local media insider

How to start a digital services agency

Alisa Cromer
Posted

LocalMediaInsider looked at 15 successful start-ups of digital services for this report. Included: Why media are starting agencies, What kinds of services to select, Realistic revenue expectations, Vendors used, Best sales force strategies, Why reporting is the product and  the role of advertiser webinars. A break down of the various models of agencies is also included (and listed in a separate report).

Most of this focuses in on what does work, since we don't case study the failures. However, cases where initiatives have failed fall into two categories: First, the "marketing" was really just one product and did not address the central needs of merchants in the market place. That is, if one service or a couple of services are launched, rather than a logical bundle that meets the needs of merchants, it may be percieved as creating another cost rather than solving a problem. An example is trying to sell directory listings alone, without also seling corrections across multiple directories, a mobile site, and other needs that create a complete "digital starter-kit."

The second circumstance where problems arise is when the sales force was not organized to support the effort. New initiatives require training, evangelism, focus and top-down leadership. Anything less will not succeed. Projects with lower performance are typically ones in which either a separate digital team is too isolated from the existing account base to leverage it, or, on the other hand, the existing sales team has too many initiatives to accomodate yet another point of focus. 

Having said this, selling digital marketing has been a positive experience at all of the case While first year profits are common, if that is the objective, other companies think longer term and bigger,  investing more resources in initiatives counting on larger profits in a two year period. 

1.Why media are starting digital marketing agencies 
Owning an advertising agency used to mean charging top dollar to develop creative and place media buys. But today, most merchants want help developing their web and social media presence and learning how to turn web and social presence into leads and leads into new customers.  With a dizzying explosion of marketing avenues and tools, many are simply paralyzed by choice and will take help when offered the right way. In fact the demand for trusted, understandable, inexpensive help with developing web and social marketing is a growth market. This provides an opportunity for local media to get back in business as the leading provider of marketing for local merchants in their area.

Local media who have delved into selling digital marketing have grasped this opportunity to sell into a growth market, while also accomplishing important objectives:

• Exponentially increase active customers and market penetration by reaching non-traditional advertisers

• Support true needs-based selling by providing more kinds of services that can meet a variety of merchant interests, especially the inclusion of “be found” pull services available now via intereactive media, as well as traditional "push" marketing delivered by display and on-are ads

• Secure new traditional advertising campaigns. Once merchants web and social presence is solid, and conversion-tracking via landing pages viable, merchants are more likely to invest in programs that drive leads, whether via contesting, discounts, events or other initiatives.

• Rebrand  media as a digitally savvy.

• Create an annuity. While some digital services sales look small - $130 a week or even month - these sales are typically annual and can build up an annuity, plus up selling opportunities.

While the closing cycle per client is slower than a traditional media sale, LMI case studies show that companies can cash flow first year  35 or so accounts within five day of a single workshop, on annual plans worth $6000 to $10,0000 a year. New revenues in even smaller markets is coming in at $150,000 to $300,000 in first year contracts, with margins in the $50,000 to $100,000 range for companies that have invested conservatively. 


2. What kind of services to offer
LocalMediaInsider has provided a variety of case studies on selling digital marketings, all of which have taken a slightly different approach to offering services - from a single set of packages  offered inhouse to a complete suite managed by a third party. So before going into the process of selection, it may be helpful to review "what's out there" and what combinations are working. 

Some companies have chosen to "start with what they have, plus a little more" - typically reputation management and listing distribution - and add additional capabilities slowly. This is especially true in smaller markets where merchants are struggling just to launch web sites. 

In other cases, companies have chosen to dive-in with turnkey partnership and a wide array of services. The latter decision may be driven either by the competition (anything less is not competitive) or the desire to conquer territory more rapidly at the expense of early margins (split with the third party). In general there also needs to be some kind of extra on-going marketing that is monetizable (Facebook management, SMS, PPC, contesting, etc.) in the package so that merchants continue to generate leads rather than just paying for hosted solutions - and so media companies can earn long term revenues from each merchant. 

