For the majority of e-commerce businesses, pay-per-click (PPC) advertising is a leading revenue driver and key to future growth. A major challenge with PPC is its complexity, which can make highly demanding on resource. Managing Paid Search and Shopping campaigns is a full time job, that when done properly, can be highly profitable. Businesses who rely on PPC channels are faced with the decision whether to hire an external agency to manage the activity for them or build their own in-house team. There are various pros and cons to each approach. In the end the right solution will differ for each business depending on a number of factors which should be considered before making a decision. Let’s take a closer look.
Weighing Up The Costs
If PPC is to be managed in-house, the technology (bid management and campaign management) and labour will all need to be paid for. If we use an example budget of £1million per month, we would have to account for £30,000 for in-house staff (5-6 employees) and £20,000 in technology costs per month (2% of the advertising budget). In total, the costs add up to about 5% of the PPC budget. A professional PPC agency would charge somewhere between 7% and 13% of the monthly advertising budget, depending on the level of expertise, headcount, technology used etc. The in-house solution therefore, seems to be more affordable.
However, purely looking at cost ignores a vital aspect – performance. Using the same example as above, let’s say that a revenue of circa £10m can be expected from a monthly budget of £1m. A small performance increase of only 10% would lead to an increase in sales of £1m. If slight differences in performance alone can quickly trigger sales jumps of over one million pounds, it is clear that the difference in cost is rather insignificant.
Therefore, the big question is where the best performance is likely to come from – an in-house team who understand the businesses challenges and brand identity, or a professional agency with a wealth of proven experience in the field.
Unique Benefits of an In-House Team
PPC is the most profitable marketing channel for many ecommerce businesses, while also being the leading cost driver. In-housing PPC brings the advantage of eliminating dependency on third parties. By successfully developing a first-class team, faster communication channels and better internal knowledge can be developed, which all help to achieve excellent results.
When factors such as industry expertise, understanding of the product and brand come into the question, in-house teams usually have an advantage over external PPC specialists, unless the agency is specialised in a specific vertical and therefore has a deeper understanding of the industry. Working in-house, the PPC managers will be fully immersed in the business and gain a full understanding of the businesses strategy and challenges. They will also be able to build relationships with other internal teams which can lead to better synergies and joint projects.
Valuable Experience Provided by Professional Agencies
Agency teams have the advantage of experience. They will have worked across many sectors and industries, building and optimising PPC campaigns of all shapes and sizes. Businesses who choose to outsource their PPC to an agency will benefit from working with a team of experts who are ready to hit the ground running. Agencies use processes and ways of working that have evolved over time and are in place to eliminate errors and streamline workflows. Agencies also have the ability to stay at the cutting edge of the industry. They will receive full support from key media owners (Google, Bing etc.) and are often the first to be invited on to new product launches and betas.
Many e-commerce companies are active in multiple markets. Smaller markets such as Denmark or the Czech Republic often provide a relatively small contribution to revenues. Equally limited are the PPC budgets for these markets. In these cases, the cost of recruiting a PPC Manager with the necessary language skills and to then have them responsible for only a tiny budget would not make sense. Here, agencies with international experience and the ability to cover multiple languages with native speakers have a clear advantage.
Hybrid Models Offer Dynamic Flexibility
Some technology providers not only readily supply their tools as ‘software as a service’ (SaaS), but also offer various levels of support – all the way up to full-scale PPC optimisation. The advantage of these types of solutions is that you can switch between your own service provisions as well as external ones at any time without having to change the technology or the contractor. In addition, in-house teams can be streamlined, such as the case of temporary personnel bottlenecks, which can then be fluidly covered.
For example, should a key member of the in-house team decide to move on unexpectedly the team might struggle to manage the work load in the interim period while a replacement is found, which could result in a drop in performance. A hybrid model would allow the technology provider to take over management of part of the activity, a group of smaller markets for example, until the replacement is found. This not only protects performance during that period, but also alleviates the risks related to remaining team members being overworked.
To effectively manage ads in a foreign language an in-house team would need at least 2 native speaking PPC managers to guarantee performance when one is on holiday, get sick, resigns etc. In a hybrid model companies can save costs by using their service provider as the backup.
Synergies With Other Channels Offer Opportunities to Cross-Train
Paid Search and Google Shopping are often managed out of the same team within large online retail businesses due to the fact that they are both managed through the AdWords platform. There are many synergies between PPC and other digital marketing channels such as affiliates, display retargeting and other acquisition channels. Rarely are digital marketing professionals happy to be pigeon holed into one channel and these synergies mean that they can often add value in other disciplines with little additional training. This provides benefits with regards to flexibility and makes the team stronger as a whole. The ability to gain experience of managing other channels can also be a key benefit to potential employees and could be decisive when it comes to hiring the next digital superstar. To enable this within a digital marketing team, there must be a certain level of flexibility in terms of workflow. Managing PPC campaigns can be extremely time consuming, more so than other channels. This leaves little time for anything else, which can limit the opportunities for team members to experience other channels and projects.
Today, most companies see two alternatives: In-house or external provider. However, there’s a very interesting third option. With a hybrid approach companies can flexibly adapt to their changing needs in different growth and maturity stages of their business. They can always benchmark their internal PPC results and are able to flexibly change the level of external value creation without being dependent on agencies.