The Internet is slowly but surely entering its golden age: in 2007, online advertising is expected to represent as much as 12-15% of worldwide budgets. The web has become a leading source of information, revenue, R&D and beta testing for a majority of companies. I've seen 2006 as the "Getting Ready Year" for a lot of firms, as most of them are getting very excited (or stressed out) looking at the social media explosion and want to grab their share of this emerging market.
For the last year, I've studied several business models for Web Marketing/Development since I wanted to figure the best way to jump into 2007 as a small/medium size company willing to increase its size rapidly while keeping our company’s core elements:
- Have our core team stick together and be excited about upcoming projects
- Develop individual skills through experimentation and analysis
- Offer the best vertically integrated experience as a provider to companies seeking a global approach on the Web
So far, we at NVI Solutions have managed to grow from a 3 person web design company to a 15 person web marketing / web development company in less than 2 years. But what lies ahead? How do you make the leap into the big leagues? How do you move from 15 employees to 30… to 40… and then to 100+ employees without diluting all of your knowledge?
I kept analyzing and figuring existing online and offline business models for the last year, trying to find a model that would really stand out of the crowd, get the job done fair and square, and also add some personal value and creativity. I really think we are going to see a next generation of Web Marketing / Development companies. After spending the last year dealing with 100+ customers and studying both kind of models, here are some of my observations on how Offline / Online marketing companies offer their services:
Offline Media
The catch here is to know where you are in the food chain. Usually, there is an external marketing firm which develops long term relationships with their clients. The marketing firm will get its yearly budget, which will be widespread amongst different tactics and strategies, and most likely (if the company is fairly large) through several freelancers or sub-contractors. The marketing firm is responsible of holding everything together and delivering results, but the difference in traditional media is the difficulty of measuring metrics (and thus, lack of accountability).
If you are the marketing firm (the guy who gives food to everyone else in the food chain), the key is to have a great versatility and to frantically manage your markup. Reliable freelancers, subcontractors, and outstanding project managers who care about quality will help you grow and deliver great results.
If you are the freelancer / subcontractor, the key is to find the right type of marketing firm that fits your expertise. I've seen so many freelancers happy to charge the same fees as consulting companies (which are usually way higher) just because they had taken the time to dig into their vertical niche of expertise and create synergy with the right partners. Also, please, do what you are passionate about, and discard the rest, you will suck at it anyway (and it will be a painful process for you...).
Several marketing firms have decided to start their own web division while others have decided against this expansion and create partnerships with existing and well established web companies.
Offline Media - conclusion
What I think is great about Offline Media is that marketing firms are on the driver seat. There is someone accountable who oversees the global deployment of all marketing tactics and strategies. This is possible only because there are massive amounts of marketing dollars to be spent and optimized. But as the marketing dollars are slowly drifting away from traditional media to a more balance online / offline synergy, you can expect a lot of changes – this industry needs fresh air.
Online Media
I was surprised to realize how disorganized many corporations are with regard to the Web as a whole. A company can have an outstanding marketing firm directing all their strategic actions, yet, often, the “weakest link” is that no one is actively connecting everything to the online world. There are immense disparities if you look at major corporations from their online and offline perspectives. Some spend millions on TV ads but have the same unique title for their 2,000 page site. Some have outdated and buggy pure flash sites but pay an SEO to optimize the site without recognizing the basics of the practice.
I think it's very challenging, in our industry, to sell our services in a way that clients AND providers sit on the same side of the table and deeply understand the big picture of what they are trying to accomplish on the web. In most cases, here’s what happen:
- Too many people are needed to approve anything published on the website
- No synergy is created with the offline marketing team, lowering the ROI
- The CEO or the leading board has its own “outstandingly wrong perception" of what Internet can do to its company (rather than what it can do "for" the company)
- The web company changes its project managers every season, losing key data
Online Media - conclusion
I can personally say that from my experience, there's a simple explanation. Since our industry is very young, there are “tons of Indians, but very few Chiefs”. Everyone’s learning and trying to stay afloat with emerging technologies in specific niche markets (and there are so many on the Web), but very few are left to make sure the boat stay afloat by grasping the bottom line of any strategic planning.
I think there is a great business opportunity in honestly trying to help your client to figure the big picture of the Web and to educate them so that they understand how the e-marketing dollars can have an impact. Transparency is, and I raise my white hat to Rand, the highway of the future. You have to share what you know, and you have to admit what you don’t know! Yet, the most important tip I figured is to try to offer a vertical approach (a good example is American Apparel; they do everything in the US, and yet they can surpass China's cheap labor) so that your own global understanding of the web increase as you take on new challenges and put it against everything your team and yourself already know.
As a great example, let’s look at NVI’s debut. It started with 3 partners, doing website design and basic php programming at 35$CAN / hr at the end of 2004. But then, clients wanted some hosting – so we analyzed the best opportunity we had with that and went ahead and boom – we were offering web design, programming and web hosting. Then, clients wanted to edit their content – our CMS package was born. Clients also needed some business cards, flyers and posters – we had the layouts done and found a subcontractor to print everything. But hey, now they needed a new logo – we started doing graphic design and branding. And now they wanted antispam filtering, so we added the service. And after, clients were looking to attract more people to their site – SEO/SEM, and Web analytics were just around the corner. The point is simply to be smart about what comes your way and make the best of it: I never expected I’d be doing branding and marketing on the Web.
