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SEM: In-House vs. Outsourced

Rob Laporte
DISC Search Engine Marketing

July 2, 2003

Executive Summary

SEM (Search Engine Marketing), which consists of the distinct activities of SEO (Search Engine Optimization) and Paid Placement, requires exceptional linguistic and technical aptitude, at least six months of experience, and ongoing research and training. Therefore, a manager who would like to have SEM expertise in-house should expect to allocate at least $50,000 (in the US) towards employee salary and training. Good programmers rarely make good search engine marketers, because of the highly linguistic nature of the work, so that a manager should be cautious about using existing Web programmers for SEM. Marketing personnel may have the linguistic and product knowledge, but they need to have substantial technical knowledge of Web programming relating to search engines. Even in SEM firms, it is rare that one person possesses sufficient mastery of the various fields of knowledge that impinge on SEM, and people who do have this mastery are likely to cost more than $50,000 per year.

In the future the search engines may offer services to help advertisers with SEO as well as paid placement in much the same way that SEM vendors do now, so that companies may be able to hire less experienced people to accomplish successful SEM. I doubt that this will happen in less than two years, and it may never happen because of various conflicts of interest, but the possibility of this change gives this article an expiration date of roughly July 2005.

This article discusses the complexity of SEM, the skills needed, the amount of labor time required, and the importance of a Web marketing plan to help you decide on the extent of investment in SEM. This information should help you to decide whether to outsource SEM.

The Author's Background and Possible Bias

I have owned and operated a Web development and marketing firm since 1995, with clients ranging from Barnes and Noble and Smith & Wesson to one person businesses. My firm has worked with in-house IT and marketing departments, other Web development vendors, and as the sole vendor providing all Web development and marketing for clients. Nobody at my firm has been employed by a corporation in the capacity of Web marketing. In this article I strive for objectivity by outlining key factors in the decision to outsource or not, rather than recommending one over the other.

Aircraft Carriers and Conferences

A family would not hire a physician to live in-house full time, but an aircraft carrier would. Obviously the size of your business dictates whether hiring in-house makes sense, but the crucial point of this metaphor is that SEM requires substantial training, aptitudes and experience. Not as much as a physician requires, but much more than you might think. For example, bidding at Overture and AdWords (Pay-Per-Click or PPC) seems clear and simple from a distance, but move closer and you learn that one may write titles and descriptions that bring many untargeted and costly clicks, requiring careful adjustment of one's writing according to established principles that your SEM copywriter needs to comprehend. ROI analysis must be used to ensure that your are not over-bidding, and this requires familiarity with gross profit, conversion rates, server statistics or other tracking software, lifetime value of a customer, and more. And PPC is far less complicated than SEO.

There are no international conferences held at premium conference facilities in major cities for word processing, but there are for SEM (The Search Engine Strategies Conference series). The high value and complexity of SEM, as opposed to word processing, accounts for this fact. In other words, SEM is a serious discipline with high demand, which means that a manager should not expect to achieve optimum results by hiring a good programmer or a good writer and asking her to learn SEM and to complete an SEM campaign in a month or two. A firm could hire a seasoned SEM worker, but such people are rare relative to writers and programmers, and they are likely to cost a lot to hire -- and to keep. In fact SEM vendors face the same HR problem, but such firms have the advantage of having seasoned employees available to train new people.

If a company hires or cultivates an SEM person with the skills and aptitudes discussed below, the company should be able to complete a first-rate SEM campaign within four to six months.

Skills Needed

Your decision of whether to outsource or to cultivate in-house resources for SEM will be easier if you have a good sense of the skills needed. Those skills are listed here in order of importance.

Linguistic Aptitude: SEM is primarily a linguistic activity, wherein you match the query language of searchers with the language of your advertising and Website through the nexus of search engines. My experience teaching at a major university has shown me that engineers and artists (Web designers), while sometimes able to write well, are rarely motivated to master language and writing to the high degree needed in successful SEM. Linguistic aptitude alone is not enough, but is absolutely required.

Research Skills: Knowing what one doesn't know, and being humble about what one does know, are key characteristics behind the sharp, ongoing research needed to maintain mastery of the various technical fields that impinge on SEM. For example, how easy would it be to separate some static optimized pages from your company's dynamic Web publishing system? Is your current server statistics package sufficient for tracking SEM results, or should you consider a more devoted software solution, like ClickTracks or Maestro or PPC Management with ConversionRuler? When should you use the robots.txt file and how? What kinds of JavaScript menus can Google follow, and where should the JavaScript be written? How can Flash be used while preserving SEO? Does your site have a static IP address? What usability and navigation principles ensure that the traffic you get will convert optimally? These are just a few of the myriad questions that impinge on SEM. The more technical and Web marketing knowledge your SEM person has, the better, but a good researcher will be able to find and assess questions and answers when needed.

