Video Deep Dive Is it harder to run an Agency in 2018?

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This is our Deep Dive Into Local from September 10th, 2018. In our Deep Dive series, we take a closer look at one thing in local that caught our attention and deserves a longer discussion.

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Mike: Hi, welcome to Deep Dive. This week we have Carrie and David Mihm with us. We invited David, he recently did an interview with LSA where he discussed the role of Google ads and help relationships of agencies visa Google ads, but it took on a broader, tone in that. Maybe you could summarize that and...

David: Sure, yeah. It was a conversation that Greg Sterling moderated with myself and Alex Porter, who's the CEO of Location3. They do a lot of local marketing for franchisers orders in that space. So, Alex contributed the more enterprise perspective and I was focused primarily on smaller independent local businesses and agencies serving those folks. So, the conversation was really... Yeah, it was more about automation and where the opportunities are to add value as an agency and the extent to which you can still build a business, primarily as a reseller. I guess with that as your ...as your main pillar of revenue.

And I think Alex and I both agreed actually, that that's a riskier proposition in terms of being a reseller of Google ads and Facebook ads because at least at the local business level they're going after those dollars, directly, these days, at least Google is with things like home service ads and the like. And both of us agreed that we ... We felt that you needed to expand the menu of services that you're offering and think more strategically rather than just, "I have this widget that I'm reselling to this customer."

So that was the overall view of the conversation. But Greg, posed a question at the very end as a throwaway, I thought, but it's actually, I think, a really good question for this forum, which is... His question was, "Is it easier to be an agency today or 10 years ago?" And I think that would be something I'd be interested to get both of your opinions on and talk about some of the things that might be easier today and things that we may wish were still around. So...

Mike: Yeah, you wonder what easier means. I mean, is it easier to find new clients, easier to be successful, easier to have lower churn? I suppose it could be any of those things. I think in terms of local search, there's a specific context historically where local SEO for whatever that meant, historically meant, getting citations for Vivo, cleaning up their local listings, and creating a consistent local environment and that was...that plus some local ad words had provided the basis for many local agencies to get a start and be moderately successful. Some of them grew larger, although interestingly, at the very large size, I just read recently an article about how Gannett, which had historically only sold ads and then sold ads not only towards newspaper but also sold ad words, bought up ReachLocal, SweetIQ and Word. Something Word, something like Word.

David: Is that WordStream?

Carrie: WordStream?

Mike: WordStream, I think, to create more of a true value add... to try to create a more true value-added agency and then coalesce their demand around that. So, even the very large, historical ad sellers have seen the writing on the wall that selling ads is not a strategy moving forward that they need to expand in the agency. So, in that sense, there's more competition in the agency world that's also being rolled up, you know. So, there's issues of competition as well. So there's issues of process, there's issues of focus, there's issues of pricing, retention, churn. So, I don't know.

Carrie: I think that if you look at even the consumer for an agency like, "Who am I selling to 10 years ago?" it was in a lot of cases, somebody pretty un-savvy. Most of the local businesses, the mom, and pops, the not-enterprise level people really didn't know anything about Internet marketing or how to do it or what even it consisted of. And so, you could baffle with bullshit quite easily back in the day. And I think that's a little bit harder now because people are doing their research in a lot of cases before they hire an agency and they know a little bit more about the internet than they did then so that's... I think that we're selling to a more savvy consumer. I think that the technology that we use to service a client in the agency setting is a lot more sophisticated than it used to be. There was a lot of manual churning of links and directory listings, and citations, and content.

And, if you needed a page built, it wasn't a WordPress-based website where anybody could build a page and put it up, you had to write the content and then send it to the design department. And they had to create a page on the HTML website and, it was a lot harder to get things done back in the day. I see it as easier and harder, but I prefer the more savvy consumer than the less savvy consumer just because I don't have to explain everything in such a granular sense, which I'm not the most patient person in the world. So, I would get frustrated with that for sure back then although I never was in sales very much. So, it wasn't really my issue, it was more the sales team. But then I had problems with the sales team selling things we couldn't deliver, which was always an issue. And then I think it's still an issue in an agency.

