Many Big SEO Firms Make Chicken Scratch

Jan 2nd

I recently got a copy of AdAge's year in review. Since the 2001 web bust almost every job field in advertising is flat or down, with the exception of a sharp growth in the number of people working as marketing consultants. AdAge also listed the top 20 search marketing firms. I think the 2006 numbers for the 20th firm had like 5 million in revenues with something like 260 employees. Some companies may not want to be on such a list for competitive reasons, but the companies on the list are likely rounding up on the numbers and counting whatever they can as revenue. That comes out to revenues of less than $20,000 per employee, which stinks when you consider that if you deliver any real value to the clients and are growing your business some of that spend needs to go into

  • doing market research
  • buying PPC ads
  • marketing your own consulting business
  • office related overhead
  • employee benefits
  • travel
  • taxes
  • creating custom software
  • buying links
  • etc.

Some of these companies have been around for 10 years and have CEOs who go to 20 or 30 conferences a year. I have been on the web less than 5 years and am already getting burned out on conferences. I could not imagine going to that many conferences when we have kids. And none of these companies made as much per employee as I do. Even my wife, who is still quite new to the web, is doing far better than these firms are at producing return. I am afraid that she might be beating me come this time next year. Gulp :)

The same day I read AdAge, another magazine about SEO came in that I do not remember subscribing to. Out of the whole magazine, I only saw 2 names I even recognized. I think many of the people who wrote articles also bought ads from the same site. Along with the magazine was an offer for an SEO contest where you pay a $5,000 entry fee, with the promise that the winner will be shopped to CIOs of fortune 500 companies.

  • First off, what firm is going to pay $5,000 to enter a contest?
  • Second, what client worth having is going to want to pay consultant rates only to have have third parties looking over their marketing? I have consulted some fortune 500s, and I can tell you that some of the ideas proposed by them and some of the ideas I proposed might not look pretty to third parties. If something works only because it is exclusive then where is the value in sharing it?
  • Third, what fortune 500 company that has not got into search yet is going to be impressed by some arbitrary paid award? And which of them got to the size of a fortune 500 company while moving that slowly on a large market (like search) without being the type of company that would research the background of such an award?

My partners and I are quite selective with what clients we are willing to take on, and we price toward the high end based on our brand strength and experience, but in most cases we only get a fraction of a fraction of the value created. I do not think that the SEO market is bleak though, I just think that companies who believe in it ultimately bring it in house, and after they have an in house team there is only so much they can pay external consultants before the competency of the in house team is questioned.

To appreciate how many people have an in house SEO team, even a search engine tried hiring me a while back, but that would have been a big pay cut. And I can not tell you how many times I have seen a mainstream media company write an article trashing SEO only to have someone from their in house SEO team send me an SEO question via email a week later.

As marketers we have to keep moving ourselves up the value chain. There is only so much value you can provide as a third party consultant. Adding 100 extra employees means that you are adding bulk workers for automation, but the best marketing can not be automated. And if you want scale it pays much better just to own your own site and network. Give me 200 SEOs (or maybe just 5 of them), a designer, a programmer, a few writers, and 5 years, and I should be able to create a BankRate, Monster.com, or a WebMD in whatever markets I aggressively pursue. And, according to the market, that pays much better than consulting work does.

Published: January 2, 2008

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Comments

January 2, 2008 - 6:51am

and it's far more satisfying to build something on your own from start to exit... vs. telling companies how they should be doing things while wearing a consultant's hat.

January 2, 2008 - 7:25am

I'm curious about this comment you made: "there is only so much they can pay external consultants before the competency of the in house team is questioned."

Could you explain that a bit more? I don't know if it's because I'm tired or what, but I did not get the entire meaning.

As for consulting, what makes you write that there's only so much value we can provide as a third-party consultant? Is it because we would not have control over the whole process (content creation, etc) as we would with managing our own niche sites?

I completely agree that there's more to be made in niche marketing than in SEO consulting. That makes sense. The overhead is so low...

January 2, 2008 - 8:24am

Hi Deborah
Lets say the in house SEO team costs 3 million dollars a year, and then they have to hire external consultants too. At what point does paying consulting become excessive if the internal team is already making $X?

