The issue of whether brands should handle their search marketing in-house or outsource it has been thrust into the spotlight as two of the UK’s largest retailers pursue decidedly different strategies.
In August, John Lewis became the latest company to announce it was taking its paid search account in-house after two years with agency Steak, prompting some to predict a trend away from the outsourcing model. But weeks later, Marks & Spencer renewed its paid search contract with Efficient Frontier, hailing the agency as an “important contributor towards M&S’s online presence”.
So should brands consider taking control of their search marketing in the current economic climate? Or, with both pay-per-click (PPC) and search engine optimisation (SEO) arguably more important than ever, can agencies bring a level of expertise and experience that will add more value to a client’s business?
John Lewis claims that taking its search operations in-house allows the brand to better match its marketing to its wider corporate goals. While the company admits it did not have the capability to manage its search account in-house when it appointed Steak in 2007, the discipline has been a big area of focus for the company in the past two years (see case study, page 38).
John Lewis development manager for online marketing Luke Kingsnorth explains, “Steak is expert in its field but our in-house people know John Lewis better than the agency. They’re a lot closer to the company and the business objectives than an agency could ever be.”
Another reason some clients are moving away from outsourcing is that paid search is getting easier, suggests head of digital at Toyota, Simon Rutherford. “There was a lot of mystery around PPC and how complex it was to run a campaign for a long time, especially on the client side, but there’s less of that now,” he observes.
He continues: “Google AdWords is so well thought out that any client who spends enough time on it can set up a PPC campaign. It’s very different in terms of the amount of expertise involved compared to, say, running a TV campaign, which is more about contacts, experience and negotiation. PPC is a mathematical exercise that can be relatively simple.”
Rutherford points out, however, that ZenithOptimedia handles Toyota’s paid search as part of its wider media buying account because the brand believes the agency is best placed to have an overview of what proportion of its advertising budget should be spent on PPC.
Liz Baker, client service director for Digital Consortium, agrees that in-house teams usually know their products and services better than anyone else, but argues that being so close to the business can also be a disadvantage.
She claims: “Businesses can have a blind spot when it comes to what their customers actually search for, often using technical terms or jargon because they believe it is in common use but, in reality, it’s not. Some search terms are overlooked because they are not liked or used a lot in the industry, but consumers use them readily.”
While Steak will continue to work with John Lewis on its natural search, the loss of the paid account was mitigated somewhat when it was appointed to handle Debenhams’ paid search marketing in August. Steak has been tasked with delivering cutting-edge search campaigns and central to the brief was the requirement for an agency to challenge the status quo within the client business.
Steak chief executive Ollie Bishop claims: “Usually when clients take it in-house, the return on investment that’s been achieved by the agency slowly drops – eventually by more than what the agency fee would be.”
The benefits of agencies
It’s not just saving money on ROI that counts, he argues. Using an agency also cuts down on capital expenditure by reducing the need for clients to spend on building up resources and manpower. The client doesn’t need a specialist technology department, which can be expensive to set up.
“You’re investing a lot in certain individuals – if your main guy gets poached you’re in big trouble. I have got 30 paid search people in London and we have agency meetings to compare what new and exciting things we’re testing,” he says. “In-house teams are often put in the corner and just left to get on with it, whereas we can work with clients’ other agencies to come up with a holistic approach.”
Managing director of Jellyfish Rob Pierre agrees that the sheer scale of agencies and the breadth of experience makes it difficult for in-house teams to compete. He adds: “We have got such a cross-section of skills and experience and knowledge. One or two people, even if they’re the best in the world, can never be better than 80 people who are running campaigns every day at an agency.”
Executive planning director of MRM London, Ben Felton, acknowledges that search budgets have increased so much that there is a strong financial argument for taking PPC in-house, but claims there can be a problem attracting the best talent in-house. “The best people tend to go to the most exciting agencies where they can hone their skills on multiple accounts and varied campaigns integrating affiliate, PPC and other channels,” he claims.