And as we are hiring people who all have unique expertise, we realized that a client of NVI can earn a massive ROI if we could only manage their entire web strategy while feeding our company's learning process. If we could simply “get ahead of our client” and help them to think about long term – while also strongly commiting to measure and improve - we would have a perfect relationship. This is exactly what the corporate world is always looking for: ownership.
As a conclusion, stay alert for great opportunities, share all you know with your employees and clients, and make sure you take smart steps in your business. Just keep the idea that the more your company succeeds in sharing and learning from its actions, the more unstoppable you will be. You'd rather have a competitor spending a lot of time looking at what you do; he will forever be stuck in your footsteps.
Guillaume - thanks for your insight (hope you don't mind the edits I made to your post). I'd agree that, in many cases, being able to handle the entire online operation of a company can provide the best results, but it's also a lot of responsibility to shoulder.
Your team has to be ready to take its own "ownership" of the successes and failures of the project - to learn the business inside and out and to prepare for changes not only to the online world, but to the industry of the client as well.
There can be little doubt that this type of engagement is very valuable, but also volatile.
No - I was kinda expecting that the published article would get Randvised ;)
It was quite long - so thanks for keeping the essential!
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Excellent post Guillaume – it’s well timed, and very much needed.
I like your insight into the offline vs. online world. I have witnessed the same - that the offline marketing agencies are seemingly well organized, with superstar account executives and project managers, and large teams of experts delivering the results.
I don't necessarily agree with their lack of accountability. Its there - they just have to "spin" things differently to make sure their value is perceived by the client in a way that is desired.
As for your online assessment – spot on! Disorganization, SEO’s trying to be project managers, and an idea that SEO and PPC is all that’s needed – success is found by top positions and lots of traffic.
This was all fine and dandy 2-years ago, but it’s a whole new game now.
Long-term strategy is needed. Project managers that understand online AND offline marketing, business strategists that understand the long term affects of various marketing and market penetration initiatives.
It sounds like you guys are heading down (mostly) the right path. I would definitely caution you on taking on too many disciplines though.
I think it’s great to have both SEO and PPC. It’s also beneficial to have web design and programming on your team. You may even find that having a specific social media and/or link-acquisition champion is a good idea – but you’ll definitely need a support team to keep all of these in line; i.e. project manager, account executive, media strategist, marketing manager, etc.
As for hosting – this is a dangerous game to get into, often placing a heavy burden on your team if its not a core service offering. Also, print advertising, anti-spam software, etc… be careful!
Hey – if you can offer it to a customer here and there and make their world brighter – who’s to say you shouldn’t, but I recommend you limit your core service offerings and have an open partnership with other firms that excel in each.
For instance, we do SEO, PPC, and analytics. We dabbled in hosting and email marketing, but quickly realized these offerings were dragging down the quality of our core services.
Recently we took on media placement for a partner agency, but only because it was tightly related to their PPC campaigns. We are now building open partnerships (with revenue sharing) with firms that offer email marketing, hosting, social media, and web development – as well as offline partnerships with print houses, broadcast, and other mediums.
This has been very successful, and well received by clients. We are open in saying “we don’t offer that as a core service, but we highly recommend another agency that will do wonders for you – we’ll even help manage the project/relationship”.
We’ve found that clients (especially corporate), prefer agencies that excel in core services. At the same time, they aren’t real excited about having to manage too many relationships. If we can tell them where to go – and offer management assistance – they are typically ecstatic. One final note – we still have a long road ahead on getting clients (and traditional agencies) to understand the importance of web marketing and the need for additional budget. A recent prospective client mentioned that they had about $18k budgeted for their 2007 online marketing campaigns (including a site redesign). This already seemed really low for a large company, but when asked what their overall (offline) marketing budget was for 2007? Over $2 million.
Wow Scott. Thanks for your long feedback. I agree 100% with you about hosting / antispam and other issues - and this is precisely what we are doing: we have reseller accounts for hosting, antispam, and any other thing that we can't hire people full time to manage and get a great ROI.
Companies just want you to take ownership and be the first on the front line to defend their interests - and I think that is where the low hanging fruits are.
And for that client, tell him 18,4k will be enough. I think he will understand how silly he is ;)
Great comment again - thanks!
My company has a similar outlook in that we're always looking to add services that are in demand. One of my jobs is to ensure that if we do something then we do it well. I've worked with companies in the past who made a hash of some work for me and I never used them again even though they may have been brilliant in other areas.
The proliferation of software and services available in the online world makes it easy to start telling clients that you do SEO or hosting or many other things, but if you lack expertise in the area concerned, then it can have a negative impact on the perception of your company.
What I love most about these sort of posts is the way it invites you to look at your own business, decide what you could do better, and what possibilities you may have missed out. Thanks for that, Guillaume. :)