Well by there is only so much value you can add as an external third party consultant is two fold

  1. the companies that really believe in SEO typically have an in house team, and the in house team can only reach out for so much consulting before they could risk looking incompetent and risk losing their jobs
  2. those that do not believe in search enough to have an in house team are not likely to want to spend too heavily on third party consulting. if the topic was high priority they would try to create an in house team.
January 2, 2008 - 9:41am

"...Give me 200 SEOs (or maybe just 5 of them), a designer, a programmer, a few writers, and 5 years, and I should be able to create a BankRate, Monster.com, or a WebMD in whatever markets I aggressively pursue. And, according to the market, that pays much better than consulting work does."

I completely agree with your observations on building your own thing - but don't really understand where you are coming from with the above. You being who you are, the stuff you are asking for (programmer, designer ...) are fairly easily accessible to you. So, why are you not doing it?

Nadin Rath

January 2, 2008 - 10:06am

Hi Nadin
In some ways I am doing it. A lot of stuff has been coming together over the past 2 years. I already have some sites that aspire to greatness and are on their way, and I should have a few big launches this month and next.

January 2, 2008 - 11:48am

I am almost baffled how a company could hire and SEO person either in house or out sourced.

In my perspective, everything must be controlled from top down, and the only person that can design the architecture this way is an SEO person.

I have trouble imagining also what to do with five SEO people, unless each works on a component, and then how do they all agree, SEO people do not agree.

I see SEO as the leaders of web teams only when in house.

January 2, 2008 - 2:56pm

I read about this competition in Visibility Magazine.... what a load of bollocks - nice earner for top seo's but come on.....

I work solo (and have done since I fell into this by mistake in 97) I made $75,000 last year - that's fine for me as I didn't break into a sweat and had a lovely summer.

I could triple that amount if I REALLY tried but to be honest I need a life and SEO has been able to give that to me .

I could employ people but have had to do that before when I had a pub + restaurant in Bath, England - employees are a pain in the arse so I am staying solo.

My dear wife is learning bit by bit and will take over some of the jobs when she is ready.

I have been an "in house" SEO Director twice and one position lasted an hour after I nearly got into a scrap with the IT guy....

The other IMO just didn't have a clue and wouldn't listen to me so off I went again.

Nice - work from home 400 sq ft tax write off plus all my comforts around me - hey I get to watch Chelsea live whilst sitting on my Google Bean Bag and working with my laptop - nice....

$5000 ??? I'll be a Bottom SEO and enjoy life

Happy New Year Everyone......

http://www.needagoodrank.com -<- couldn't help it ;)

January 2, 2008 - 3:36pm

Aaron,

I think you are misinterpreting something here... I at first did the same thing.

I believe the AdAge numbers you are looking at show "SEO/SEM Revenue" for that company at $5 million, but the 260 (or 280 something) employees aren't necessarily all SEOs. As such, the company could have made $20 million in revenue, only $5 million of which is "search-related", thus the revenue-per-employee is much higher than that.

At $20k total revenue per employee they would have to have all minimum-wage part-timers when you take out overhead and other costs!!! I believe its just that they did $5million attributable to SEM, but may have made alot more in Media Buys, etc. I know Avenue A | Razorfish who is listed high on that list makes alot of revenue in non-SEO/SEM areas of online marketing, such as media placement (read: banner ad placement).

- Jon (ephricon)

January 2, 2008 - 6:03pm

What a phenomenal post for the beginning of '08! You could not be more right on point with your ideas of how large SEO firms run. I have worked for very large SEO/SEM firms, have started and ran my own for a bit, and have also worked with small to medium sized businesses on a consultant level. And its true, unless you can charge your clients a very high rate, it is super difficult to make alot of money in this industry.

And we all know how difficult it is, and costly, to manage more staff! Its a royal pain. As professional search marketers we are better served to create our own niches and market within them. It is much more profitable, and easier.

I am glad that someone put this into words because I have been feeling this way about the SEO business for the past few months. Get out of my head Aaron!

