SEO companies have more experience and expertise in site optimization and search marketing, and more likely to stay abreast of recent changes in technologies and changing search marketing landscape.  Ad agencies and web design firms can provide a more holistic approach to search marketing, and may determine a more appropriate assessment of SEO needs and costs.  These firms may not assign their best expertise to SEO work, however, and may outsource the work.

Companies that are serious about site optimization and have decided to outsource this work have to decide early on if they want to have it done by an ad agency or web design firm or by an actual SEO firm.  There are some aforementioned companies which do SEO work, but it is hard for such non-specialists to keep up with the contanstly changing demands of web design and engine optimization.

The basics of achieving high engine rankings have not really changed, but the actual search engine landscape is in a constant state of flux.  Dedicated SEO consultants work hard to stay abreast of the curve, whereas a non-specialist might still be deciding what to put in your meta keyword tag.  Also, ad agencies and web design firms which look at SEO as a secondary revenue stream might not accord it the same importance as other company services, meaning that their best expertise may not go there.  

These firms may decide to outsource their own SEO work altogether, to dedicated SEO firms and specialists, which means that a third party may have access to your own company's confidential data.  In this case, you would also have to trust that your agency or web design firm has hired the right SEO people, since you did not bring them on yourself.  

Large ad agencies are now starting to win more SEO contracts, however, so it is worthwhile to briefly consider some of the advantages they might offer:

1. A holistic campaign approach

A major advantage of going with a regular ad agency is that they can view your SEO campaign in a larger context, in terms of how it fits in with other campaign work, such as wireless or other online advertising.  Experienced in various creative and targeted marketing techniques, these agencies can draw on their wide range of expertise and experience when devising search marketing strategies.  Agency reports can also incorporate the metrics of an SEO campaign's success into the larger picture.

2. Providing only the basic work needed

Ad agencies might be able to better ascertain how your search marketing objectives correlate with your larger objectives, and thus determine more approrpiate SEO costs and work for your company.  SEO firms may not see your bigger picture as well, and as such may overestimate your SEO needs.

3. Providing a less expensive solution (maybe)

SEO firms overestimating your optimization needs will also overestimate your optimization costs.  Larger SEO firms may pressure you to spend more on their services, since small projects may not be worth it for them.

There are obvious advantages and disadvantages to both approaches, then, and the size of the firms being considered will be an important factor.  Ad agencies and web design companies do not have the same level of experience and expertise in site optimization and search marketing that actual SEO firms have, however, and that may be the deciding factor.  If you have real important SEO work to do, you might want to go with a real SEO company!