Study: Defining the Gap between National and Local Digital Marketing Service Providers
October 3, 2014 | Contributed by: Joe Morsello
Of every five dollars spent on digital marketing services, about three of those dollars go to national vendors. The driving force behind the gap between companies like GoDaddy, Facebook, Google and Dex Media and the local newspaper turned digital marketing service provider, for example, is web presence services.
Based on 2014 projections from Borrell Associates in the 2014 Digital Marketing Services Outlook, web presence services – design, hosting, and ad, social and mobile media management – will account for a whopping $270B or 54% of all digital marketing services spend. National vendors earn around 60% of that web presence spend which equals to a $54B gap between national and local.
While profit margins tend to be low with these types of services, they are foundational to any business’ online presence and will continue to see the majority of spend when it comes to digital marketing services. Therefore, the importance for all providers, local and national, offering these services is self-evident.
While national vendors consist of well-known brands like GoDaddy and Facebook, the “local” vendor does require some definition. Local vendors of digital marketing services are increasingly made up of traditional local media organizations from print, radio and other traditional media outlets that are transitioning into the digital space.
The strength of local vendors comes from long-standing client relationships and familiarity within local markets. As these local entities transition themselves and their client spend, they are in direct competition with national powerhouses, and therein lies the challenge.
The growing number of digital marketing services provided by local media organizations is mirrored in the national space as well. Companies like GoDaddy and Web.com went from basic domain and web hosting to offering a variety of marketing services and are seeing some significant growth.
However, when looking at specific services featured in the study, local vendors tend to perform better than national vendors in some cases. For instance, in the web presence category, local vendors will earn around 56% of all website design/maintenance spending this year suggesting a preference for local availability for this service.
Additionally, local vendors have a leg up when it comes to online video production, blog development, display ad design and SEO. According to the study, local vendors capture around 70% of spend on each of these four digital marketing services. Still, these services collectively account for around $79B or just 15% of all digital marketing services spend.
This disparity between national and local vendors as it relates to specific services is probably less a reflection of aptitude and more so a reflection of competition. With many national and local vendors offering identical or similar services, noise and confusion tends to ensue, resulting in fragmentation.
However, the study shows that national vendors are winning more SMB business than local ones across all digital marketing services. Given the fact that local vendors provide market expertise and accessibility, the SMBs preference of national vendors is interesting. Whether a reflection of brand familiarity or ease of use, national vendors are making the most of these SMB relationships.
With the SMB preference of having just one “trusted advisor” when it comes to their marketing, I would expect even more national and local vendors to work towards being a one-stop-shop, with the hopes of leveraging existing relationships to diversify and therefore, increase client spend. As the noise continues to increase in the space, it will be interesting to see how clarity and sales success will look for both national and local vendors.