A hybrid model, which ties together the best of agency experience with client knowledge is becoming increasingly popular. This may involve agencies licensing software to clients or even seconding their staff to brands in order to handle search until the in-house team is up to speed. One of the advantages of this approach, according to chairman of the Internet Advertising Bureau’s Search Council, Jack Wallington, is that it forces clients and agencies to work more closely.
“Communication between agencies and brands isn’t always as good as it should be,” he says. “It’s even more important in search that you don’t have the typical client-agency relationship problems, and I think we’ll see more of the hybrid model in the future.”
Motorola uses what it calls a “hub and spoke model”, hiring regional agencies in local markets to work with its in-house experts. The company has an SEO strategist who sits within its corporate division in the US and handles the overall strategy for search worldwide. He will then work with specialist agencies in different regions to implement the strategy.
Head of business-to-business interactive marketing Belinda Hudmon explains: “We’re a global organisation and have limited resources in our interactive team. We operate in over 40 countries. China, for example, has search engines like Baidu that we’re not familiar with so we rely on our agencies over there.”
She says that a hybrid model does not mean clients losing control when operated properly, adding: “It’s very important to get the balance right between in-house and external expertise. You need someone dedicated to making sure this is successful internally.”
Tamar, the natural search conversion agency, feels that the majority of large organisations will continue to outsource their search marketing, in the short term at least. Head of search Neilson Hall reports: “It’s difficult and time consuming to have the in-house specialist knowledge and resource required to be at the very forefront of the digital space. We’re working in an arena where the goalposts are constantly moving and having the agility to adapt quickly is going to be key.”
Horses for courses
Client services director at Efficient Frontier Europe, Jonathan Beeston, says that generalising is dangerous because every client has different needs. While the agency is retained to handle all paid search for M&S, it is the “technology partner” in a hybrid-style arrangement with Moneysupermarket.com, which runs the business in-house.
Beeston claims that the debate over outsourcing is not cut and dried. He says: “In-house versus outsourcing is a false dichotomy. What clients really want is the flexibility to use resources as they need it.
“With Moneysupermarket.com, we’re delivering the technology to help them manage paid search but the relationship is more than that – we’re also giving them strategic advice at board level. It ebbs and flows depending on the business.”
While it might be expected that most agencies would be against John Lewis handling its own search, co-founder and technology director of Ambergreen, Grant Whiteside, says each case should be judged on its own merits.
He concludes: “There’s no real right or wrong answer when it comes to the question of outsourcing versus in-house. Brands have to be realistic about their own resources and objectives and make decisions about what works best for them.”
Case Study: John Lewis
John Lewis took its multimillion pound paid search account in-house in August 2009 as part of a significant corporate investment in digital marketing.
The department store chain had worked with Steak for two years but decided it wanted more control over the account as it increased the product range on the site in a bid to become one of the leading online fashion retailers in the UK.
The company, which reported a 13.7% increase in year-on-year sales through Johnlewis.com for the first half of 2009, has been building up its in-house capabilities during its two years with Steak.
Development manager for online marketing Luke Kingsnorth, who joined John Lewis just after Steak was appointed, explains: “Steak did great things with our account, taking us from what was very basic paid search to a quite advanced, well-structured account.
He acknowledges Steak’s expertise in the field of search, but says that John Lewis’s in-house team now not only understands the technology but is better integrated into the overall business and its aims.
Kingsnorth is familiar with the argument that specialist agencies can offer experience and knowledge of industry trends in a way that is superior to in-house staff, but reports: “I’m reasonably confident.”
“We have four people in-house and our research manager is on top of 95% of all developments in the search industry. We have a really close relationship with Google and I don’t think we miss out on too much, but just in case we do, we’re keeping Steak close to us,” he says. Steak will continue to work on John Lewis’s natural search and will be available as consultants to the in-house team.
Brands thinking about taking their search accounts in-house must have complete faith in their employees, believes Kingsnorth. “The real challenge is finding the right people to manage it because it’s now such an important part of your online marketing mix,” he adds. “If you have any doubts you should use an agency.
“But I think we’ll see more of it. As search becomes a bigger part of clients’ media spend, they’ll want to have more control over it. Companies are prepared to invest in in-house human resources in a way they weren’t prepared to do before.”