The Ad Industry’s Focus on Scale Has Ignored Small Businesses

By Jon Schulz On Aug 9, 2019

Today’s Advertising and Marketing industry model is focused on serving large enterprises. But with small- and medium-sized businesses (SMBs) making up 99% of all private sector businesses in the US, this model neglects companies that need support the most. This is where a SaaS (software as a service) business model really shines: with a subscription model, SMBs can access enterprise-grade solutions in a very cost-effective manner. The subscription model provides much more transparency into the fees associated with programmatic ad buying and allows SMBs to scale spend without incurring additional fees.

A recent survey revealed 42% of SMBs do not use technology to its full capacity. This shouldn’t come as a surprise considering they might not have the same needs as large organizations, and often don’t receive the same amount of attention as their larger competitors. But SMBs are big contributors to the US economy and are at the front lines of innovation – visit any coworking space or incubator to see this first-hand. As the Advertising industry puts SMBs on the back burner, focusing solely on servicing large enterprises, it misses out on an opportunity to build relationships that have considerable lifetime value as these companies grow and expand.

For example, Programmatic technology should have leveled the playing field for advertisers of all sizes, giving any brand an equal chance to purchase the same inventory. There will always be an expertise gap that needs to be bridged, but programmatic creates an equal chance to compete. Whoever is going to pay the highest cost per impression is going to win.

But the model today is geared towards serving bigger customers, and that isn’t due to a lack of interest from the smaller ones. The Advertising industry has grown so large with a focus on the scale that SMB’s suffered in the race for greater margins. And this makes sense, right? If the current business model only supports providing live customer support and training to its biggest paying customers, that’s going to happen. The irony is that as SMB’s grow, they suffer from operational issues and manual processes that could have been solved by the very businesses that neglect their needs.

One of the biggest challenges an SMB has when it comes to any technology investment, but especially Advertising and Marketing, is the number of choices its leaders must make. Making the decision to invest in search, social, video, audio, DOOH, CTV or all of the above can be intimidating for someone that is not an expert. Where to get started and what is going to get the biggest return on investment can require some hand-holding for an SMB. Thinking about this from the perspective of lifetime value and customer retention, it’s important for the industry to consider a better way to approach customers beyond the large enterprise or agency. The SaaS model ensures SMBs have access to specific tools that positively impact their efforts.

It goes back to their Marketing plan and budget, their goals and objectives. For most SMBs, their primary objective is lead generation and creating demand for the business and the Sales team. They often have a social media presence and have invested in paid search, but want to go the next step. They just need a pathway to get there.

A major roadblock to creating an entry point for SMBs into the Digital Advertising and Marketing ecosystem comes down to pricing structure. Current fees are based on a percentage of media spend, in other words, the more an advertiser scales, the more they pay in tech taxes. Right now, if an advertiser invests $100,000 per month on programmatic spend, they might pay around a 10 percent fee or roughly $10,000 on technology taxes alone. And this is cumulative the more they spend. This approach does not reward scale and efficiency of spending over time.

A simplified pricing model, that takes out the inherent complexity in media buying, makes the most sense for SMBs. You don’t need to look any further than the SaaS model, which better serves the small- and medium-sized business community, while also proving beneficial to larger enterprises as well – it’s a win-win. A predictable, fixed platform fee is a more cost-efficient way to advertise, by removing the variability of fees as an SMB scales spending, increasing their return as more dollars are going towards working media.

Nearly 91% of SMBs plan to invest more in Digital Advertising in 2019, making them a valuable part of the ecosystem that should not be neglected. With a SaaS model, the advertiser benefits are clear, including consistency and transparency with how much spend is going towards media. From a business perspective, we’ve seen the rise of subscription companies in every industry from entertainment to MarTech to fitness because it works for the business as well as the customer. It’s time advertising moves in that direction to help the SMB market.