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Study: Half of Small Digital Agencies Outsource SEO & Web Development

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A large percentage of SMBs outsource digital marketing because of time, expertise and resource constraints.  Interestingly enough, in some ways small to mid-sized online marketing agencies aren’t much different.

According to a new study by HubShout, of the most common online marketing services they provide, local boutique agencies outsource a good portion of the work they do.  SEO and website development – the top two according to the study in regards to client allocation of online marketing spend – led the way, being outsourced by 52% and 58% of these agencies respectively.

On the low end of the scale is reputation management and social media, with 25% of agencies saying they outsource this work. One in four agencies is nothing to scoff at, especially when, technically, all of the services these agencies provide could be managed in-house with the proper know-how and strategy.

With clients of small agencies spending over half of spend on websites and SEO, and with over half of these agencies outsourcing this work, the question is, where is this spend going? Simply put, national vendors.  According to a recent study from Borrell Associates, national vendors earn around 60% of web presence spend or about $54B more than what is spent with local vendors.

The Borrell study showed that the most cited national vendors for web presence support included Facebook, Frogman, GoDaddy, Google, HubSpot, SquareSspace, Dex Media, Web.com, Weebly and Yahoo.

What is most interesting when comparing the Borrell and HubShout studies is the notion of competition.  While Borrell’s study suggests competition for digital marketing spend is intense, HubShout seems to be showing it is half as intense as we thought. Many of these small, local digital marketing agencies are willingly giving spend away to their larger competitors.

While we can definitely attribute some of this outsourcing to resource constraints, the larger picture is probably more complex than that.  Small agencies, much like their SMB counterparts, and even national brands, are challenged by a complex and fragmented digital marketplace.

On the question of effectiveness, in a recent BrightLocal survey 11% of “marketing” SMBs – digital marketing, marketing consultants, and local SEO agencies – reported internet marketing to be “not effective.” While 11% isn’t much, it is interesting when considering that these SMBs are selling and providing the very services they don’t find effective!

A few weeks ago I discussed the way in which overall industry understanding of digital marketing continues to be one step behind tech, platforms and software developments.  I think this is equally or even more applicable to the small digital marketing agency. But if these agencies are to ultimately succeed, they will need to do what it takes to bring this spend in-house. After all, they have one huge benefit that many national vendors don’t: they are local.

12 Responses to “Study: Half of Small Digital Agencies Outsource SEO & Web Development”

  1. Josh N says:

    Fifty percent is a lot. Good info!

  2. John B says:

    a lot of great information here

  3. Jason G says:

    Outsourcing makes so much sense for every business. Let your sales people sell and let the pros do the work. I’m a firm believer that people should stick to their area of expertise. IT makes for better results for all involved.

  4. Marc says:

    I am not surprised. People underestimate how much time it takes to efficiently implement SEO and website design.

  5. jamie burrows says:

    Is the glass half full, or half empty?

  6. Andrew says:

    Outsourcing SEO just makes sense. Why waste the time, money, and effort trying to learn a strategy that’s always evolving? It’s easier (and smarter) to let the pros take care of it.

  7. Mari says:

    very interesting how the field plays out when you take reselling into account

  8. Madeline Schoeck says:

    “Small agencies, much like their SMB counterparts, and even national brands, are challenged by a complex and fragmented digital marketplace.”
    I loved this description. I’ve run into several people in the last few weeks who were trying to change up their company’s marketing efforts and had no idea where to start because of the variety of options and challenge of creating a comprehensive brand identity.

  9. Stephanie D says:

    Honestly, I wish more small businesses would give a little more attention to their web development — if only half of them are outsourcing that might explain why there are so many awful websites still out there.

  10. Chad Hill says:

    Joe. Thanks for the coverage and the interesting analysis. I think there are 2 things that could explain some of the contradictions in the Borell and our study.

    First, many of the agencies are outsourcing a portion of their SEO but not necessarily all of it. We didn’t dig into what portion they outsource. For example, many people are using outsourced writing services to handle their content requirements but they may still be handling other parts of the SEO services. We plan to explore how much of the SEO they outsource when we repeat this study at the end of the year.

    Additionally, many small agencies are looking for ways to differentiate and also to validate their offering. Many small agencies are becoming Hubspot certified because it elevates their brand by being associated with Hubspot. The same is true with Google and some of the others you mentioned. Many agencies are more than happy to give up a small percentage of their fee to these companies and keep the service work. As an example, a Hubspot license may cost $800 or $1000 per month but the ongoing services work to execute Hubspot’s recommended tactics could be an additional $2000 or $3000 / month.

  11. What’s interesting, I would love to see how many agencies of those 11% outsource those marketing activities… I bet a good deal, since most outsourcing service providers are not that good and usually focus on low quality activities that sometimes hurt websites more than help.

    I’ve had many people approach me to white label our services 🙂 But I always turn them down because I LOVE having direct relationships with SMBs to nurture them and be a trusted adviser… not just another vendor.

  12. Nowdays it is very important for a small business to hire a digital marketing agency specially if we see the competition among them. So I totally agree with Joe and hopefully the digital marketing industry will go to a new high in the coming years.

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