The Ugly Side of Local Online Advertising

There are a few reasons that i’ve decided to do a series on local online marketing:

1. It’s not spoke about all that often
2. When it is spoken about it’s made to seem super easy (a la Shoemoney posts)
3. I have extensive experience in the field

In order to speak about local online marketing I think we first need to define the business that are best catered to:

• Businesses that depend on leads and have decent sales departments are usually the best businesses for local online marketing.  Some of these businesses would include car dealers, real estate agencies, lawyers, accountants, cosmetic surgeons, dental spas, home contractors etc.  Although it can work with other types of businesses such as restaurants, proving ROI can be trickier.

To understand the local business mindset, you need to look at where they are spending their advertising dollars:

• Print (Mostly Newspapers)
• Radio
• Cable
• Direct Mail
• Outdoor Advertising (Billboards, Bus Stops, Shopping Carts, etc)

All of the above advertising methods are significantly more costly then an online marketing campaign.  I already see the dollar signs in your eyes.  Don’t get all excited and wet yourself because local businesses make ABSOLUTELY NO SENSE.  I don’t care if you can provide them with 100 high quality leads for $1000, they are still going to spend their money in the newspaper buying a $1,000 ad and getting 1 phone call.  Guess what else: they’ll never complain about that $1,000 they spent in the newspaper but they will bitch and moan about every single one of those 100 leads you sent them for $1,000.  Perception is everything.

Here are some common models for local online advertising catered to small/medium sized local businesses:

Flat Rate: This is the most deceptive model and usually kills the local businesses trust of online marketing in general.  In this model the advertising company comes to the small business, charges some set fee like $500 per month and says they are going to transform their business.  Usually any company offering these flat rate programs are just snake oil salespeople trying to capitalize on the businesses lack of knowledge about online advertising.  Yellow Pages companies are notorious for selling these crappy packages to small businesses.  The small business never understands what they are getting and are normally turned off from online advertising altogether because they say “I paid such and such Yellow Pages company $6,000 last year to manage all of my internet advertising and I got NOTHING from it!” – Please Note: Flat Rate is not ALWAYS bad.  Sometimes it’s simply the “management fee” model without the actual explanation of the management fee.

Management Fee: This is typically how search engine marketing companies that cater to the local space operate.  They charge some sort of set fee or percentage in order to manage the clients ad spend. The percentage usually works out to 20-30% of the ad spend.  For instance if the local business agrees to spend $1000 on a search engine marketing program, the search engine marketing company will take $200-$300 for the management fee and spend $700-$800 on the search engines.  Sometimes the SEM company provides backup to show how much they actually spent on the clients behalf and sometimes they don’t.  Also, sometimes the SEM company lays out the funds for the search engine marketing and then get’s paid in full from the client for the campaign + management fee and sometimes the SEM company takes the clients credit card and charges all advertising fees directly to the client and then just bills for the management later.

Per Lead: Attention affiliates.  This one’s for you.  Per lead is exactly what it sounds like.  You negotiate a per-lead fee to which a local business will pay you for each lead delivered.  You define what a lead is at the time of closing the sale with the client.  You take all the risk on the advertising and only charge the client a per-lead fee.

Hybrid: I really like the concept of this model.  You proposition a business that you can handle their search engine marketing/online marketing.  You charge them the actual cost of the advertising (or have it billed to their credit card) but do not include any profit for yourself.  You then say “I only get paid for results” and negotiate a per lead model for your compensation.  Since the client is actually paying for the advertising, your per lead fee has to be significantly less then if you were putting the risk into the advertising.  It’s actually a cool business model because you take almost no risk and still get paid on performance.  You just have to work it out in such a way that you get paid more then the management fee model.

Publisher/Directory Model: You’ve seen this method is the 100k/year &  200k/year threads on Wickedfire.  The model is essentially that you create your own medium in which you sell cheap ads to local businesses.  Whether it be a directory, news source or just search engine optimized pages.  You create the medium for cheap/nothing and then sell ads to local businesses based on your organic search engine rankings.

The Many Problems & Complaints Of Local Online Marketing & Client Management:

• Clients Are Stupid: Straight up, I said it and I mean it.  Most online marketers probably know a small businesses business better than they do.  Small business owners focus on the most bizarre/retarded things in a campaign.  If you get into creating landing pages for them you will see this come right to the forefront.  Here’s a great example.  I dealt with a local client selling a particular product.  They refused to agree that it might be important that the product someone would be searching for to be prominently displayed on the landing page.  Instead, they wanted the entire landing page to be a map of their area.  I’m not kidding here.  This is for real and i’ve dealt with this type of retarded thinking time and time again.

• Why Is My Ad Not Showing?: This issue infuriates me and is very common.  Here’s an example: You run a search engine marketing campaign for a mortgage broker.  You bid on terms like mortgage, mortgages {LOCATION} etc.  After a few days and some data on the keyword “mortgage” you find that it just dosn’t convert for this client.  Not only that but it costs $10+ per click.  You pull the keyword out of the campaign  to focus more on the mortgages {LOCATION} keywords that are only costing $1.50 per click and converting like crazy.  The client calls up complaining their ad isn’t showing up on the keyword “mortgage.”  You explain the situation to them as well as the negative ROI they are receiving on the keyword and they say “If you won’t bid on that keyword, I’ll find another company that will.”  This goes back to point number 1: Clients are stupid.

• Small Businesses Cannot Close The Sale: This issue effects you heavily if you are in the lead sales model but really effects every model.  Small businesses suck at selling their own services.  Often times when you call a small business you get a secretary who couldn’t be bothered to sell anything to the caller, let alone answer questions intelligently.  Many calls are dropped into voicemail and often times the people answering the phones are just downright rude and unhelpful.  This leads to my favorite: YOUR LEADS SUCK.  I always find this complaint interesting and fun at the same time.  Why fun you may ask.  Well…..I track every one of my clients phone calls.  That’s right I have call recordings on every lead that calls a place of business through one of my landing pages.  Listening to these calls can give you a days worth of entertainment.  I can send these call files over to the client and they still won’t admit it’s not the lead, it’s the salesperson.  A lot of the time if the lead is not READY TO ORDER/MAKE AN APPOINTMENT but rather has questions the salesperson/receptionist cannot sell to them and the business considers it a bad lead.  They can’t fathom the fact that you are selling them LEADS not PAYING CUSTOMERS.

• Clients are Flaky: You can prove to them that they are getting a positive ROI off the money they spend with you and a negative ROI with other traditional advertising that they are doing and they will STILL flake out and cancel your service.

• Clients are Needy: They call a lot and love to waste your time.  They want to be taken out to lunch and pampered even though your profit off them isn’t that much money.

• Lack Of Scalability: Local online marketing for clients is not THAT scalable without in house software and employees.  There are some companies that have done it well such as Dennis Yu’s BlitzLocal.

What can you do to combat these problems?

This is a tough question to answer because there isn’t a whole lot you CAN do.  If a client is taking up too much of your time for not enough money you need to fire the client.  If they are being unreasonable and you prove to them that their ROI is positive and they still want to cancel your service, let them.  What I am saying here is to expect churn.  No matter how well you do for you clients, they aren’t all going to be clients forever.

I know that a lot of those points are negative but I want you to KNOW that it’s not a cake walk if you decide to go into it.  There are some positives such as lack of competition and a profit potential.  But you need to deal with clients, and clients are not always worth the money they can bring in.  Be careful who you work with and manage your risks.

I have some other great posts coming as part of this local marketing series including some interesting case studies.

Do you have any questions about all of this?  I will answer them in the comments.

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