Outsourcing is sometimes noted as a negative term and it doesn’t just occur with telemarketing or programming jobs.  Would you believe that search marketing jobs are outsourced to low-cost labor countries?

Outsourcing online marketing which consists of search engine marketing, managed paid advertising and search engine optimization began in 2002. This is when companies and people started recognizing how important SEO was and how it could benefit a expanding online business.  The initial bunch of entrepreneurs used search engines to look for people or companies that were based in other countries and could carry out SEO projects.  This is also the same time some SEO agencies began to outsource link building projects to businesses overseas, primarily in India.

The results of these outsourcing cases were mixed. Along with the genuine companies who were just trying to provide a reputable service there were some fraudulent people also trying to make some easy money on the Internet.  Many of those who lost money could not do anything about it legally because the crooks were outside of the United States and got their payments from wire transfers, PayPal and check.

The fundamental reasons for outsourcing are strong and it can be a good way to do business.  What started as an experiment has expanded into a large industry.  But is money the main reason for outsourcing?

Outsourcing Cartoon - TechCrunch

Why do we outsource search marketing?

Higher Labor Costs
The main reason small businesses accept outsourcing is that there is a high cost of labor in the United States.  A typical search marketing agency can bill $50-$500 per hour.  With outsourcing you could expect to spend $10-$35 per hour.

Small Advertisers Don’t Get Enough Attention
Lots of great search marketing agencies have more work then they can get done.  This makes them focus on the bigger advertisers, and not the smaller ones.  Smaller advertisers get a greater response from outsourced agencies, where they are not just another number.

Why do agencies outsource?

There Aren’t Enough Skilled People
The industry of search marketing is pretty new. And in my opinion the term “SEO” is very misused.  There are many skilled people who are knowledgeable of the industry, and a lot of them have their own business or are doing affiliate marketing to make money. They don’t want to do any outsourced work unless they are making a pretty penny. There is the choice to train people from related industries and teach them the process, but that can take quite a long time. With the internet changing every day, and Google (most importantly) altering their algorithm for how they rank pages so frequently keeping up on “SEO” as a whole is not an easy task. The “right” person has to have a drive to market “anything” online. That’s the person you want to invest it in.

The Advantage of Cost
Many search agencies will try to get 2,000 billable hours every year from employees.  This could cost a company a minimum of $100,000 for just one employee at $50 per man hour.  To make a profit, the agency would have to sell the time from $75-$500 per hour, depending on the internal revenue computations.  When you outsource these duties for $10-$30 per hour, agencies shrink the cost to their business and expand their margins.

Basic Competency
Only a few agencies have basic competencies for both SEO and PPC, but many of their clients will need both services.  Joining with a local company may create future competitors or may be a conflict of interest.  In this situation, agencies will want to work with outsourced vendors.  Now they will have another service to cross-sell to clients and not worry about losing them.

Benefits & Insurance Costs
Benefits that full-time employees receive, like healthcare, social security and pension will result in high costs for a digital agency.  If an agency were to outsource, they could save on some of the costs.  If your company chooses to look into outsourcing, you should be very thorough.

If your business is looking to outsource, here are some pointers you will need to know:

Individuals vs. Companies
A company is typically preferred over one individual.  Working with only one person can be hard depending on their personality and how much time they devote to your account or giving you assistance.  In a company, there is usually a group working on one account and someone from that group will be around at all times.  If you work with only one person, they could have personal problems that will get in the way of your project. A company will more likely have more structure, more stability. With individuals and freelancers (based on reputation) you could be working one day and the next they are gone like dust in the wind. I’ve seen it happen all too many times.

Studies, References, and Testimonials
Ask the agency or person to give you one or two case studies so you can look them over and check for the accuracy.  Get references and testimonials.  Call those references and ask how their relationship was with the agency. How was performance, payment terms and overall work product?

Time Zones
Many outsourced vendors are in a different time zone.  Ask if there are any people who work for them in the US and always consider the vendors who have people in your time zone more than other companies. See if your new agency or freelancer can be available on your time zone via Instant Message, Email and phone. It will help many issues become resolved before they snowball. Believe me, I know from experience.

Local Number
Is the vendor offering a local US contact number or a toll free number?  If they don’t you should not forget how expensive long distance conversations can get. If not look in to a Skype phone that is voice or IP. This could save you a ton and the technology has come a long way.

Payment Methods
If wire transfers are only accepted, this is a warning sign.  Make sure there is a payment option for credit cards, especially in the beginning.  This way if you are unsatisfied or don’t get a complete service, you can contest your transaction with the credit card company and not some agency or individual 10,000 miles away.

Support and Reporting
Ask the vendor how often reports are and what kinds of customer support are offered.  Email is usually the typical form of support, but you need to be sure that the vendor has 1 day of turnaround time for email support.  There are vendors who offer instant message chat support; be sure to see if that is available for you. Many outsourcing vendors will have people working in a few shifts, so you will be able to get a hold of someone when you are in a different time zone.  There may not be telephone support but it may be available when problems arise.

Agencies should also think about these items before they outsource:

Non-Disclosure Agreements and Confidentiality
You need to sign both non-disclosure agreements and confidentiality agreements so your clients aren’t pursued if you no longer work with the agency.  There should be a clause that says the company can’t pursue your clients for two years after your agreement has expired and make sure it stands in your country’s and their country’s court of law.

Private Label Service
See if the company gives a private label service, so any reports that are sent to you will be branded in your company name.  You can save time and energy this way when the logos and other brand elements are inserted.  Branded email support is also a nice touch once you have an established trusting relationship with the outsourced agency.

Experience with Other Agencies
Ask if the company is working with other agencies.  It is different working with an end client and an agency, because of the confidentiality matters.  It is hard to get references of agencies, but you should attempt to get the references of agencies that are international.  If you are in the US, ask if the company is working with Canadian agencies.

Identify the Scope of the Work
It’s vital to identify the scope of the work or the duties you would like outsourced, so it’s easier for the other company to comprehend your requirements and get them done.

Employee Skill and Experience
See how many people the company has hired and ask about their capacity for work.  Now you will be able to judge if they can handle the volume of work you might have in the future. Find out from your point person how many years on average a person is employed with the company. How much do they devote to training? Where do they find their employees? What is their client retention level on average?

Direct Clients vs. Agencies
Ask the company what percentage of clients are direct clients and what percentage are agencies.  If there is a larger agency percentage then you are blessed.

Exit Clause
It is important to have an exit clause in your contract in case their performance, communication and work product has issues.

When two businesses start working together, the first couple months can be a challenge to get through.  This is only from trying to learn work styles and understand how each does their business.  When this is over, matters should start moving along swimmingly.

Many times, agencies will choose to work with one company.  It makes things easier to manage, but it might not always enough working with just one company.

Agencies can go after another option, like Google, who opened two offices in India to handle global support for AdWords and AdSense.

Outsourcing search marketing to countries with lower labor costs can help you save money and can give you better service.  You do need be very meticulous when going through all the steps to select a vendor.  Outsourcing should be used to the advantage of US companies by sending their labor-intensive tasks overseas.  Companies can use their US-bases employees as a link between the clients and the outsourced vendor.

Do your homework and consider all options and in the end ask yourself “can outsourcing really save and make me money in the long run?”

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