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This post started out as comments I was making on Mark Cubans blog as I started to type the comments it quickly became apparent that I had far more then a few comments on the situation.  However, given that this post is still at least in part a response to Mark’s post you may want to take a look at his post, which was called, The Google Brilliance applied to Newspapers and Local Media. 

For those that do not want to read Mark’s article let me summarize the jist of it.  Mark correctly assumes there are thousands of local businesses that don’t know how to advertise online and that advertising sales people for Newspapers and other local media are best equipped to reach them in face to face sales environment.  Mark states that a company that had a staff of good web marketers familiar with local targeting could basically sell web marketing as an “add on” to their current services.

Having worked in the search engine marketing space for a long time now I can tell you that this is already happening all over but it is not really a good thing.  The reality is the SEM/SEO industry is still quite young and the actual number of people who are any good at it AND are available to hire is relatively low.   Many companies “add on” a “web division” which all to often is one or two people with very basic skills, the “division” then under performs and yet more potential clients start to see Internet marketing as some form of “black magic” and swear off it forever.

The key to understanding this issue is you must accept the fact that if a person knows what they are doing in these areas it is really easy for them to make far more then the average American salary independently.  They can do so from an extra bedroom with a DSL connection and never even have to speak to a customer.  I am not saying it is not good to actually speak to customers it is really a great way to do business especially locally.  

I also think Mark is correct that a decent sales person could easily sell this type of service as an "add on" and in fact with a perhaps two days worth of sales training the sales force could probably “add on” some internet marketing to 60-70% of their new contracts and perhaps even do better when working their existing account bases.  The issues will not be the ability to sell the service no they will be much more complicated and really be about the ability to deliver service at a profit.

First issue, as these are local stores they will on average spend say 1,000 dollars or less a month.  With local advertising and small businesses it is often hard to spend more then 1,000 dollars effectively even if the client is willing to do so.  A standard industry charge is 20% of spend or 200 dollars though many firms have a minimum in the range of 300 dollars.  So say each small business customer is worth say 300 dollars in gross revenue.

Now that means I have to serve 10 customers to net 3000 dollars before expenses, taxes, etc.  Right?

OK now that is going to take what say 10 hours a month per customer of work to insure that bids are right, adjustments are made, etc.  PPC is NOT an auto pilot process it requires good management to be done properly.  So now lets see at 100 hours a month for 10 customers I will need to have about 20 to employ one full time person.  

My net will be about 6K and I have to pay this person.  Paying anyone who actually knows what they are doing with SEM under 50K a year is getting really hard to do and even when you find one who is decent for a wage at that rate it is only a matter of time before they are stolen by someone paying 70-80K or more then my gross on 20 customers.  

It should be noted that in some markets my figures are honestly low enough to be laughable and in a few others they might be considered a little high.

Now on top of this thin margin I have to deal with customer service, billing, invoicing, etc to make 10,000-20,000 dollars in gross profit a year.  Then with that I have to insure my employees, pay for office space, etc.  A small time guy who knows what he is doing could just build an account base of 20-30 and keep all the money though right?  Well the issue is the same for him, invoicing, dealing with questions, dealing with turn over of clients, having to sell and work.  Most would choose to simply run a few specialized sites, run some Google adSense, build some email lists and do some other affiliate marketing.  Each month they get a check and Google, Amazon.com and their other vendors can deal with all the customer service stuff.

Now none of this means the business model is that bad, the reality is most SEO/SEM firms serve a lot of these clients in of this size and blended in with a good base of organic clients paying 2,000 – 4,000 dollars a month for optimization and a few big spend PPC accounts in the range of 10,000 to 25,000 dollars a month each (grossing about say 2K average in revenue) a sound business model is built.  I am not even going to directly address organic SEO directly because it is far more labor intensive and requires a more advanced skill set then PPC, so it would just magnify the issue.

Then it still comes back to one thing, competing for talent!  If you know what you are doing the reality is making 40-50K a year after taxes with adSense, affiliate marketing and some direct informational product sales and perhaps some lead generation is really pretty easy to do.

Now what does that mean?  It means that every truly qualified applicant you interview has the ability to self fund a minimum of 40,000 dollars in annual income for themselves relatively quickly and much more over time.  Trust me when I tell you that these applicants know this is the case and to make it worse; if they are really any good they are probably already making 15-20K part time on their own.  

