal knowledge base in these areas, they are unlikely to provide adequate direction or set worthwhile goals for the responsible party. In this instance, someone is given the very vague goal to "get us ranked highly on Google." Here, the marketer is sent out into the great unknown not knowing why they need to be ranked highly, what the business goals are, how to do it, or even what terms they are supposed to be improving the rankings for.

In a best case scenario, the marketer steadily learns through research and trial and error and begins to do an effective job using tools like Google Adwords and Yahoo Search Marketing. Through this process they may begin to understand the basics of organic search optimization. However, this is a process that could take months or even a few years to really do well. With this type of learning curve and investment of time, what happened to the employee's previous responsibilities? And depending upon the monetary investment behind the PPC campaigns, is it worth letting a novice burn through thousands of advertising dollars before they start understanding how best to use the channel? This approach is risky, and many companies head down this road only to find several years later that the initiative sits largely in purgatory, lacking ownership and direction, while failing to achieve serious results but still swallowing a significant chunk of the advertising budget.

Scenario 2: In many ways, scenario two carries some of the same risks as scenario one if not thoughtfully implemented. Here, the company looks outside to acquire the resources to successfully implement a pay per click and natural search campaign. In an ideal setting, the company finds a marketer with experience not only in these two practice areas, but also has a functional understanding of the dynamics of the target industry. Alternatively, the company takes someone with the appropriate skill sets and provides them the necessary support and guidance to understand the competitive landscape and industry dynamics they will be working within. Here, the marketer quickly can adapt their skill set and begin making headway in both arenas. To optimize effectiveness, these ongoing efforts should be made an accountable piece of the ongoing marketing strategy, integrating with the ongoing tactics with appropriate goals and metrics.

In terms of raw dollars and cents, an SEO specialist salary can run anywhere from $50,000 to upwards of $100,000 depending on your market. Even spending $35,000 on an entry level hire can be a stress on the budget of a small to mid-sized company, particularly when this person runs the risk of hemorrhaging a portion of the marketing budget for months.

Scenario 3: Here the company looks outside their walls for expertise in pay per click and search optimization. While this article exists to advocate this approach, there are still risks. The pitfall of scenario one is still an issue, where the company does not adequately provide their search partner with tangible business goals and simply assumes their investment will magically turn into business through no effort of their own. Secondly, not performing some due diligence in vendor selection can also result in an unsuccessful engagement. Making sure your vendor either has experience in your industry, or adequately understands how to tie their services into your business goals is critically important in creating a successful relationship. Assuming a company is able to navigate these potential pitfalls successfully, the real benefit will be seen on the bottom line. For the two services outlined below, SEO and PPC, your average firm will charge an ongoing fee for the SEO and typically charge a fee that is a percentage of your pay per click expenditure. From a dollars and cents standpoint, here are a couple potential cost estimates for these services:

On a smaller scale, a client might want to do some initial SEO and run a PPC campaign with a $1,000 monthly budget. The SEO might run you anywhere from $300 - $500 per month, and with a 25% fee on the PPC campaign, that would be $250 per month. On the high end, this would cost roughly $750 per month, or $9,000 per year. Even if you add in the annual ad budget of $12,000, there is $14,000 in savings over adding an inexperienced new hire. If you tie in the ad budget, you're looking at realistic savings of nearly $30,000. Bringing an expert in-house may provide some benefits in terms of having more control of those services, but even in this small scale scenario it may ad another $20,000 to $50,000 in expenses. Certainly, this would require some serious justification at the end of the year in terms of cost/benefit analysis.

In a scenario where this is handed to an existing employee, the situation would include opportunity costs of diluting an employee's responsibilities and moving them from their core focus areas, as well as the waste associated with potentially mismanaged campaigns.

In the end, there are significant benefits in finding a well qualified vendor to provide web services. It's the most cost effective way to add these services to your marketing mix. However, as with internalizing these services, there is a responsibility on upper management and the marketing department to create clear goals and avenues of communication to align these efforts with the broader organizational objectives to achieve real value.

The author of this article is a Managing Partner of Michigan based Internet marketing firm Netvantage Marketing, providing clients with search engine optimization, pay per click management, and web analytics services.