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Street Fight

July 5, 2013 View Original Article

Why SMB Marketing Services Won’t Save Newspapers’ Bottom Line

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Here’s an argument I recently heard against the idea of newspapers getting into the SMB marketing services business: “Small businesses don’t need SMB marketing tools/service bundles sold to them — because if they can’t figure it out on their own (by finding the right tools and services on their own) then their marketing efforts won’t last.”

I’ve never been a big fan of newspapers getting into SMB services, but in the past it was mostly because I thought these services weren’t a forward-looking solution for newspapers’ declining fortunes — rather that they simply represented a pivot of the original business model. But I find this argument about SMBs adapting or failing to be even stronger.

The fact is that most newspapers aren’t building new and innovative tools to provide SMB services. Instead they are white labeling offerings from other providers or are connecting their audiences to an existing service. They offer a simple way to buy online display on other ad networks (including Google); they help you manage your Facebook and Twitter posts; and they repackage email marketing tools, call tracking, and other tools that already exist from a variety of providers. It’s true that there are plenty of SMBs that are currently willing to pay a monthly fee to get all these tools in one place — but as technology makes these tools easy to use, being this kind of marketing middleman for the SMBs lacking savvy becomes less and less of a sustainable business.

Right now the feedback we hear from small business owners is that they don’t have the time or knowhow to set up their social media accounts, buy online search or display ads or track their reviews on the various reviews sites. But over time new small businesses will pop up with owners who really understand these tools, and put the small businesses who are outsourcing it (or not doing it all all) out of business. I already see this happening in my community. I’ll see a new business launch with a great digital marketing campaign (effective use of its website, social and email usually) and the place takes off. Yet there are also businesses that have been in my community forever that I have completely forgotten about because I never see them unless I drive by.

The other problem is that over time the provision of these SMB tools is going to become a commodity. When someone who is still in high school can buy some business cards online and step out into the street and offer exactly what you are offering, you’re in trouble. With the high cost structures and overhead that newspapers have, being in a commodity business (where margins get pushed lower and lower) won’t prove lucrative in the end.

This isn’t a new phenomenon for those of us who have been in the newspaper business. It wasn’t that long ago that we all had conversations about building out quick-and-dirty websites for small businesses. We’d talk about creating something that a sales rep could set up in 30 minutes with the client (and it’s worth noting that some of the SMB offerings of newspapers still offer this). The problem was that many others were quick to market with better and easier-to-use tools. And our local marketplaces got flooded with Joe Schmoes offering the same product for cheaper. To this day I still see road signs on the highway advertising services to create a website for your business for $250 (not billboards, the cheap plastic signs sometimes written with black marker). I’m not saying you can’t charge more than those guys, or that what the newspapers were offering isn’t any better. The problem is that websites are a commodity, and folks like Squarespace or Intuit are figuring out how to do self-service for small businesses that makes sense. So while the self-service tools for SMB marketing can be difficult for most small business owners to understand, it’s only a matter of time before the tools to do it easily are a commodity.

So if all of this is true, why are so many newspapers are jumping on the SMB marketing services bandwagon? First off, there’s revenue in the short-term: in most markets SMB tools are not yet a commodity and most small businesses haven’t figured out how to do digital marketing on their own. The other reason is that there are businesses offering seemingly easy-to-implement white-label solutions for newspapers. In a panel I moderated at the recent Street Fight Summit West, Sean McDonnell, SVP Sales at Propel Marketing, which is the SMB agency created by GateHouse media, said he expects to see about half of the company’s revenue coming from non-GateHouse newspapers.

While there is nothing wrong with what GateHouse is doing, my concern is that in the long run Propel will be unable to pivot. The company may continue to provide value for small businesses, but as the tools it is offering become more commoditized, the newspapers they work with end up using their sales force to sell a commodity product. This is why companies like GateHouse, Gannett and McClatchy (that are taking these SMB tools seriously) are building out separate businesses that can create a national footprint and survive without newspapers. Not a bad spot to be in — but not a solution in themselves for newspapers’ woes.