Digital Agencies: 11 Things You Might Not Know

As digital agencies start to mature, the results from the companies that invested early are really encouraging. GateHouse Media's Propel Marketing (now four years old) will surpass $50 million this year. The Dallas Morning News is on track to surpass $40 million in total digital marketing services. Hubbard Radio's 2060 Digital is delivering $5 million in Cincinnati alone and has now rolled out the model in their other six markets. 

Is this revenue making up for print and broadcast losses? You bet! "Almost to the penny, we have made up for the print shortfall with digital marketing services," said Mike Orren, President of Speakeasy (one of the agencies acquired by the Dallas Morning News). "Propel is our growth engine," said Peter Newton, Chief Revenue Officer, GateHouse Media, "By the end of 2017, we expect to show overall gains as a company because of this business unit."

Local Media Association and Borrell Associates hosted a Digital Agency Summit this week in Chicago. Nearly 100 executives representing TV stations, newspapers, radio stations, directories, standalone digital agencies and more attended the event that featured robust discussions and lots of audience interaction. 

Here are 11 things that really got my attention that are worth sharing with the industry:

• Facebook ads represent the biggest opportunity for digital agencies right now. Propel went from $0 to $7.5 million in a year. Scripps is also on a $7 million run rate. Dream Local Digital has been selling this longer than most and their FB business is up 300% this year. If you aren't selling Facebook ads to SMBs in your market, you are missing out on a huge and lucrative opportunity. 
• Think SMBs with 10 or fewer employees aren't worth the time? Think again. Propel is doubling down on this segment with their acquisition of ThriveHive and their new 100 person call center in New England. This platform is perfect for very small businesses and features a monthly subscription. They will gladly partner with interested media companies on a rev-share model. This could be an amazing passive revenue stream for the industry. 
• Think niche! Digital agencies have a unique opportunity to own a category. The folks at Thrive have focused on YMCAs all over the country and have built 31 websites so far in this category. In Dallas, they are becoming experts with bariatric surgeons and are planning a national expansion. If you find a winning category, go national. And be sure to attend the conferences associated with the category. We learned from Camilyo that there are digital category marketing specialists exhibiting at almost every specialty conference imaginable. 
• Build it or acquire? There are a lot of acquisitions going on in this space. "We had no idea how to run an agency," said Mike Orren. Several key acquisitions later, they have a $40 million dollar business with nice profit margins. Cordillera TV's Informed Interactive also believes in this model and has acquired four agencies to date with specialties in areas such as engineering. "These agencies allow us to climb up the food chain," said Jay Small, President of Informed Interactive. 
• Hubbard's 2060 Digital has a unique sales structure that really delivers results for them. Account executives are expected to set two qualified appointments per month and they are held accountable. And then the digital brand strategist (DBS) makes it all happen. "The DBS is the lynchpin hire for us," said Matt Chamberlain, National Director of Digital Strategy, "They come from outside of radio with deep knowledge of how to educate clients in digital advertising. They have the ability to build custom, long-term holistic campaigns."

• Recurring revenue is super important! "It seems to get lost in the conversation," said Shannon Kinney, Dream Local Digital, "Give the reps an incentive on this." At Propel, the ThriveHive model is built to be a recurring monthly revenue stream. And at 2060 Digital, 40% of next year's revenue is already booked. 

• Many media companies are not treating the digital agency business as a separate unit. "One third of our survey respondents don't have a separate name for their digital agency," said Gordon Borrell, CEO, Borrell Associates, "And 67% don't have a sign that is visible to the public. What message does this send?"
• How are small markets doing with digital agencies? Very well. We heard terrific stories from Federated Media (radio stations in markets such as Elkhart, IN) and from Paxton's WPSD (Paducah, KY). LMA is planning a follow up call specifically to address the opportunities in smaller markets. We will feature some terrific case studies and lessons learned. Send me a message if you would like to be included. 

• 64% of SMBs are buying ads on Facebook; up from 30% one year ago per Borrell Associates.

• In order to become a badged marketing partner with Facebook, you must use an ad tech partner such as Tiger Pistol. Hibu and McClatchy executives both reported good results and high profit margins using this approach. 

• Putting the customer's needs first is the most important thing to the really successful agencies. That means not forcing traditional media into the mix if that isn't what they want or need. 2060 Digital's three tenets really resonated with many in the audience: "Educate don’t sell, offer long-term, holistic campaigns and sell only what we’d sell our Grandma’s."

Bottom line: media companies that are not investing in digital agencies are really missing out on an amazing opportunity. The time to get in the game is now. According to Borrell, there are 248,000 digital marketing businesses out there. Go big or go home!