Digital advertising is part of the future of local media sales. It helps you grow revenue, complement OTA (over-the-air) spots and compete for more ad dollars. Stations use a variety of frameworks for ordering and executing these campaigns. Many are outsourcing digital advertising to agencies. While it keeps stations hands-off after the sale, it’s not sustainable.
Outsourcing may seem like a convenient and easy approach, but it has consequences that jeopardize your ability to grow revenue, upskill your sellers and keep customer relationships. Let’s review why this may not be great for your long-term survival.
5 Reasons Outsourcing Digital Advertising to Agencies Isn’t a Sustainable Business Model
To examine why this practice isn’t sustainable, you must assess the current climate and what will happen long term. If your station is currently using an outsourcing model, here’s why you may want to reconsider.
You Can’t Continuously Improve Seller Performance or Strategies If You Outsource
According to the 11th annual Borrell-RAB digital benchmarking report for radio, digital sales will approach $2 billion for the industry. It cements the fact that radio is becoming better at digital ad sales and that stations view it as essential to growth. It’s attributable to many things, according to the study, including:
- Improvements in strategy
- Seller knowledge of digital gains
- More training for sellers (48% of stations do it weekly!)
- Increases in adding digital tactics to proposals
All these things point to media companies embracing the world of digital, investing in their sellers and having a focused strategy. These are all pillars of digital success. However, you risk diminishing these drivers when you outsource. Even if you keep these things and push ordering, executing and reporting to an agency, your approach may never mature or keep pace with such a dynamic environment. Momentum is critical in sales, and you risk losing it with outsourcing.
If all a seller does is come to the table with a templated package from an agency, they aren’t really applying their digital acumen. What sellers recommend must align with advertiser goals. Otherwise, campaigns aren’t likely to perform as expected. This erodes trust and causes churn. When sellers execute using a third-party digital advertising platform, they enhance their aptitudes, which increases their value to clients as a local media expert.
Your Margins Will Be Slim and Prevent Selling of Some Tactics
Outsourcing digital advertising to agencies is expensive. These campaigns already have lower margins than linear and O&O (owned and operated) spots. Those margins diminish further when you’re paying an agency to execute them. Revenue growth stalls, which could significantly hurt your bottom line.
Additionally, the lowest-margin tactics don’t make it to the proposal. Often, these are very popular options that local businesses consistently buy, such as SEM (search engine marketing). Others are emerging and seeing local market increases, like OTT/CTV. When you eliminate these, you can’t win an advertiser’s total digital budget. They may look elsewhere and take all their dollars with them.
Over time, the margin issue will become more concerning and could lead you to abandon digital altogether.
Low Margins Also Impact Commission
Sellers thrive when there are good incentives. Commission for digital sales can take many models, but having separate ones for digital is crucial. Low margins, fueled by agencies taking their cuts, could mean commissions are much lower than what would be deemed competitive. While sellers may appreciate that they don’t have to do the ad ops, they could grow dissatisfied with compensation, which could lead to churn. The turnover in local media sales is already high, and there are challenges with attracting new people to the industry.
Outsourcing only exaggerates these problems and could have sellers exiting your organization.
Agencies Are Your Competitors
An agency doesn’t need you to drum up business for them. They have their own sales and marketing staff to do that. They are your literal competitors, so the relationship will reflect this. The business you outsource to them provides them with insights into the advertisers, and they could then use that to poach your customers. You can mitigate some of these with non-compete agreement. It’s the risk you take if you outsource.
Not Owning the Campaign from Start to End Impacts Analysis
Another issue is that agencies own all the reporting and analysis when they execute. Post-campaign, sellers should be talking to customers about what worked and what didn’t so they can improve in the future. Doing this may be harder if sellers don’t own the campaign from start to end. They don’t see the campaign in its live phase, nor can they optimize in flight. It causes disconnection, and advertisers may pick up on this. It could cause them to be less comfortable and willing to spend with you.
So, what’s the alternative to outsourcing that’s easy, keeps margins healthy and keeps sellers learning?
Third-Party Digital Platforms Do the Ad Ops for You
If you adopt a third-party digital platform built for local media and radio, you can handle all aspects of digital on your own. Such a solution allows you to integrate linear and digital into one proposal, design the best mix of tactics to meet advertiser goals, track performance, improve insights and grow margins.
Using this platform, your sellers will work more efficiently because execution is guided. They’ll also continue to learn as they see campaigns in motion. Additionally, they can keep upskilling with a library of resources and specialized expert help. Implementing third-party digital can be easy and friction-free.
If you’re ready to take ownership of digital, you’ll want to know what to look for in a platform. Get insights on nine must-have features.