Here are some of the first  basic approaches with links to the case studies: 

a.SoloMo – The basic SoLoMo product set exemplified by Morris Communications' initiative (case study here), is built around Social (reputation management ), local (directory listing and placement across many directory), mobile (simple site, with sms and mobile banner ads). The SMS product encourages traditional display advertising since it requires push-media, although in this case Morris included mobile display which pairs well with SMS and of which there was an abundance of inventory. This basic package is a good ‘starter,' (note that Morris did not significantly change it more more than a year, though are now transitioning to LocalEdge, a Hearst product suite, executives say).  Merchants are willing to continue to pay for programs where they see demontrable change in their organic rankings without spending thousands on fly-by-night "digital specialists." Adding SMS helps to create longer term marketing strategies. 

b.SoLoMoSho – Coined by executives at Rust Communications who launched this model in one market over the summer, SoLoMoSho adds video to the mix, rather than focusing on SMS. Rust calls their marketing package, "ShopTalk." It relies on a basic set of services starting with a profile in the company's "Marketplace' section, and including a professionally produced video that is distributed on the Marketplace profile, plus YouTube and the clients' web site. A key aspect of this program - which executives say will clear $50,000 in profits on $150,000 in new revenues in one market its first year - is the quality of the video (LMI has see the results and work produced by the local videographer is exceptional). Packages all include a print component with QR Codes.

c.Solomoshoblo – The original idea for ShopTalk came from the much larger Metroland Media (case study here), that added $1 million in new revenues across ten sites in 2011. Adding a managed blogging schedule to  print QR codes completed the “shopping place” model and provided extra SEO. While Rust used its existing Marketplace, Metroland built their own, and the division is run by a former television producer which as helped to streamline video production.

"Video is critical marketing tool for every single business. If you create a video for a business they can utiliize it in many ways,"  said Meriel Bradley, Director of The Digital Video Group.

Metroland's version incorporates merchant blogs as content on the ShopTalk site.

d. Focus on Facebook and other social media services. Social media is in high demand by local merchants who need help understanding new channels and also  in turning customers into fans and fans into leads. So basic custom Facebook set-up packages have  natural upsells to managed services and contests, the latter of which requires more traditional push media and produces big, measurable results for clients. 

Most media companies include "social" as just one set of services, however, a few companies selected social as the core focus and built other services around it. One such effort at a newspaper company is GetitSocial (case study here) created at Lee Enterprises. There are three tiers of sales packages:  A first one that helps clients get their social presence "established," followed by a managed program with contests that gets fans "engaged" adn a third tier for high end customers. Lee uses a variety of vendors (included in the case study) to scale the program, which now totals 250 multiple-month accounts in its  first year (late 2011-2012). 

Broadcast company E.W. Scripps also went straight for the big money, launching a full-on Facebook strategies initiative supported by ad workshops (case study here). Scripps did not rebrand a separate division, but in other aspects, however, the initiative looks remarkably similar to other agency service models: Educating advertisers via workshops, building simple entry forms for merchants' pages, managing long-term fan engagement and conversion strategies and reporting results. 

Social media is also one of a suite of services is a model exemplified by NextMedia360 (case study here). NextMedia360 added customized social media and social media management two years  into the launch of its digital agency. Executives say they should have done it sooner. 

e. Focus on SEM and SEO, with leads-based reporting. 
SEM is typically more difficult with edgey margins,and left for companies with more digital sophistication. However, large companies such as McClatchy's ImpresLocal launched in mid 2012 with a focus on leads tracked by a new integrated dashboard and univerasl landinag page (case study here) and Dow Jones Regional Media group (case study here) have moved strongly into that sector as the key element  of its digital services program, largely because of the abiltiy to produce measurable leads.

While Dow Jones launched ahead of the pack in 2011, and simply used a corporate team to support the effort without rebranding, McClatchy's initiative, ImpresLocal is especially interesting.  The new agency focuses on SEM in a fairly small initial product set, but one that includes a customer landing page to track conversions and the conversion-tracking dashboard developed with TruMeasure. This focus starts out right by allowing reps to prove "leads" not just clicks or impressions; more products will be added later. 

f.Hourly services package on a Flex plan. This is an interesting concept created by NextMedia360 (see examples here) that includes packaging set services with a certain number of hours that can be used for anything, see the services broken into units and packages. The case study includes a chart of billing units that is a good starting point for other local media considering this model. 

g.Addition of email. Increasingly targeted e-blasts have been added to the mix of marketing services offered. Skill-sets and resources deployed to create email audiences daily deals are a hidden resource that companies can expand and monetize. The Washington Suburban Press Network (case study here) built an entire agency  around its 108 suburban newspaper members based largely on targeted e-blasts to 25 or so e-mail categories. But even small markets are adding targeted emails to the product set as something they have current skills to deploy, as shown by the Kenosha News case study. Typically, local media who have moved into this area have needed to upgrade their email capture process to add more targeting, and many are using the vendor Presslaff to achieve this, including The ElkhartTruth. 

h.Turnkey solutions with comprehensive products. A further option is to use a provider to "fill in the gaps" in skill sets that the local media doesn't have. Hearst's LocalEdge; Gatehouse' Propel Digital, and two independent companies, Guaranteed Digital and Dream Local Digital, all provide support plus back-end fulfillment. The latter two provide hands-on in-market training, conduct the ad workshops and support a wide variety of products and services. The case study on Kenosha News shows how they used this model to develop $25,000 a month in digital revenues in six months of 2012. 

