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High labor cost
The biggest reason small business embrace outsourcing is because of the relatively high cost of labor in the US. Search marketing vendors typically bill anywhere from $50 to $500 per hour. Compare this with the $10 to $20 per hour that outsourcing vendors charge and there is obviously a significant cost advantage.
Not enough attention for the smaller advertiser
Many good search marketing agencies have more work than they can handle and hence they try and move up the value chain. This forces them to concentrate on the bigger fish and not on smaller advertisers. Smaller advertisers get a better response from outsourcing vendors, which makes them feel valued and gives them a comfort level.
Shortage of skilled manpower
Search marketing is a relatively new industry. Although there are a lot of talented individuals who understand this industry, most of them either have their own company or are doing affiliate marketing to make money. One option is to train people from allied industries and bring them on board, but this can be a long, cumbersome process.
Cost advantage
Most search marketing agencies try to extract 2,000 billable hours a year from their employees. The cost to a company for one such employee is a minimum of $100,000, for a cost price $50 per man hour. To make a profit, the agency would obviously try and sell this for anywhere from $75 per hour to $500 per hour based on their internal revenue calculations.
By outsourcing some labor-intensive tasks for$10 to $20per hour, agencies reduce the cost to their company and improve their margins.
Core competency
Very few agencies have core competencies of both SEO and pay-per-click, but most of their clients will want both services. Partnering with a local company can be a conflict of interest or can help create a future competitor. In such a case, agencies prefer to work with outsourced vendors. This way, they have an additional service to cross-sell to their clients without worrying about losing them in the future.
No benefit costs
Full-time employee benefits like pension, healthcare, and social security are a considerable cost to an agency. By outsourcing, agencies can save on some of these costs.
If your company decides to investigate outsourcing, it is advisable to do your due diligence. Here are some tips for small business looking to outsource:
Individuals vs. companies
A company is usually preferable over one individual. .
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