David: Definitely still an issue.

Mike: I know.

David: From my, outside experience, anyway. I think, Carrie, you make a really good point about the savviness of the consumer and of the business consumer. And I think from the enterprise side, it probably is a little easier today because you don't have to convince people, "Hey, local search is a thing," right? Everybody at the VP level 10 years ago was still on the , back to our earlier discussion, the print bandwagon or the, mass media bandwagon.

Carrie: TV. Put it on TV.

David: Right, exactly. So I think you're starting to at least see some of those budgets shift online and the realization of the importance of local search. So that's, I think the awareness side of things may make it a little easier to sell. And the flip side being, you can't BS people. And I would argue there's no... there's certainly some benefits that, claiming GMB listings and, and making sure you've got proper categories and that thing. But the impact isn't anywhere near what it was when you did that 10 years ago at a local business level. I mean, all it took was a couple of custom categories with whatever keywords you wanted and you were in the, top of the seven pack or the 10 pack. So, I think that the algorithm and the stuff that you have to do has gotten more complex and I really think you need a more holistic package if you want to actually have an impact on a business's bottom line with search these days. So, I think that you really do have to have some facility with ad words, some facility with GMB, some facility with websites, some facility with reviews, certainly, which I'm sure Mike loves to hear.

Carrie: You know what? Email as well.

David: And I would hope it's supposed to do with email. Yeah. So I think that, one of the points that came up during my conversation with Alex was just that, let's say you have been reselling ads, ads are getting more expensive. You can't make the same, 50% or 60% margin that you might've been able to 10 years ago when you had to do a lot of this manual work on the back end. Now, you really have to think about, "Okay, well how do I stretch...?" Everybody's, basically at parody with what they're spending and what margin they're making.

You, as an agency, you really need to add value in stretching those dollars further, right? So, one of the ways to do that is to extend the life of the customer and bring in repeat customers through paid ads, through other organic channels, which I would argue email, but you could also talk about SMS marketing, even direct mail. So, I think that that's really an area that I would encourage agencies to expand into is if you are selling ads right now, you got to figure out how to make the ROI of those adds stronger than the business could get on its own through something like local service ads.

Mike: Right. And in that same vein, is we've had this discussion on streetfight frequently that with AI, machine learning, and better user interfaces, and the greater familiarity people have that the $500 ad campaign,... or $700, which is a sweet spot for many small businesses, that campaign, Google is going to suck up, or Facebook or Google or maybe Amazon in the future, is going to suck up the bulk of profit from that and it can be very difficult for you to profit from it. So, if you're at the very low end, you either have to figure out how to move up, or how to add more value to that, or move sideways into different services.

Carrie: I find that the smaller budget levels instead of it being me setting it up and managing it for the client, I'm setting it up and giving them a little bit of education and consultation once a month or once a quarter on how to manage it themselves because they just can't...I can't make money doing it for them at that low budget level, but I can help them at least get them set up at that budget level.

David: Yup. And that was Alex's point as well. It was just that you need to have more educated, strategic, consultative account reps who can do exactly what you're talking about and, helping the business with, once a month, one hour phone call in terms of optimizing as opposed to actually going in there for, five hours and doing bid management and keyword management, all that stuff. it's got to be a more strategic consultation rather than tactical education.

Carrie: Well, the platform's more sophisticated now, so we can automate some of that stuff as well, that bid management, and keyword management, etc., that we couldn't before. It was all manual. If you wanted to change your bid based on time of day, you could day-part a little bit, but not really. I mean, it wasn't very sophisticated, so that helps us in a consultative manner, get things set up so we don't have to touch it as often, which can make it more profitable even in a larger budget.

