Over the past several years, local media companies have aggressively pushed into selling digital marketing services, in many cases even going so far as to build completely separate business units with distinct brands. And with good reason – Borrell Associates data pegged digital marketing services as an $84.5 billion market opportunity in 2016 (and that doesn’t include any digital advertising products).
The “what” and “why” of forming agencies to sell digital products and services are well established. What continues to elude many media operators is the “how”: how to cultivate consistent top-line revenue growth while netting healthier profit margins, all the while creating a sustaining competitive advantage in an industry rife with competition.
Recent Texas regional Innovation Mission visits to the Dallas Morning News, Nexstar / LIN Digital and Advocate Digital Media highlighted shared traits of breakthrough agencies, including successful sales and fulfillment structures and key considerations for building, buying, and partnering to achieve sustainable growth.
Dallas Morning News: Comprehensive Digital Agency Portfolio Owns the Full Buying Funnel
The Dallas Morning News offers one of the best examples of a media company utilizing a combination of build, buy and partner strategies to completely redefine its core business while offsetting traditional revenue losses. DMN President Grant Moise calls these “the 3 pillars of innovation.” The company has leveraged each in unison to position itself not as a single digital agency, but rather as a portfolio of brands with complementary competencies that enable DMN to address a full spectrum of customer needs.
DMN has purchased six businesses in five years, while also building a high-touch marketing agency (Speakeasy) and its own programmatic advertising trading desk (Connect). However, as Moise advised, “we don’t think of these as brands, but as marketing tactics. Our sales teams focus on specific parts of the purchase funnel depending on the needs of the customer.”
Mike Orren, the President of Speakeasy, provided concrete examples of “full-ecosystem campaigns” that span the entire customer lifecycle, from acquisition to consideration to actual purchase, followed by retention and ultimately, advocacy.
Different products and services tied to different DMN brands solve specific client needs at each step. The agency units specialize in a handful of verticals such as health care, luxury retail, major events, and fast-casual restaurants. Typically 13-month retainers are signed (one month setup), with an average program at $5,000 per month. ARPA (average revenue per account) will grow this year as DMN pushes up-market, a common theme we detect across the industry as more local media focus “upstream.”
Nexstar / LIN Digital: Massive Broadcaster Builds Internal Technology to Scale Efficiently
Much like DMN, LIN Digital- the recently-acquired central fulfillment arm for all of Nexstar Broadcasting’s local television properties- has also stitched together a comprehensive suite of agency brands and services. LIN Digital VP Operations
Nerissa Brooke explained that using the same fulfillment process and structure across the portfolio has provided a critical path to success. LIN Digital built many of these automated internal processes, augmented by high-touch client delivery services.
The central tool is PHNX, a fully-integrated workflow and task management system that automatically marks up campaigns for individual markets, handles order fulfillment, and provides tracking and billing. Meanwhile, Argos powers automated campaign optimization for smaller clients (under $1,000/month) to drive better results with lower touch. The company has also built external tools such as HYPH8, a full-service social media management platform.
Advocate Digital Media: Becoming the Agency of Record
Some local media may have the conception that large metro markets and deep corporate pockets are required to build successful digital agencies. Not so! Advocate Digital Media (ADM), the branded digital agency connected to the Victoria (TX) Advocate newspaper, is located in the 203rd largest DMA (hours from Austin, Houston and San Antonio) yet now represents nearly 30 percent of all advertising revenue (in additional to digital marketing services) in the market. General Manager Jason Holmes highlighted the biggest keys to ADM’s success:
- “Agency in a box doesn’t work. We’ve positioned ourselves as a digitally-focused marketing company versus a digital agency. We take a high-touch, consultative approach, with the goal of managing the client’s entire marketing budget.” Note: ADM does not outsource fulfillment. Why? “In order for people to believe we are marketing experts, we actually have to be marketing experts!”
- “Everything about ADM is separate: separate team, separate P&L, separate physical location. The culture within this company is completely different.”
Holmes and Victoria Advocate Publisher Dan Easton challenged the IM group to think more strategically about their digital agencies. For ADM, this means focusing on fulfillment as a competitive advantage, and clear customer segmentation to ensure they are solving the right problems and delivering strong results for different customer sets. “You’re not just buying cash flow with digital,” Holmes advised. “Forget about protecting your business model from innovation.”
Authenticity, believability, and credibility are keys to Butter.ATL, an unconventional new local media brand capturing the culture of Atlanta