Brains and Education: I have found that a high IQ and first-rate education are prerequisites for success in SEM.

Technical Aptitudes and Experience: The more experience with Web programming technicalities possessed by your SEM person, the better. Your SEM person can research answers on the Web or in consultation with an SEM vendor or an in-house IT person, but this research still requires some technical aptitudes and some technical background. For example, Overture and AdWords prefer direct links to relevant product pages, but does your site use session variables that prevent this, and if so, how easily can one switch the system to use cookies instead? What kind of domain pointing and redirects are search engine friendly, and what kinds are you using now?

SEM Experience: Obviously the more of this experience your SEM person has, the better. However, if one claims expertise because they did SEM for two or three sites, he or she is making a false claim. Look at standard proof of the person's SEM results, namely, WebPosition reports and server statistics for the sites treated.

Can One Person Do It All?: Rarely. SEM has become a major discipline comprised of both science and art spanning marketing and Web technology. I have 6+ years experience in this field and my principal partner has 4 years of production experience in my firm, and we still need the help of a serious programmer on some jobs, especially for bigger clients. If you are to hire or cultivate an in-house person, that person should work with a team that can address both technical and marketing problems and opportunities.

Should One Person Do It All?: If you do cultivate that rare person who can do it all, you had better be able to keep him or her.

Labor Time Required

Obviously the size and scope of your business and Web properties determines the amount of labor time required to complete and maintain SEM, and thus whether you should cultivate an in-house SEM person or use a vendor. I discuss here some key variables that influence the amount of labor time needed, and I report average labor times from my firm's client histories.

The geographic and demographic spread of your target markets determines how much ROI you can get from SEM, and thus whether you should outsource. A specialty manufacturer of jet engine parts may have such a small set of possible buyers that SEM is not worth more than a few thousand dollars, so that outsourcing makes sense. A major reseller of shipping cases for both personal and commercial use, or a seller of walking tours throughout America and Europe, may achieve rapid and positive ROI from $50,000 of investment in SEM, so that developing in-house personnel is viable.

Your ability to handle a large increase in demand is another factor in your decision. A small investment through a vendor may help you to test the waters and grow your business at a manageable pace.

Contrary to what many SEM firms say, 95% of SEO (not including Paid Placement) is done once and needs little ongoing tweaking, if it is done right and if – big "if” here – nobody screws up the SEO after it is implemented. The minimum number of hours needed to implement an SEO job is about 25 hours, and that's assuming that the Website needs no re-design or re-programming. An average SEO job takes my firm 60 hours, including minor re-design and re-programming of html. Larger clients average 100 hours. Pfizer, Inc, for example, could easily achieve positive ROI in one year by hiring two full time SEO people. Again, this is only for SEO, not for any paid placement.

Paid placement in the search engines, particularly PPC, requires a minimum of 15 hours per Website, and I have known small to medium sized businesses that have each hired a full time person merely to manage PPC. Managing PPC to prevent over-bidding and to be sure that your bids convert to buyers constitutes the crux of successful paid placement campaigns. Various software solutions for managing your bids according to results are on the market now and will continue to improve, so that less and less labor time will be required to keep your PPC and other paid placement within strict ROI targets. Using such software, I would expect to allocate at least 40 hours per year per Website in a successful paid placement campaign in the search engines. Without such software, expect at least four times that amount of time.

Note that you will need to spend at least a couple of thousand dollars per year in software and subscriptions to aid in-house SEM.

Web Marketing Plans Help You Decide on In-House vs. Outsourcing

So many variables impinge on the decision of whether to use an SEM vendor or cultivate the resources in-house that I recommend hiring an SEM vendor to produce a report that evaluates the ROI potential of various levels of investment in SEM. About 10% of my firm's work consists of producing such reports. These reports should estimate traffic, conversions, gross profit, and ROI. They should also indicate comparative value of SEM vs. other Web marketing. They should indicate ways to improve the design (usability and navigation) of your Website so that the new traffic converts optimally. These reports take between 8 and 30 hours. They are extremely helpful in predicting ROI, and thus what is worth spending on SEM, which in turn will help you to decide whether to outsource.


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