The Ugly Side of Local Online Advertising

Posted by Ad Hustler | Posted in Local Online Advertising, Traditional Media | Posted on 09-09-2009

There are a few reasons that i’ve decided to do a series on local online marketing:

  1. It’s not spoke about all that often
  2. When it is spoken about it’s made to seem super easy (a la Shoemoney posts)
  3. I have extensive experience in the field

In order to speak about local online marketing I think we first need to define the business that are best catered to:

  • Businesses that depend on leads and have decent sales departments are usually the best businesses for local online marketing.  Some of these businesses would include car dealers, real estate agencies, lawyers, accountants, cosmetic surgeons, dental spas, home contractors etc.  Although it can work with other types of businesses such as restaurants, proving ROI can be trickier.

To understand the local business mindset, you need to look at where they are spending their advertising dollars:

  • Print (Mostly Newspapers)
  • Radio
  • Cable
  • Direct Mail
  • Outdoor Advertising (Billboards, Bus Stops, Shopping Carts, etc)

All of the above advertising methods are significantly more costly then an online marketing campaign.  I already see the dollar signs in your eyes.  Don’t get all excited and wet yourself because local businesses make ABSOLUTELY NO SENSE.  I don’t care if you can provide them with 100 high quality leads for $1000, they are still going to spend their money in the newspaper buying a $1,000 ad and getting 1 phone call.  Guess what else: they’ll never complain about that $1,000 they spent in the newspaper but they will bitch and moan about every single one of those 100 leads you sent them for $1,000.  Perception is everything.

Here are some common models for local online advertising catered to small/medium sized local businesses:

Flat Rate: This is the most deceptive model and usually kills the local businesses trust of online marketing in general.  In this model the advertising company comes to the small business, charges some set fee like $500 per month and says they are going to transform their business.  Usually any company offering these flat rate programs are just snake oil salespeople trying to capitalize on the businesses lack of knowledge about online advertising.  Yellow Pages companies are notorious for selling these crappy packages to small businesses.  The small business never understands what they are getting and are normally turned off from online advertising altogether because they say “I paid such and such Yellow Pages company $6,000 last year to manage all of my internet advertising and I got NOTHING from it!” – Please Note: Flat Rate is not ALWAYS bad.  Sometimes it’s simply the “management fee” model without the actual explanation of the management fee.

Management Fee: This is typically how search engine marketing companies that cater to the local space operate.  They charge some sort of set fee or percentage in order to manage the clients ad spend. The percentage usually works out to 20-30% of the ad spend.  For instance if the local business agrees to spend $1000 on a search engine marketing program, the search engine marketing company will take $200-$300 for the management fee and spend $700-$800 on the search engines.  Sometimes the SEM company provides backup to show how much they actually spent on the clients behalf and sometimes they don’t.  Also, sometimes the SEM company lays out the funds for the search engine marketing and then get’s paid in full from the client for the campaign + management fee and sometimes the SEM company takes the clients credit card and charges all advertising fees directly to the client and then just bills for the management later.

Per Lead: Attention affiliates.  This one’s for you.  Per lead is exactly what it sounds like.  You negotiate a per-lead fee to which a local business will pay you for each lead delivered.  You define what a lead is at the time of closing the sale with the client.  You take all the risk on the advertising and only charge the client a per-lead fee.

Hybrid: I really like the concept of this model.  You proposition a business that you can handle their search engine marketing/online marketing.  You charge them the actual cost of the advertising (or have it billed to their credit card) but do not include any profit for yourself.  You then say “I only get paid for results” and negotiate a per lead model for your compensation.  Since the client is actually paying for the advertising, your per lead fee has to be significantly less then if you were putting the risk into the advertising.  It’s actually a cool business model because you take almost no risk and still get paid on performance.  You just have to work it out in such a way that you get paid more then the management fee model.

Publisher/Directory Model: You’ve seen this method is the 100k/year &  200k/year threads on Wickedfire.  The model is essentially that you create your own medium in which you sell cheap ads to local businesses.  Whether it be a directory, news source or just search engine optimized pages.  You create the medium for cheap/nothing and then sell ads to local businesses based on your organic search engine rankings.