By 2014, most agencies had or were working toward a full-service model, leaving newer players further behind. So get in the game if you are considering this as an option. 

3.Where to start?

With all of these options to consider, boiling down the right choice for a particular market requires assessment of the market - and of your own company and its long term objectives.

Sending a market questionnaire to prospects first.  To really know  and understand what potential advertisers are thinking about right now, a simple prospect survey will go along way. Dream Local Digital also uses this approach before entering a market. Like media companies, markets have different levels of sophistication - and competition. Use this link for a quick ten question survey to plug into Survey Monkey. (Note: One member who used this survey reported 45% of respondents had a demand for at least one of the non-traditional servcies offered). 

Make a list of existing skill-sets, products and competencies within the company.  What competencies, skills and partners does your company already have inhouse, what does the executive team think is critical to develop inhouse right now, and what can be outsourced. On this list be sure to cover all the list options: Video, SEO, SEM, Facebook contesting and management, email deployment, blogging, etc.

Next, rate how easily these competencies  can be adapted for sales to third parties. That means how easy would it be to redeploy current staff to absorb or manage the extra work. In many cases the skills may be there, but the staff may be unwilling and a re-organization unworkable. So to keep your list realistic put an "A" or "B" or "C" next to staff based on whether they are "gung ho, on the team," will do it if asked, or think it's "not their job" to help with the new deployment. It's your right to start over with a different more responsive team, but that also takes time, and time is a factor in deciding whether to peck away at a new division using people who are passively resistant, or hire from the outside. We've seen great success from existing teams that get an A+ for passion but needed an outside turnkey platform to create the skill set, and project flop when organizations had the skill sets but not the buy in. 

Last, assess the key company objectives in launching digital marketing sales. How important is it to make money first year? To launch with a full suite quickly, versus adding on to a basic set?  To re-take marketshare from a variety of competitors? Some of this depends on longer term objectives. If the market is very competitive, a strong start may be neccesary to catch up and stay  in the game. If not, a strong start may still be desired to take advantage of the opportunity  - and that may mean a turnkey provider to help fill in the gaps. If, on the other hand, there is a large opportunity to win a key area, such as email or facebook contesting, a strategy apporach that generates revenue quickly may want to focus just on those areas first.

Keep in mind a couple of factors when rolling out digital services that there are some lessons to be learned from those who started first:

a. Typically there is strong interest right now from merchants  in Facebook and other social media – especially in how to converst fans into leads. This is a big "hook"  for getting merchants to seminars, and may be worth considering. 

b. Look for combinations that both move the dial for merchants in terms of lead-generation and create an annuity. For example, SMS and Facebook contesting both require extra push-media support and have upsells to annual management. Typically upselling packages should include trackable benefits that can get merchants excited about annual programs.

c. Decide on turnkey programs versus going alone. Turnkey vendors such as Dream Local Digital and Guaranteed Digital may be a good option if your company is missing many or most of the key skills needed to launch a high-demand set of packages - or if they are serious about "needs based selling." 

In all cases,  avoid launching one product at a time without some kind of integrated bundle that can be utilized in a needs-based approach. Subjecting merchants to a new version of "Here's the new best thing" over and over again will burn out your sales team and your marketplace.

Partnership opportunities also media owned companies such as Gatehouse’s Propel Marketing and Hearst’s  LocalEdge. 

Start the search for tools and partners! Look at the MediaExecsTech link in the nav bar of this site to see tools, platforms and partners used by other media.

4. To re-brand or not to re-brand
There are a variety of approaches to branding sales of digital marketing. Many broadcast companies offer a wide range of products and services powered by broadcast without the need to rebrand. 

However there are also good reasons to do so. In particular, a new brand signals the market that you company has evolved its approach. However, to avoid losing all the brand power  of the original media, a compromise is to alter their brand, rather than completely change it. 

An example of a total rebrand is the high end agency, 1100 Broadway, developed at the Tennessean, which took advantage of a rebrand to charge hourly for high end services, and go after key accounts with a changed perception. Their reasoning is explained in the case study; this is truly a separate business with $2.6 million in new revenues. 

