Does it make sense to outsource your PPC advertising management? There’s no single right answer to this question. A great deal depends on the following:

1. Can your in-house team do the job well?
2. Can someone else do the job better?
3. If the answer to 2 is “yes,” will the difference be enough to cover the cost of their services less your internal management savings?

Consider the following metaphor: I need to do my taxes every year. When I was younger, I could fill out a 1040 EZ in about 10 minutes with an ink pen. As I’ve gotten older, the cost of doing my taxes myself has gone up (more time, plus software), and the chance of me making mistakes is increasing. At some point, outsourcing this task will be the only smart decision for me to make.

Similarly, with PPC advertising, if you have the right combination of in-house expertise, tools, bandwidth, and a marketplace where you can compete effectively with those tools, then DIY might make sense.

We believe, with lots of evidence to support us, that the answer to question 2 is “Yes” in almost every case. As the industry matures the level of complexity necessary to optimize for size and efficiency has grown beyond all but a handful of the very best in-house programs.

However, the answer to question 3 is not always “yes”. Sometimes the improvements from outsourcing aren’t worth the incremental costs. Perhaps the market is too small for improvements to amount to much, or the cost of outsourcing are too high, or some combination of the two.

Another reason outsourcing can fail is that, while there are companies that can do the job better than your internal team, your firm might not have hired one of those companies. Many SEM agencies are using tools that are no better — indeed they’re no different! — than the tools you can rent directly. Their ability to do the job better then DIY comes down to expertise and attentiveness of their staff versus yours, and they may not win that competition.

If you find that you or your team has to direct the term expansions, testing initiatives, bidding strategy etc, that’s a red flag warning that you may not be with the right agency.

It’s like hiring a company to do your taxes, finding out that they’re using Turbo Tax, and then finding out that they don’t really know any more about tax law than you do. I’d be pretty ticked off if that was the case. Indeed, if I have to direct them on the tactical issues it’s guaranteed that I’m wasting money: I’m paying them, I’m spending the time myself and the results won’t be any better than if I was doing the job directly.

The right outsourcing relationship should involve:

• trust (and data!) that the agency you chose has better tools than you could build or rent;
• recognition that they have tactical expertise and experience beyond that of your internal team;
• oversight and collaboration with respect to goals and general strategies rather than tactical details; and
• reduced need for internal management. You shouldn’t need a full-time employee sitting on your SEM firm unless your program is astronomically huge, or unless your agency is incompetent.

Outsourcing is a great choice for many retailers, but not all outsourcing solutions are good ones, and sometimes the DIY solution is the most cost effective.