The Many Problems & Complaints Of Local Online Marketing & Client Management:

  • Clients Are Stupid: Straight up, I said it and I mean it.  Most online marketers probably know a small businesses business better than they do.  Small business owners focus on the most bizarre/retarded things in a campaign.  If you get into creating landing pages for them you will see this come right to the forefront.  Here’s a great example.  I dealt with a local client selling a particular product.  They refused to agree that it might be important that the product someone would be searching for to be prominently displayed on the landing page.  Instead, they wanted the entire landing page to be a map of their area.  I’m not kidding here.  This is for real and i’ve dealt with this type of retarded thinking time and time again.
  • Why Is My Ad Not Showing?: This issue infuriates me and is very common.  Here’s an example: You run a search engine marketing campaign for a mortgage broker.  You bid on terms like mortgage, mortgages {LOCATION} etc.  After a few days and some data on the keyword “mortgage” you find that it just dosn’t convert for this client.  Not only that but it costs $10+ per click.  You pull the keyword out of the campaign  to focus more on the mortgages {LOCATION} keywords that are only costing $1.50 per click and converting like crazy.  The client calls up complaining their ad isn’t showing up on the keyword “mortgage.”  You explain the situation to them as well as the negative ROI they are receiving on the keyword and they say “If you won’t bid on that keyword, I’ll find another company that will.”  This goes back to point number 1: Clients are stupid.
  • Small Businesses Cannot Close The Sale: This issue effects you heavily if you are in the lead sales model but really effects every model.  Small businesses suck at selling their own services.  Often times when you call a small business you get a secretary who couldn’t be bothered to sell anything to the caller, let alone answer questions intelligently.  Many calls are dropped into voicemail and often times the people answering the phones are just downright rude and unhelpful.  This leads to my favorite: YOUR LEADS SUCK.  I always find this complaint interesting and fun at the same time.  Why fun you may ask.  Well…..I track every one of my clients phone calls.  That’s right I have call recordings on every lead that calls a place of business through one of my landing pages.  Listening to these calls can give you a days worth of entertainment.  I can send these call files over to the client and they still won’t admit it’s not the lead, it’s the salesperson.  A lot of the time if the lead is not READY TO ORDER/MAKE AN APPOINTMENT but rather has questions the salesperson/receptionist cannot sell to them and the business considers it a bad lead.  They can’t fathom the fact that you are selling them LEADS not PAYING CUSTOMERS.
  • Clients are Flaky: You can prove to them that they are getting a positive ROI off the money they spend with you and a negative ROI with other traditional advertising that they are doing and they will STILL flake out and cancel your service.
  • Clients are Needy: They call a lot and love to waste your time.  They want to be taken out to lunch and pampered even though your profit off them isn’t that much money.
  • Lack Of Scalability: Local online marketing for clients is not THAT scalable without in house software and employees.  There are some companies that have done it well such as Dennis Yu’s BlitzLocal.

What can you do to combat these problems?

This is a tough question to answer because there isn’t a whole lot you CAN do.  If a client is taking up too much of your time for not enough money you need to fire the client.  If they are being unreasonable and you prove to them that their ROI is positive and they still want to cancel your service, let them.  What I am saying here is to expect churn.  No matter how well you do for you clients, they aren’t all going to be clients forever.

I know that a lot of those points are negative but I want you to KNOW that it’s not a cake walk if you decide to go into it.  There are some positives such as lack of competition and a profit potential.  But you need to deal with clients, and clients are not always worth the money they can bring in.  Be careful who you work with and manage your risks.

I have some other great posts coming as part of this local marketing series including some interesting case studies.

Do you have any questions about all of this?  I will answer them in the comments.

Ad Hustler | Subscribe To Ad Hustler

Comments

  1. Terrific article, looking forward to the rest of the series.

    A couple of questions:

    1) What system/platform are you using to manage/record the lead calls?

    2) How is BlitzLocal able to mitigate some of these issues? Simply having a large-enough staff, or something else?

    Thanks again.

  2. I feel your pain dude. Reading that just made me want to slap one of those typical clients. This is why I stay away from local – I can’t stand dealing with those kind of clients. Their ignorance and stupidity can sometimes be astounding.

  3. Good post, I’ve been hanging out to read it.
    Can you give some insight on you CMS and Lead management software.

  4. Thanks for saying this aloud man! There is too much hype and BS about local marketing, but I got some scar tissue from dealing with these small businesses.

  5. Great post man. Dealing with people who are not open to test/tune is always a challenge.

    Time management and scalability are my main issues with local clients.

  6. Brandon,

    Wow– that was one of the BEST in-the-trenches explanation of local marketing I’ve ever seen. From a client management perspective, probably the best, as you know exactly what the issues are and are brutally honest about it.

    We can’t get away with saying things quite so bluntly, since clients who read the post might think we’re talking about them– and we probably are!

    To the folks in the thread who have questions about scalability, if you’re a little guy, my best advice is that success comes not from being better at optimizing campaigns (PPC is easy), but in choosing the right clients.

    Anyone who complains about price, doesn’t return calls promptly, has an existing webmaster who won’t cooperate, won’t roll up their sleeves to write content, and so forth– stay far away!

