Digital marketing services: A lucrative business in Texas

“Amateurs can waste thousands of dollars if they don’t know what they are doing. That’s where we see ADM fitting in,” says Victoria Advocate Publisher Dan Easton in describing the digital marketing services company he founded at the regional daily.

by WAN-IFRA Staff | August 22, 2017

For small and medium-size businesses (SMBs), marketing their merchandise or services used to be a relatively simple task: buy a listing in the yellow pages, place a few ads in the local newspaper, and perhaps buy a billboard on a busy road, for instance.

The internet has banished that simplicity forever. Nowadays, a business also needs a website, a social media presence, visibility in search engines, and other digital marketing devices. It goes without saying that many business owners need help with those activities.

Thus providing marketing services to SMBs has become a significant business opportunity, one that newspapers, especially in the USA, have been entering in large numbers.

For the past four years, businesses in a widening area around South Texas have been increasingly turning to Advocate Digital Media for marketing services. ADM was founded in 2013 by the Victoria Advocate, a seven-day newspaper with a weekday readership of some 76,000 in its local market of Victoria, Texas. We interviewed the paper’s publisher – and ADM’s founder – Dan Easton by e-mail to get the details of what it means to a regional newspaper to build and operate a separate business unit selling marketing services to SMBs.

WAN-IFRA: How many people work at ADM, and in what roles?

Dan Easton: ADM has 22 employees: eight salespeople, two developers, three designers, six fulfillment personnel, two administrative assistants, and a general manager.

Is it housed in the newspaper building?

The company started out within the newspaper, but we moved our headquarters into a separate facility about 24 months ago. We felt that in order to be a true agency, we had to avoid both the reality and the perception of being tied to a particular media. We also felt that we needed to invest in our own image and brand if we were going to persuade our clients to do the same, and we weren’t in a position to make those investments in our newspaper offices at the time. We still have some of our team in a newspaper office in one market, but are weighing moving them to a separate office.

Could you describe how ADM has grown over the years?

Regarding growth, we’ve had mixed results that might be discouraging at first glance. For example, our annual revenue growth rate in 2014 was 82.3%, but for 2016 it was only 4.6%. That appears disappointing on the surface, but there are a couple of things you have to look at to truly understand those numbers.

First, since we grow in relatively small markets, we begin to saturate those markets over time. Second, and more importantly, our markets are heavily dependent on oil and gas. To illustrate, if you compare our growth to the local economy (retail trade) in our primary market for the same periods, we see the local economy grew 6.5% in 2014, but shrank by 10.1% in 2016. From that perspective, you can see that we’ve significantly outperformed the local economy over those same time periods.

There is no question that we are approaching saturation of our primary market, which is why we are pushing to expand into other markets.
– Dan Easton, founder and head of Advocate Digital Media

We currently have more than 200 active accounts that span five states. Tracking profitability is a bit trickier because some of our products are tied to our news media properties, and we haven’t done a perfect job of accounting for those commingled revenues and expenses.

That said, I think we do better than most in our accounting for our true digital revenue. For our South Texas operation, including expense allocations for the shared services, our margin has ranged from 3% to 12% since the inception of ADM.

Maintaining margin is a constant struggle, as media properties continually try to push margins up (as they should). It is a never-ending job to find access to inventory at lower rates to hold our own margins. Finding ways to cut out middlemen is key. We also staff for anticipated growth, versus a more stable or mature industry, where we might operate a bit leaner.

What are some of the main lessons you have learned in the course of ADM’s existence?

You learn the most important lessons through failure, and we’ve learned hundreds of lessons, but I’ll share just a few. The primary lesson we learned was from the Innovator’s Dilemma, which is the theory of disruptive innovation and the trap into which incumbents inevitably fall when faced with this dilemma.

Regardless how smart or talented we are, we are all susceptible to it, yet when faced with it, we all believe that with the right amount of talent and hard work, we can overcome it. It is akin to thinking that we can somehow overcome the laws of gravity if we just work hard enough or smart enough. I find myself falling prey to it regularly in my role as publisher.

By having a separate operation with a lead that is not directly involved in the incumbent business, it creates a situation where we pursue the opportunities offensively instead of defensively.

I’ve also seen that it is easy to fall into a trap of waiting to develop the perfect strategy or build the perfect product mix.

With ADM, we create and destroy products and service offerings sometimes within weeks. We constantly adjust tactics based on the rapidly evolving media landscape.
– Dan Easton, founder and head of Advocate Digital Media

Change becomes the norm, and we must have the flexibility to go where the opportunities are, and evolve as things change.

Lastly, many larger organizations seems to view this space in a stratified way, and decide that they don’t want to deal with smaller customers. But we’ve found benefit in accepting relatively small buys in order to get our foot in the door. Some of those tiny, $150/month customers have evolved into $10,000/month clients. To get them there, we convinced them to give us a tiny piece of their budget, we demonstrated the positive return on the investment, and over time we win their confidence to take on their entire budget, which is the ultimate goal.

What advice would you give a local or regional newspaper that is considering establishing a digital marketing operation?

Find someone to lead the operation who is truly passionate about helping SMBs develop their business. If you just view this as a sales problem, or believe that if we create just the right product mix and train the sales team with just the right pitch and collateral, it’s not going to work. You have to build a culture of true business development passion. You need a team who loves to learn about their clients’ businesses, how they operate, and how we can help them grow to the next level.

Every small business on the planet is hearing a never-ending message that their marketing dollars need to be spent on digital, or that their clients are all using digital to find them. They know they need to be there. At the same time, with rare exceptions, most business owners didn’t go into business to be marketing experts. Instead, they went into business to sell furniture, or fix cars, or build houses.

When the marketing decisions were basically a choice between newspaper, TV, radio, and billboards, the decisions were fairly simple and the markets were fairly efficient and stable, making the return on marketing spend fairly equivalent across the choices. In short, you might not make the optimal choice, but you also didn’t make horrible choices with your media mix. Now there are literally thousands of marketing choices – with orders of magnitude of difference in return or efficiency, depending on the channel, the targeting, and even how you buy the media.

Amateurs can waste thousands of dollars if they don’t know what they are doing. That’s where we see ADM fitting in. The message is “let us solve this marketing problem, so you can get back to running your business.”

At the World Publishing Expo in Berlin, Easton will participate in a panel discussion titled New Revenue Pillars, 13:30-15:00 Wednesday, 11 October, on the conference stage at Digital Media World.

More information about digital marketing services can be found in the WAN-IFRA Report “Alternative Revenue Streams for Publishers”, available free of charge to WAN-IFRA Members and for sale to non-members.



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