Mike: Right. Even there, though, like with Google is changing the playing field with a product like local service ads which are stupid simple, and where really the reason you might drive it through your agency is just because it's a single point of contact for you, but you'd still manage it yourself. And David and I were discussing last week about, it appears that some large agencies are giving, through Google, a discount on local service ads so that Google is essentially offloading support to large agencies in return for them passing a discount through the user. Now, they don't make money on that, they just retain their relationship. So, even there, that it's almost like a lost leader. It's like grocery store giving away Coca Cola at a cost, or whatever, or the turkey at cost at Thanksgiving to keep the customer. and I think you're going to see even more of that, where at the very... where Google's continuing to simplify as they did with AdWords Express a couple of weeks ago. They upgraded the product and now it's much easier to create a much more sophisticated thing on your own.

And, again, the agencies might only do that to keep the relationship, not because they're making money. And so, the question is, "Is that harder or easier?" Well, it's an area where like David said, "You're not going to make money on the very low end, you got to figure out how you are going to make money." One of the things that's happened over the last 10 years is SaaS products have come to the fore. we now have a world in which Amazon and Google are offering up shared web environments where it makes development of a product like Tidings for David or GetFiveStars for me possible. This wasn't possible 10 years ago to really create a package that could do what these products do. So, there's a whole new realm of SaaS products that can add significant value if somebody really learns them, and understands when to use them, and how to use them. And so, I think those products need to be looked at as well.

Carrie: I don't think 10 years ago the consumer was ready for that. when we started talking reviews and the hospitality agency that I worked at, you'd start talking about reviews and everybody would freak out and bury their heads in the sand. Like, "Oh, my God, no way, because somebody might leave us a bad one. That was... We don't talk about that." Mike.

David: By the way, that conversation still happens.

Mike: It still...

David: Not only in hospitality, but other industries for sure.

Mike: They still do happen. And they also happen though around the idea, like I am a big believer in first-party reviews. It's like I've always thought you should own your own web content. And historically, reviews had been in the area of owned by Google, owned by Yelp, owned by TripAdvisor. It's was like, okay, I understand why they do reviews, they do it to help their search engine …….But all the rules those guys set up serve them, they don't serve the business. And I see that first-party reviews as a way for a business and an agency working on their behalf to add significant value that the business controls way beyond just the fact that you got a testimonial, right?

David: Right.

Mike: I mean, it's not just rich snippets, it's website content. It's a direct relationship with the customers who really can understand what's going on with that direct... Reduced historically third parties have been skewed towards really bad or really good. Whereas when you have a direct feedback loop from your customer, and I think this is an area where agencies could do a lot better job, is helping businesses understand what their customers are thinking, doing, saying so that the large percentage that are likely to do referrals stay in the loop and can be brought back in. And so, I'm a big believer in first party reviews. It's like... And I know that I'm preaching off the edge of what is accepted, because as a result, I got to get more Yelp reviews. But...

Carrie: I think that there's a place for both, coming from hospitality, getting that like top three TripAdvisor badge in your area thing. That was like the holy grail for a lodging website, I want that TripAdvisor badge and they would do anything to get that.

Mike: And I wonder, though, how many of those hospitality industries have carefully analyzed their source of new customers? And I would content that...

Carrie: Well, in the last five years, I think it's not as important as it was back in the day but...

Mike: Well, no, it's still important. I wrote a blog post a couple months ago when I went on a trip to Alaska. It was like, "Oh, my God, hit me over the head with asks for TripAdvisor reviews, over, and over, and over again." And it's because a lot of them, and this is an area where David and I disagree a little bit, but I think agencies can help them understand where their leads are really coming from. It requires a little bit more sophisticated analytics, more tools on the front end in terms of call-tracking or a tag manager, a little more sophistication there, but I think there's a lot to be done in that area. I know Joy does a good job where she harkens from. Certainly, she'll provide back to the client how many leads she delivered and what the value of those leads are through her various techniques.

So, not only do they need to understand where they're coming from, they need to understand how valuable they are and I would bet that most of these businesses still think... clearly, they're still thinking, "Oh, I got to get more Google reviews." Why? Well, who knows? Or, "I got to get more TripAdvisor reviews." And I think an area that agencies could function is where they summarize it into a single very simple chart because...and then consultants...