    As Brandon mentioned, for larger companies– the trick to scale is systems and employees. Think of the “value meal”, but applied to local web marketing services. It’s more important to mention what you DON’T do than what you do– to avoid setting the wrong expectations.

    Don’t ever position yourself as someone who makes websites– that’s a dime a dozen. What you do is lead gen– for which you’ll create a minimalist site that gets the job done, but not ultra fancy with lots of design tweaks and tech support questions all day. That is disaster waiting, trust me.

  7. Awesome post! I think with any business you will get your share of these “nonsense” clients that will waste your time. It feels like you make the most money on the clients you spend the least time on, and vice versa (my experience with my businesses).

    I think sometimes as affiliates, we get a comfortable not having to speak with clients, deal with their bullshit, etc. But the fact is that if you want to operate a business of your own, you will need to deal with the bullshit that goes with it.

    Even though there are a lot of negatives in local lead gen, I think it can still be very profitable. There are dozens and dozens of ways you can set up your business model.

    So regarding doing the “per lead” model, how do you usually determine what to charge per lead? Does it depend the knowledge or lack of knowledge level of the client? Do you run some kind of initial test? Or what?

    Also, do you ask for payment upfront? Would love to hear some more details about this.

    Thanks again for the post!

  8. Clients not following up on the leads sent is my BIGGEST gripe. Great post Brandon!

  9. @Bryan – I can’t give you mine but if you Google “Tracking 800#” there are tons of them and they are all pretty cheap.

    @Jack – I don’t have a CMS/LMS – I guess you can use Salesforce or SugarCRM though.

    @Dennis – Killer comment, very helpful!

    @Ben – There is no clear cut answer on that question. As far as payment it’s always best up front but not always possible. Your going to have to work that on a client by client basis based on your relationship.

    @Jason – Glad i’m not alone :)

  10. Great post! I tend to gloss over these challenges on my blog as well, but they are very real and you have outlined them perfectly.

    The only way I have found to mitigate some of these client problems if by having a rock solid agreement in place before starting. By outlining every possible term and outcome of the process and setting the expectations at the start we are able to avoid a lot of issues.

    Looking forward to the rest of the series.

  11. @Dennis – you hit the nail on the head. And was pretty eye opening for me. We have a client just like the ones you’re describing. I think I will take your advice and ditch the business.

    And the idea about NOT being a web design firm is correct. I find that the clients tend to push for more of a design aspect and try to kill 2 birds with one stone. I don’t like that because usually the site was designed by someone that did a terrible job and then you are just trying to fix their problems.

    But sometimes I am a nice guy if it is an easy fix. I guess it has to deal with when you are marketing to a local market that you have to consider your reputation and others might perceive you.

  12. Great article. Gives me a lot to think about for some of the local sites I have setup. Thanks!

  13. Well written and very detailed…you rock Brandon.

  14. @Chad – Definitely an honor to see a comment by you :) – I’m wondering if you have a sample contract that works for you. Even if you don’t want it shared publicly, id be interested in seeing it personally.

  15. hell of a post – i have definitely not considered all of those fun pitfalls.

    also didn’t think of bothering to record all the calls via a service like that

  16. I’d like to concur that clients are -stupid-.

  17. Brandon,
    Well said on this post. I too hit up local businesses in my area and I can tell you that being honest with these clients is the only way that I can deal.
    Calling them out on their lack of knowledge on internet marketing can actually get your client to respect you. I have had them call me back because I called them on it and besides, local business owners need to know how to delegate their own web presence and If I can be that delegate, I will definitely charge for it.

  18. Yeah you have stated what’s being real about Online Advertising. That is really very true and we have to accept that its part of the business.

  19. great detailed post off all the headaches. But your still the ONLY affiliate to not have competition. Just a client to deal with.

  20. I liked the hybrid model you suggested. It is indeed easier models to work with & think of profitability. Probably lack of ehtusiasm on part of locals to improve infrastructure for better results as important problem? I guess, lack of say in internal matters can be an issue as outsider? What kinda suggeston would you give?

  21. [...] is HOT, but so precious little on how to actually do it.  Not surprising, since for every Brandon Hoffman, Dr. David Klein, and David Kyle, there are 100 pretenders.  So let’s talk [...]

  22. [...] is HOT, but so precious little on how to actually do it.  Not surprising, since for every Brandon Hoffman, Dr. David Klein, and David Kyle, there are 100 pretenders.  So let’s talk [...]

  23. [...] 4. AdHustler.com: The Ugly Side of Local Online Marketing [...]

  24. [...] of client: Typically, it draws folks who don’t have any money– the needy clients that Brandon Hoffman likes to talk about. The catch-22 of marketing is that it takes money to make money and a lot of [...]

  25. [...] You have a number of other interested clients that you have to get back to. You don’t want bad clients. There are so many local businesses out there that you can have your pick– and that includes [...]