Personally I would not even consider hiring a web marketer unless they were making some money for themselves. To do so would be like hiring a financial adviser who was broke or a Drivers Ed teacher who has never driven a car.  Both of them may be able to speak about the subject but neither is even remotely qualified for the job.

So how do you hire good search engine marketers?  It isn’t easy, you need to have the ability to provide health insurance because that is a big draw, self insuring can easily cost a family of four close to 20,000 a year so that is a big carrot a sizable employer can offer.  Yet the draw to work for one’s self is huge as well and once up and running an individual can take a week off a month every month and still do very well.  By working really hard in the first year you can make enough to pay that high insurance cost and if a spouse has access to insurance via their job, well that is off the table.

What you are left with are people who will either

One, work for a high salary and accept it as a good trade in dollars for their time.  They will work really hard and give you 40-50 hours a week and not much more.  They will probably work 70-100 hours a week  but 30-50 will be on their own time and invested in their own projects.  In doing so they are laying the groundwork to a day when they can say goodbye to you.  They are probably laying up a big savings account with all their “side money”.  There is nothing wrong with this but if you are an employer you have to realize only a solid six figures will keep real talent on payroll for very long in the current market.  

Two, you get the people who are just employees by nature.  They want a job, they want security and they want to have an office to come to each day.  The issue here is those who really fit into and stay in this mold are never the best at SEM, as it requires such an entrepreneur mindset to be good at in the first place.  Second is if they get good in time with your training and system it will only be a matter of time until they become the first example mentioned above and then transition out of “employment”.

None of this would be all that bad, except for the fact that all types, the real experts that will only work for 6 figures or more and still eventually leave, the solid performers that will take 50-80K for some security and benefits and the regular employee with a minimal skill set that will still cost 35-50K are all in very short supply right now.  Let me be clear, finding a person who will claim to be a good Internet Marketer is not difficult but finding one, who can produce, even at a minimum respectable level and is till willing to take a full time job and is available for hire is very difficult.

This all stems from one key question.  Where do these people come from in the first place?  There is no college currently teaching Internet Marketing and with the inherent inefficiency of the bureaucracy of the educational system by the time they got the course developed it would already be out of date.  Even if there was a course how do you get a “master” to work for a “teacher’s wages”?  Further if the master is a true master he will teach his students to be self guided and how to generate money, which will make them self employed before graduation.  Let me drive that home one more time.  A true master teacher of Internet marketing would have students that would be self employed BEFORE they graduate.  Can you name another profession where that is true?

So how do you learn?  You either lean on your own or via some type of mentor, (most do a lot of both) and unlike school where you get a grade and a diploma you make progress by first getting some basic fundamental skill sets and then immediately start making money.  So those who know how to do effective Internet Marketing are almost all generating their own incomes by they time they have any real level of efficiency.  Even when you take a person with a basic PC skill set and train them in house if they really have an aptitude they quickly, “see the light” and become at least partially self employed.

The reality is that people are not very likely to work for someone if they can make more working for themselves.  The shortage of good Internet marketing people for hire is not going to get better anytime soon, the market will continue to grow larger and the opportunities online will continue to increase.  The Internet is so fragmented and so diverse that anyone with a good understanding of SEM fundamentals and some reasonable financial resources can produce income and the better you become the more you make.

This is definitely not a shot at some of the really top Internet Marketers who are working for companies in the role of an employee.  Some are being paid what they are worth and that has always been a way to attract top talent.  Many of them enjoy a lot of flexibility and are free to do a lot of their own things on their own time and are even encouraged to blend both worlds.  Some just love their employers and believe in the company mission, yet this is the exceptional individual and most sooner or later will become so successful that they realize they “can’t afford to work for anyone, any longer”.

To those that work for or run SEO/SEM firms how do you attract and retain your talent?  What flexible arrangements do you make to accommodate your people?  Finally do you feel that our shortage of talent is going to grow or decline in the next five years?

~ Jack Spirko

Technorati Tags: sem, seo, search engine marketing, business ideas, pay per click, internet marketing, seo firms, local search, local advertising, local media, search engine optimization, ppc, pay per click management, mark cuban, business

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