Pay-Per-Click advertising (PPC) is by far one of the most important sources of growth for e-commerce businesses, while at the same time also being considered among perhaps, the most complex and demanding of online marketing channels. Those who rely on PPC are usually faced with a decision between hiring external help through an agency or building their own PPC team. There are stories of successes as well as of failures with both approaches. Unfortunately, there’s no such thing as a “secret recipe” for this. Retailers should analyse exactly which solutions are best suited to their unique situation. But what actually matters the most and what should be taken into account when making the right decision? Well, let’s see!
Pure cost analysis falls short
If PPC is to be processed in-house, the technology for bid and campaign management as well as sufficient employees will all need to be paid for. With an exemplary budget of one million Euro per month, you have to account for € 30,000 for in-house staff (5-6 employees) and € 20,000 in tool 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 ask for about 10% of the monthly advertising budget as compensation. The in-house solution therefore, seems to be much more affordable.
But, with a more exact evaluation it would be clear that pure cost analysis falls short. Let’s stick with the example used above: revenue of circa ten million Euro can be expected from a monthly budget of one million Euro. A small performance increase of only 10% would lead to an increase in sales of one million Euro. If slight differences in performance alone can quickly trigger sales jumps of over one million Euro, it is clear that the costs play a rather minor role. Therefore, the big question is whether or not an online retailer should build a first-class in-house team of experienced PPC experts, with subsequent results that surpass those of offered by agencies available on the market.
The strategic importance of PPC plays a central role
PPC is the most profitable marketing channel for many online retailers while also being the most crucial cost driver. For example, if over 25% of sales were generated through AdWords, PPC would be viewed as a core competency. In-house PPC has the advantage of optimised monitoring and it eliminates dependency on third parties. By successfully developing a first-class team, faster communication channels and better internal knowledge can be developed, in order to achieve excellent results.
The complexity of one’s own business and the importance of expertise
When factors such as expertise, understanding of the product or in-depth know-how come into the question, in-house teams have a definite advantage over external PPC specialists. For example, a Shopping Club is evaluating registrations generated through PPC. The information about which new customers remain relatively active and make subsequent purchases after registering, should be used in the process of optimising campaigns but is only applicable through internal business intelligence. Such information can be more easily used internally, as opposed to through communicating it to an agency.
Combining in-house and agency PPC – the rule rather than the exception
Many e-commerce companies are active in multiple markets. Smaller markets such as those in Denmark or the Czech Republic often provide only a small contribution to revenues. Equally limited are the PPC budgets for these markets. In these cases, it is hardly worth it to build one’s own team, because it is time-consuming and furthermore costly to recruit a PPC Manager with the necessary language skills and to then have them responsible for only a tiny budget. Here, international agencies have a clear advantage, because more often than not they have the ability to cover dozens of languages with PPC-experienced native speakers.
Flexibility and a smooth transition between external service and in-house PPC
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 optimization. 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.
The success factors for in-house PPC
If a company decides to manage their PPC campaigns in-house for strategic reasons, special attention should be paid to two critical success factors:
- For starters, the right kind of technology needs to be selected. One has the option of relying on so-called online marketing suites that offer an integrative approach for multiple online marketing channels and which also cover all major areas. Comfort and simplicity are at the forefront here. On the other hand, there are also point solutions, which specialise in specific disciplines, such as PPC campaign management, conversion attribution or display advertising and furthermore promise better results in the individual disciplines. Complexity is the price for increased performance, which more often than not, particularly large advertisers are quick to accept.
- The second success factor is the team. Through new formats such as Google Shopping or Search Retargeting (RLSA) on the one hand and complex attribution models on the other, PPC complexity has rapidly increased over the past years, which places completely new demands on the skills of a PPC team. It is no longer enough for employees to only know all the most important Google AdWords features or how to use tools. In addition to PPC professionals, experienced statisticians and data analysts should be part of any strong PPC team.
What are your experiences with outsourced or in-house PPC? Share your thoughts with us in the comment section.