David: Well, that is where we disagree. We don't disagree on the concept, we disagree on the delivery. That my feeling is that a small business doesn't have the time and its eyes are going to glaze over when he looks at a dashboard and so it has to be delivered in a way that they actually understand and can internalize and actually make business decisions around so...

Mike: But it is an area where, I think, agencies could. There are a number of dashboards now that are available that...where it's a way for them to add it. But the question is, is that harder or easier? Well, in some ways, it's more tactical because you've got to be able to go beyond ad words. You’ve got to go beyond just basic analytics, go beyond just basic email, and you’ve got to go beyond just asking for reviews into, "How do we leverage these techniques and technologies to reinforce the whole purchase and marketing cycle so that we're dealing with new and existing customers?"

Carrie: Well, and if you go outside of the big enterprise brands that have, the conversion, tracking, and the dollars, and revenues measured from their website nailed down to the single location businesses who are using something like RezOvation or some, in my opinion, fairly inferior revenue tracking process where it doesn't capture all the revenue. It's a lot harder to prove the value of the lead because you can say, "Well, your TripAdvisor leads netted you X or, grossed you X." And they'll go, "Yeah, but I don't trust that because Razz stinks, or something like that." I mean, I run into that a lot where you can't track the value of that lead, or that booking, or whatever. And so, there's still... definitely room to improve, but I think we're better than we were 10 years ago for sure. For sure. If even just analytics, it's come leaps and bounds.

Mike: Yeah. Oh, for sure. So, is it harder or easier than 10 years ago? I mean, although, back to your idea that somehow large multi-location websites are tracking their leads and the revenue, it doesn't appear to me to be true. Most of them when it comes to local are just getting around to cleaning up their citations, right? I mean, they're just now leveraging the data... The tools like Moz or like aXe to finally get their canonical list of locations up to date. And I'm still seeing them not up to date, with a higher degree of frequency, that makes any kinds of sense. So, I wouldn't give too much credit to multi-location. I think there were... single location were five years ago in some ways.

So, I think that the job there for the agency is different. I mean, it's to push them through the basics into real value ad because if they... right now, there's still money to be made from that listing stuff as aXe demonstrates, perhaps obscenely. I mean, I think they're making too much money from basic listing stuff, but then what do you do with it? How do you leverage it into some...how does an agency leverage that into more benefit? And I think the big difference is, I think, it's moved from vanity searches to more accountability and true trackable value. And it's hard to track value, but it's where agencies need to go if they're going to succeed the next couple of years.

Carrie: Mm-hmm. For sure.

Mike: David, and any closing words on your...?

David: No, I agree. It sounds like you guys mostly agree with me… I think it's harder today than it was 10 years ago even though you can... It's easier to prove value and it's... and the tools make your manual process much easier. But, I think, overall, to deliver value to clients is harder today. And so I came down on that side in the previous conversation as well.

Mike: Right. Yeah, I think that's probably a good summary that it is harder. It's technically harder, requires a better strategic understanding. But you also, as Gary pointed out, need to understand all the fundamentals because they're still important. I mean, it's still important to have good citations, it's still important to have a solid website. All those things are still important, but now you have to take it to the next level. Otherwise, you're going to get creamed by the likes of Gannett who just sorta churns it out through ReachLocal, maybe, maybe not. But as this stuff gets rolled up into bigger and bigger entities, I think that there will be some accounting in the local space. All right. Well, with that, I'd like to say thanks to both of you and thank you particularly to David for joining us once again and...

David: Great to be back on, yeah.

Mike: We would love to have you back in. Maybe we could talk about the local stack, which, I know is the original topic for today, but got sidetracked, but I'd love to talk about just how you're feeling about that as well.

David: Yup, sounds good.

Mike: All right, thanks, Carrie and David, for joining us.

Carrie: Bye, guys.

Mike: Talk to you later.

Carrie: See you later.

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