Amid Local Startup Growth, There is Opportunity for Media Providers

08/08/2017

The marketing industry is currently ripe with innovation, with lots of startups looking to cash in on a growing field, especially in local digital advertising. There are “buckets” of money going toward scaling enterprise technology down to the SMB level, according to Neal Polachek, an advisor to the Local Search Association (LSA), speaking in a recent webinar on tech adoption.

This has brought about interesting data. For one, SMBs are more likely to buy additional marketing solutions from cloud-technology providers than they are to buy non-media solutions from media companies, which is a positive for any company entering the marketing-tech space. And while this “may be the most disruptive trend yet facing local media sellers,” according to the LSA, there are still advantages and opportunities for local media sellers. If these media companies can act more like tech firms while continuing to leverage their distinct advantages in media, then they stand to win.

To begin with, the unique nature of SMB marketing means that these startups face challenges in reaching their audience. First and foremost is explaining how marketing solutions will help SMB clients individually. “There’s no such thing as a small business when trying to reach a small business,” according to Steven Aldrich, CPO of GoDaddy, speaking on a panel at the recent Street Fight Summit. “It’s a person.” In reality, this is no different from how Fortune 100 companies approach advertising either. They want to know why and how a solution will work for them and their goals. To win over SMBs, digital marketing providers need to address this issue for each and every business on a personal level.

For local media sellers, this is already an advantage, because they are much more likely to know and engage with the actual people behind the SMBs. And while adoption of cloud technology solutions is up, 60% of SMBs would still prefer to work with a single services provider, as opposed to different providers, according to the LSA. While SMBs may be inclined toward cloud solutions, there’s a strong chance they’ll remain with the partners they already use.

Secondly, startups entering the local marketing-technology space now likely have high hopes of an exit, but these should be tempered. Consolidation is on the rise, but the local space is likely to see fewer big exits. Instead, M&A activity on the local/SMB level will likely occur with larger companies buying up smaller companies, also according to panelists assembled at the Street Fight Summit.
 
But because selling technology to SMBs is one of the hardest things to do, smaller companies undoubtedly need to partner with bigger companies, which again is an advantage for local media sellers. For these startups to appeal to acquirers, they need scale. As stated above, it’s difficult to enter the market starting out from square one. Therefore, a preferable road might be for startups to work closely with local media companies and smaller agencies, making inroads by working with organizations that have existing SMB customers.

Overall, new interest and investment in technology for the SMB space might feel like a threat to local media providers, but these providers are in a unique position to capitalize on their existing infrastructure and client base.