How Local Businesses Are Getting Screwed on Digital Marketing

Having worked in the digital advertising agency field for over the past decade, I couldn’t tell you how many times I’ve heard local and regional businesses say, “I’ve been burned”, or “we tried digital marketing and it didn’t work”. It’s frustrating to hear the horror stories that some businesses have gone through. Our digital marketing and creative agency has been working with businesses, mostly in the South, the past year and building a solid and loyal client foundation around Louisiana (Shreveport, Bossier City, Lafayette, New Orleans and Baton Rouge) in 2016. The key theme for us is, do good work and always do the right thing.

Let’s take a look at why digital marketing didn’t work for these local businesses.

Most likely, the business was sold a digital marketing package by a local media company. The “digital sellers” include:

  • Local Newspapers
  • Local TV Stations
  • Yellow Page Companies
  • Pure Play National Digital Marketing Firms (some of these do have great products)

The problem with most of the digital sellers is they often have high employee turnover and don’t actually do fulfillment of digital marketing campaigns in-house, it’s often outsourced to someone so disconnected from the client that they really don’t care about the local business owner.

The markup on the majority of local digital media is extremely high. I’ve personally seen local TV Stations and Newspapers selling display advertising (banner advertising) at CPMs between $10CPMs on the low end and up to $25CPMs on the higher end. The culprits have been able to get away with this because most local business owners don’t know any better and the packages the culprits are selling are boiled down to selling buckets of impressions for X dollars.

Let’s go through three pricing scenarios. A Local TV Station or Local Newspaper Digital Sales Rep goes into a local business and asks them if they would like to select one of the following display packages:

Scenario 1 Buying Through A Local Media Company:

Package 1: 100,000 Display Impressions: $1,500 (active CPM $15)
Package 2: 200,000 Display Impressions: $3,000 (active CPM $15)

For the average local business owner, being able to have your display ad shown locally to 200,000 people for $3,000 doesn’t sound like that bad of a deal, it actually sounds pretty decent, but the devil is in the details.

When our agency runs a local display campaign for a client, we buy directly from the major ad networks and don’t have to go through a half a dozen layers of middle management and brokerage fees, then this is what the pricing package looks like with the same number of display ad impressions:

Scenario 2 – Buying Through A Local Digital Agency With No Markup:

Package 1: 100,000 Display Ad Impressions: $200 (active CPM $2)
Package 2: 200,000 Display Ad Impressions: $400 (active CPM $2)

The pricing and visibility contrast in scenario 1 and 2 are drastic. When a digital advertising agency manages client ad spends directly with the ad network(s), all of the middleman and high margin fees are removed from the equation. The active markup in the Scenario 1 is ~750% and Scenario 2 is 0%.

Scenario 3: Buying through a local digital agency with no markup and the same budgets as Scenario 1

Package 1: 750,000 Display Ad Impressions: $1,500 (active CPM $2)
Package 2: 1,500,000 Display Ad Impressions: $3,000 (active CPM $2)

Which scenario would you choose?

Most business owners want to make sure their marketing is working and won’t want to worry about the details. Local business owners want to have a true marketing partner, not just someone who is going to come in and get their advertising contract renewed. It’s challenging enough to start behind on a digital marketing campaign just because of pricing and not having clear enough business goals.

Learn more about our approach. 
Read More: What questions to ask when hiring a digital agency.
Read More: Online Ad Spend to Overtake TV in 2017
Read More: Why Youtube Ads are Better Than TV Ads For Local Businesses

Seth Winterer is Chief Digital Strategy Officer at The Edge Ideas. The Edge Ideas is a Digital and Creative Advertising Agency with offices in Shreveport, Lafayette and New Orleans Louisiana.

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How Local Businesses Are Getting Screwed on Digital Marketing
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The Edge Ideas