BIA/Kelsey is alive and well. Their most recent conference, Leading in Local, was held in Boston last week at the Westin Copley Place and focused on the National/Locals. These are enterprise companies with hundreds or thousands of individual locations. The smartest of these companies have learned to advertise locally. Kelsey reports they spent $42B in local media advertising in 2012 and this will grow to $51B in 2017. This presents big opportunities for those companies that can help the National/Locals spend that money wisely. Several subjects were explored, or as Mike Boland of BIA/Kelsey likes to say, unpacked. (Incidentally, Mike if you're reading this, Google's voice to text properly recognizes your name and spells it correctly- you’ve arrived). There were panels on mobile, cross channel, local strategies and automation, among others. Tuesday afternoon I was fortunate enough to participate on a panel led by Andrew Shotland on the state of search and where it is headed. Given that we’d officially launched AdMax Local, our new SaaS platform earlier in the week it was perfect timing. I had the opportunity to explain to the audience of iYPs, CMRs, franchisors and marketing services companies that they could in fact profitably sell and deliver paid search to SMB's- and that the local paid search marketplace is perfectly suited to automation. And not the automation that provides tools to allow humans to do work, but true automation where the technology does the work instead of humans. We released a white paper on the subject last week as well. The way we see it, there are two main reasons why an automated model for SEM, such as AdMax Local, will more effectively benefit the media reseller’s bottom line: automation and a reduced cost of ownership. We use the term “agency model” to represent the technology-enabling-humans solution that is common today. Humans using platforms for account creation and management of SEM programs. The ability to profitably manage the volume of advertisers necessary to build a sustainable SMB SEM business continues to challenge emerging channels today. However, several factors unique to SEM in local markets have made automation for SMB accounts feasible. Just a few of these factors include:
- Geography: SMB campaigns are limited to specific markets with relatively stable traffic volumes that make it possible to pre-compile campaigns at a market level
- Competition: There is less pricing volatility in local markets, which typically have fewer and less active competitors
- Product vs. Service: Local market SMB campaigns typically revolve around service categories with much lower rate of change
- Account Set-Up: Automated account set-up routines and processes eliminate labor intensive and error-prone manual processes
- SMB Spend to Setup Cost Ratios: There is a linear relationship between setup costs and budget size with agency models—setup costs increase as budgets increase.
- SMB Spend to Management Cost Ratios: Budget and account management fees also increase linearly. Larger budgets require more optimization, new ad copy and landing pages, and these costs increase linearly over time when managed by an agency.
- Account to Headcount Ratios: The most significant cost driver in agency model is the headcount to account ratio. As accounts multiply, labor multiplies with it—channels become locked into a linear labor model that has virtually no economies of scale.