Most digital marketing sales, however, reach the small and medium sized business where the use of a trusted brand may help. An example of the compromise approach is KNDigitalMedia, the digital services division of Kenosha News and NextMedia360, the digital services division of NextMedia Group, a radio and outdoor company.  

This allows the company to have the best of both worlds, while still encouraging merchants  to have different expectations foar the call and " a different conversation" that focuses on their web and social presence.

5. Sales force issues 
As with so much of digital transformation, the sales force is always the key to the success.

Many local media have started and then reversed separate sales departments and integrated sales depatments more than once.  Most now run, however, with at least a digital specialist that goes on four-legged calls to support multi-media sales to the existing client base.

Selling digital marketing, however, creates a new reason and opportunity to add digital-only teams, in addition to integrated teams: There is a much larger market of non-traditional advertisers at lower price points. ImpresLocal's approach in one of its test markets is to give existing teams individual goals of one upsell per rep per month, supported by the digital specialists, plus adding a new direct team with  goals of 6 sales per rep per month. About half of the latter are meeting this goal. 

Since the initial incremental monthly charge for pure digital services is smaller, $400 to $1500 a month,  a new sales force that maximizes their efforts against this price range with higher volume goals will leverage the overall opportunity. The key is  for digital only reps to sell 2 to 3 times their salary, according to Gordon Borrell. 

Guaranteed Digital's CEO Daryl Hively, says his company has partnered in markets that have integrated and markets that have separate teams, but that having both is a way to “have your cake and eat it too.” 

6. Reporting is not an afterthought – it IS the product 
In the digital services model merchants ultimately want not just to fix-up their web and social presence, but to  generating leads and obtain real ROI. Hence the success of ReachLocal in its singular focus on generating leads. Reputation management and directory distribution comes with their own dashboards, but ultimately leads-based reporting will show how well businesses are doing and persuade them to continue. 

With so many products, ultimately it will be imperative that dashboard integrate advertising with non-traditional services so that reps can show merchants results and recommend new optimization strategies based on performance. This changes the whole nature of the "renewal" sales call. 

There are a number of dashboards evolving into this space. ClickFuel is the market leader and used by Guaranteed Digital. Taponix is a solution developed as an incubator partnership at Digital First's Bay Area News Group division. And a recent entry is TruMeasure, which developed a leads-based dashboard for ImpresLocal.

Vendasta and Yext.com or Localeze.com are included in all  these dashboards, as are most common ad serving software reports. However, video, mobile and email may be integrated on a vendor by vendor basis. So one approach to choosing partnerships is to look at which technologies are already integrated into dashboards as part of the selection.

7.Creating packages
From assessing these numerous initiatives around the country, there is some common logic emerging about packaging and pricing.  Packages typical have a basic “web ready” starter kit. Upsells include adding video, SEM, advertising or managed sevices. SMS, SEM and Contests typically require more advertising in the larger packagaes,  while Facebook and WordPress web-site builds will have managed services as a logical upsell.

LocalMedia with strong marketplace products may want to add video or even blogging to the mix. 

For ImpresDigital, which specializes in SEM, the first packages include 200,000 targeted impressions on Facebook, which are startlingly cheap (the package is just $299 a month), while higher value packages include targeted key words on search engines which have much higher CTR's.

Morris' SOLOMO took advantage of unsold mobile impressions to power SMS text messages in blocks of 10,000 to 100,000 depending on the tier.

Rust Communiations, on the other hand has built print into every package, strengthening its core product by encouraging the use of QR codes. 

Packages also vary in price range; some fall into the $400 to $600 a month range, while others range from $500 to $1500. Most of the variance was on the higher end, we aren't seeing any bundles less than $400 a month, or contracts under six months. Anything smaller than this falls into the "self-serve" category because the margins are too low to justify an outside team. Contracts are also especially important to increase the value of the advertiser, an annual contract of $400 a month is still $4800 a year, so when creating packages think about how to build value that makes the programs especially sticky for merchants. That's one reason why NextMedia's FlexPlan may be such a good idea - it reassure merchants that they will be able to get exactly what they need at any point during the year. 

8.Holding advertiser workshops 

How to start? Case studies haves show that by far the best way to market new services is to hold advertisrs seminars. Find a complete deconstruction of "How to hold a successful advertiser seminar" here, including examples of invitations, countdown calendar, and day of checklist from Dream Local Digital, which held seminars for more than 5000 local businesses in 2012. Shannon Kinney, co-founder of Dream Local also conducts seminars for local media who are building their own product set, so this is an option to consider. 

