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agency markup on local digital marketing and advertising

How Some Local Businesses Get Screwed With Online Marketing

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I’ve worked in the digital advertising agency field for over the past decade. I can’t tell you how many times I’ve heard local and regional businesses say, “I’ve been burned,” or “we tried digital marketing and it didn’t work.” It’s truly frustrating to hear some of the horror stories that many businesses have gone through. Our digital marketing and creative team have been working with both big and small businesses for over a decade now. We run comprehensive online advertising campaigns for our clients. The key theme for us is, do good work, and always do the right thing.

Let’s take a look at why digital marketing didn’t work for these local businesses.

Most likely, the business bought a digital marketing package by a local media company. The “digital sellers” may have been:

  • Local Newspapers
  • Local TV Stations
  • Yellow Page Companies
  • Pure Play National Digital Marketing Firms (some of these do have great products)

The problem with most of the digital sellers is they often have high employee turnover. Most don’t actually do the fulfillment of digital marketing campaigns in-house. It’s often outsourced to someone so disconnected from the client that they don’t care about the local business owner.

The markup on the majority of local digital media is very high. I’ve seen local TV stations and newspapers selling display or banner advertising. Usually with CPMs between $10 CPM on the low end and up to $25 CPM on the higher end. The culprits have been able to get away with this because most local business owners don’t know any better. The packages the culprits are selling are buckets of impressions for X dollars.

Let’s go through three pricing scenarios. A local TV station or local newspaper Digital Sales Rep goes into a local business. They ask them if they would like to select one of the following display packages:

Scenario 1: Buying Through A Local Media Company:

  • Package 1: 100,000 Display Impressions – $1,500 (active CPM $15)
  • Package 2: 200,000 Display Impressions – $3,000 (active CPM $15)

For the average local business owner, being able to have your display ad shown locally to 200,000 people for $3,000 doesn’t sound like that bad of a deal. It actually sounds pretty decent, but the devil is in the details.

When our digital marketing agency works with a client, we buy straight from the major ad networks. We don’t have to go through a half a dozen layers of middle management and brokerage fees. Then, this is what the pricing package looks like with the same number of display ad impressions.

Scenario 2: Buying Through A Local Digital Agency With No Markup:

  • Package 1: 100,000 Display Ad Impressions – $200 (active CPM $2)
  • Package 2: 200,000 Display Ad Impressions – $400 (active CPM $2)

The pricing and visibility contrast in Scenario 1 and 2 are drastic. When a digital advertising agency manages client ads with the ad network(s), all the middleman and high margin fees are removed from the equation. The active markup in Scenario 1 is ~750% and Scenario 2 is 0%.

Scenario 3: Buying through a local digital agency with no markup and the same budgets as Scenario 1

  • Package 1: 750,000 Display Ad Impressions – $1,500 (active CPM $2)
  • Package 2: 1,500,000 Display Ad Impressions – $3,000 (active CPM $2)

Which scenario would you choose?

Most business owners want to make sure their marketing is working, but not to worry about the details. Local business owners want to have a true marketing partner. Not someone who is going to come in and get their advertising contract renewed. It’s challenging enough to start behind on a digital marketing campaign. This is because they don’t know the pricing, and don’t have clear enough business goals.

Digital Logic is a Shreveport based company that works with both local and national level businesses. We offer a broad range of services and look forward to hearing from you!

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