January 2, 2008 - 6:07pm

I also got the two magazines mentioned, and concerning the second one, all I can say is... What the hell? Who are these "respected" writers? I also recognized only a couple names, and I also don't remember subscribing to it. Glad to hear I wasn't the only one with doubts.

January 2, 2008 - 9:13pm

Great article mate.

I agree that agencies that just work on SEO limit themselves. Design, PPC, analytics and CMS are other areas that can be added with serious value add.

I think I want to hold a competition - buy an award for $1,000. From the Frank the Tank Institute... have to make money to pay for my bar tab somehow.... the award will be a downloadable certificate and an empty beer bottle with a special label on it.

In House seo people will be more and more in demand - so maybe it is time to take Elite Retreat on a 20 city tour... hey once they see how hard it all is maybe they will just outsource to you guys!!!

January 2, 2008 - 10:08pm

I think the people here who brag about what they make are the lucky few. (If they aren't lying.)

I interviewed with an SEM firm here in Columbus, and I ended up bowing out of the process because I heard from a local contractor that they had problems paying their bills. The owner of the company is someone who speaks regularly at conferences and writes articles.

January 2, 2008 - 11:46pm

Hi Chris
I don't think anyone was bragging. As an individual who is passionate about a topic it is not hard to do well after years of effort, but SEO as a service just does not scale. And sure the people who do exceptionally well are in the minority, that is how capitalism and network forces work.

January 3, 2008 - 3:45am

Aaron,

You mention: "Adding 100 extra employees means that you are adding bulk workers for automation, but the best marketing can not be automated."

I agree 110%!

January 3, 2008 - 4:21pm

I do all my work - SEO, web development, manage clients, manage my servers, the lot. Overheads are low, and you can offer a personal service. No project managers, no consultants - my clients talk direct to the person who can answer their questions best - myself. I offer really low rates compared to the larger companies, but my earnings are more than I could earn if I was an employee. I work as hard as I like - just like David above I could earn more but I like my holidays and think I can offer better work just working at my own pace. Having said that, my availability to my clients is normally 7 days a week and evenings if need be (normally by email) - better than Mon-Fri 9-5 availability you get with companies.

January 3, 2008 - 6:16pm

Great Post. I think a lot of us in this industry, from consultants, to in-house SEO, to SEO's with their own networks have had an irksome feeling these past few months about the direction of this industry.

For someone who is relatively new (just over 1 year) I can say that working in an agency does not come close to the per hour earnings I make when I take on side consulting jobs. In terms of my own web sites, I do not have time to develop them to the levels where they can replace my salary to pay the bills.

This leads me to an open question. At one point do most SEO's quit the 9 to 5 to go solo? And also, how much and what kind of experience do you need before you sound marketable to potential clients?

Any feedback will be much appreciated.

~ Wage Serf

January 3, 2008 - 8:32pm

Hi Flipsideinvest
I quit my job when I was making $100 a month, but I had no family to support and was living in a trailer with a roommmate so I had virtually no living costs. :)

I think if

  • your site projects are enough to be self-sustaining or nearly so with growth
  • they are on rock solid foundations (clean domains with organic links etc)
  • you have a few months living cost
  • you really want to work for yourself
  • you feel comfortable making the switch

then you should go for it.

January 3, 2008 - 8:40pm

Thanks for the advice Aaron. I guess it is a matter of giving yourself the best fighting chance and then taking the leap of faith in your own ability. I will gruel it out a few more months and then take the plunge.

January 3, 2008 - 9:56pm

-- what firm is going to pay $5,000 to enter a contest?

You would be amazed.. I'm an airport bum most weekends and our local small town airport was named airport of the year for 2006.. Took us a while to figure out just how a run down, failing, small town airport could win airport of the year.. Seems the airport manager sent $5000 to a contest for airports and won.. Two other airports also entered and they also won..

Grand prize was a plaque for his office and a banner to put on the fence.. When we asked him about it he wasn't terribly excited to talk with us, but it did make him look good when the mayor drove by and saw that his hand picked airport manager had "won" airport of the year..

Not a bad return for the guy running the contest either.. $15,000 in entry fees and the cost of 3 plaques and 3 vinyl banners..

January 3, 2008 - 10:13pm

Funny. Great story. :)

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