Author's note: I started writing this article in reaction to a recent study published, and I ended up writing so much that I needed to break it into two posts!  You are currently viewing part 1, and part 2 will be released first thing Monday morning.

The other day, a report came out from Borrell and Associates saying that most small businesses (SMB) that try local online search advertising almost universally give it up after 6 months.  More specifically:

  • 50% give up within the first 90 days
  • 90% quit within 6 months.

While these numbers are certainly staggering, the important thing to note here is that nearly all of these companies who do not find success with search advertising are entering into the search world with the help of resellers; companies that simply re-sell clicks on Google and other search engines, while adding little value to the advertising company beyond being another hand in the pot.  These resellers include local yellow page companies and other online advertising companies like Yodle and Reach Local.

The report wasn't so much a critique of local search or paid search as a tactic, rather an expression of frustration with some of the service providers that have entered the space in the last 12-18 months.   Personally, I started to anticipate this over-saturation of the marketplace as soon as Sams Club started offering Google AdWords discounts alongside gallon drums of Nacho Cheese.

I had my inclinations that it would fail, because search advertising is still so nuanced and micro-targeted, that it can never be attacked with a "big box retailer" mentality.  This is why big box resellers have a 90% churn over a 6 month span.

While local and paid search might not be right for all SMBs, success can be had for the right companies in the right industries.  For example, we have a number of home improvement clients that are now driving up to 30% of their revenues from online advertising.  However they are not getting these results from, or Reach Local or Yodle.  In fact, most of our clients tried the resellers, and dropped them before becoming a Three Deep client.

The truth is that online lead generation has been around for quite some time, and most of our current clients have been engaged in this form of lead generation for several years now, to varied degrees of success.   This concept is reaffirmed every day when we talk to potential clients who verbally display their battle scars, alongside stories of ineffective marketing campaigns, and a slight chip on the shoulder toward the concept of online lead generation.

This leads us to the point of our post:  Why do Local Search resellers fail their SMB clients? I'll give you 3 big reasons:

1.) They focus their effort and measure their success on just generating clicks -- not actual leads.

2.) They make little or no attempt to understand how their client's business actually works.

3.) They fail to help their client understand whether their investment is actually producing for them.

I have a unique perspective in that prior to joining Three Deep, I was one of those SMBs.  As the marketing director for a medium sized home improvement company, I was responsible for all media buys for the company.  I managed an annual marketing budget of over $1mm, with about 11% of that going to online search -- mostly through PPC on Google.  Even though I had engaged a very good search management consulting firm to run our PPC program for us, I still was called upon by at least 4-5 online companies a month.

What were all of these guys selling? One word: Clicks.  All the sales pitches I sat through from resellers were essentially the same; they boiled down to how many clicks per month were they going to guarantee me for $x per month.  If you are new to online advertising, those click numbers can be pretty intriguing.

700 clicks per month for $1500 -- Where do I sign up????

In part 2, we will discuss the difference between clicks and conversions... and what it means to YOUR business