There are two typical kinds of advertiser seminars - one that is high end, and involves just a few large clients and one that is both educational and open. To launch digital marketing services, open seminars with personal invtiations to clients from their reps - and incent reps on the number of invites. Keep seminars educational and about one hour long. An extra 45 minutes should be left for reps to show merchant attendees their  individual score cards - typically a standard reputation management report from Vendasta, also some media have done extra research.  

9.Managing the program long term

The key executive must be the evangelist. A key to long term success of sales of digital marketing requires continued top-down support, compensation, and investment. While this is true of all initiatives from launching events to selling digital display ads, sales of digital marketing is significantly different.  The price points are lower but the marketplace is larger and richer; so in the long run the opportunity here is much much bigger than tapping the same top 20 accounts for more revenues. 

Also, the variety of products and services means that sales people can truly be leveraged with a needs based approach. That is, they can finally sell what merchants not only need, but want to accomplish wtih their marketing. In short, selling digital marketing is a critical approach to transforming the company culture and replacing declining push-marketing dollars.  That is, the company will be shifting dollars for dimes, but there will be more dimes. 

This messaging has to come from the top of the company consistently, and the organization structured to make success a companywide objective. Another component to managing these programs long term is sharing results - something that local media are typically not good at doing. Leaving it to the reps to report results and testimonials at the sales meeting is not enough. The dashboard reports and other data needs to be as transparent as possible and part of the conversation at sales meetings and team meetings that involve other departments that optimize campaigns.  McClatchy is just one company that has recognized the value of this approach to building its digital services model. 

10. Financial expectations

Ultimately the financial goals attached to selling digital marketing are determined by each company's tolerance for cash investment  and ambitions for marketshare penetration. Many companies have been able to show incremental profits in less than a year using existing sales teams. Both Rust and Kenosha are reporting first year profits on brand new digital marketing product sales. Kenosha has 35 new sales with monthly revenues of $25,000 mostly generated by the ad seminars, from a team about 8 existing sales people. Rust confirmed it stands to make about $50,000 first year on its test market sales of ShopTalk. 

The bigger long-term opportunity, however, may be in expanding direct sales teams.  ImpresLocal executives expect existing teams to generate one new acccount per month, but has also hired a direct team to generate six new sales each in one of its two test markets. Only about half of the direct team is achieving that level, so for a reliable metrics, 3 or 4 sales a month for a direct team is an achievable target. Since the marketplace of merchants who need digital marketing is so much larger, however, than those who want traditional advertising,  its possible that an organization that successfully launches, say, three reps who double their salary in sales, could launch five more, or ten more, where management becomes the scarce resource. 

Keep in mind, however,  that digital services generally have a longer close cycle and lower dollars. The back-end fulfillment requires a few cycles of set-up and approval that advertising does not have. It will take more than a month, but less than a year, to break even or make money on these programs even using existing teams. 

Conclusion

As you have probably noted, LMI is recommending that local media all get involved in selling digital services as a key initiative for 2013. Not only is this trend spreading but several companies, including Gatehouse, have doubled-down on this model. A key to understanding the value of this approach is to understand that digital marketing is not "another product" such as sales of Facebook services or sales of banner ads or SEO via directories. It is an approach to sales that puts media companies back in business as the leading provider of marketing to local merchants. 

Resources

Splash pages: vSplash and unBounced.

Web development:  Websplanet.com. 
Mobile landing pages: Insequent
Listing distribution:  Localeze.com, ubl.com and yext.com.
Rich email: Presslaff

SMS: Textcaster

QR codes with analytics: QR Stuff
Reputation management: Marchex and Vendasta.

SocialMadeSimple.com - Provides a content library with industry based articles that is updated on a regular basis, plus custom pages, a report card against posting, and analytics. 

Shoutlet.com -  Provides sweepstakes and other contests with email sign-up forms, plus scheduled posts triggered by contest events, and image feeds from galleries. 

SecondStreetMedia.com  - Provides custom contest apps behind the tab function. Resource center and free webinars train clients on best practices and contesting ideas. Pre-built national sports contests are plug- and play except for prizes.

Turnkey providers: GrowthWeaver.com, contact sweaver@growthweaver.com, which provides full back-end management for  a full set of social media tools, GuaranteeDigital and Dream Local Digital. 

Alisa Cromer

The author, Alisa Cromer is publisher of a variety of online media, including LocalMediaInsider and  MediaExecsTech,  developed while on a fellowship with the Reynolds Journalism Institute and which has evolved into a leading marketing company for media technology start-ups. In 2017 she founded Worldstir.com, an online magazine,  to showcases perspectives from around the  world on new topic each month, translated from and to the top five languages in the world.

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