  26. Looks like I am a bit late to the party…

    As someone who is just starting out in the local online marketing space I can agree with your statement of “choosing clients carefully” the most.

  27. Adhustler and Dennis great stuff you guys.

    Here is my question have you tried actual affiliate product sales in the local searches?

    Not just providing help to business owners, but like running seo and ppc and driving them to CPA/clickbank offers..

    thank you

  28. [...] in how to explain the different relationships that can be built. Here is a great article from Adhustler. Take a few minutes and read. I will wait. Twiddling my thumbs. Ok, you are [...]

  29. Couple of total noobish questions I hope aren’t too out of place…
    Are people using local businesses as drop-shippers and making commissions on sales? The thing about a local bicycle dealer is I can walk into their store with the orders so it’s not like I’m trying to follow-up with a company 1000 miles away. Especially for higher end niche products I wonder about partnering with a local retailer.
    Also, in the Per Lead scenario where the desired action is getting a new customer to walk into the local business, how do you track that?

  30. @John – Im not really sure how the dropshipper question relates to this post but it would probably make no sense. Local businesses typically have ridiculous markups already so i’m not sure how you would make a profit by selling a marked up product online.

    In the per lead scenario usually a lead is a phone call or email. Its the clients responsibility to get them through the door.

  31. Great post, but I have a question. Suppose you charge by lead. How do you count phone call leads if the lead calls the client directly??

    Thanks!!

  32. [...] Hustler Local Online Marketing Series The Ugly Side of Local Online Advertising Local Online Advertising Case Study: Facebook Vs. Google Adwords Google Adwords Local Targeting Is [...]

  33. @Richard – Redirect them through a tracking number…

  34. Adhustler,

    Do you have a vendor you prefer for tracking #s?

    Thank you.

  35. @Bryan
    @Richard
    @Adhustler

    Check out Ifbyphone.com for Phone Call Tracking Numbers. We have a full suite of Call Tracking Tools, including:

    - Toll-Free & Local Call Tracking Numbers
    - Real-Time Call Tracking Reports
    - Dynamic Numbers & Google Analytics Integration
    - Unlimited FREE Customer Support & A Reseller Program

    One of my favorite features for local online marketers is Ifbyphone’s “Whisper Message” which enables you to announce a message to your customer before they accept each call. For example, say “This is a lead from XYZ Marketing” so that you get to remind them of the value you provide each time they answer the phone.

    For more information, visit our website (ifbyphone.com), give us a ring (877-285-5100), or find us on Twitter (@ifbyphone).

    Best,

    Elan

  36. @Elan (IfByPhone) – Quite honestly your pricing is off the wall expensive. You have some cool features but are way overpriced.

  37. @AdHustler –

    First of all, I’m certainly glad to hear you like our features!

    In terms of pricing, there are 3 main types of Call Tracking companies and each one serves a different purpose.

    1. Companies that sell cheap phone numbers. You can grab a few cheap local numbers, but you”ll end up with minimal, if any, reporting and functionality.

    2. Higher priced, often time enterprise-focused, companies that charge setup fees, require long-term contracts, and in some cases offer minimal flexibility. This can work well for big companies with very robust campaigns that need really granular results, for whom cost and call routing functionality aren’t a big concern.

    3. Companies like Ifbyphone that focus on a robust, yet cost-effective, feature set for small to mid size businesses.
    For example,

    - We have no setup fees and no contracts.

    - We offer unlimited phone support, a reseller program, and a full suite of virtual phone system applications to enhance your call tracking capabilities

    - We offer real-time reporting online, via email, via download, and even via API if you want to integrate our reports with your software

    The bottom line is that different types of vendors are ideal for different companies. I suggest Ifbyphone as one option, but I’d certainly also recommend that @Bryan and @Richard do some searches related to “Phone Call Tracking Numbers” on Google to see what’s available in the marketplace.

    I certainly appreciate your candid feedback, and believe that upon further examination your readers will find that Ifbyphone is VERY competitively priced for the value we provide.

    I’d be glad to continue the conversation and provide additional details over the phone: 877-295-5100.

  38. [...] The Ugly Side of Local Online Advertising – Ad Hustler [...]

  39. Why not just sell the lead? They want it, they buy it. Give them an x period’s worth of leads on a trial basis–they still pay. They must always pay. Once they see the leads work, they will buy. No?

  40. [...] You have a number of other interested clients that you have to get back to. You don’t want bad clients. There are so many local businesses out there that you can have your pick– and that includes [...]

  41. [...] in how to explain the different relationships that can be built. Here is a great article from Adhustler. Take a few minutes and read. I will wait. Twiddling my thumbs. Ok, you are [...]

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