Social Enterprise Network Cooperatives - Global
The digital marketing industry is a powderkeg that’s about to explode.
It’s been festering for years like a virus, and now it's rapidly reproducing.
It comes down to this…
The number of businesses who need digital marketing is growing at a 10th of the pace of the suppliers.
Its economics 101, when a rush of supply fills the marketplace if the demand does not keep pace, prices go down.
A rising tide raises all ships, but the tide is not rising anymore, it’s falling.
I have been talking with marketing veterans. I am not talking about guys with five years, but guys who started in the late 90’s and early 2000’s
These guys lived off the fat of the land; they got clients easily for $3500-5000 a month.
Now, they are lucky to get $1500, and they get a month to month retainer with a load of concessions.
Clients are asking for free trials, guarantees, more work. In every market, there is a finite amount of profit.
There are five forces you compete for to gain profit in the digital marketing space.
Rivals, Alternatives/Substitutes, Powerful Buyers, Powerful Suppliers, and Threat of entry.
Which of these five do you think you are losing to?
At Least one if not all five.
Rivals represent your competition. You have never had more of them, and they are multiplying at a rapid pace. They are willing to do more work for less.
Anyone who gets even a few clients discovers the unrelenting five forces coming after them.
When you have an endless horde of people who can do EXACTLY what you do for less, or give them more for the same price, you are like Leonidas and the 300 Spartans fending off the Persian horde.
In this case you are not much better equipped than they are and in the end they can just do it for less than you. Every day your clients are getting called, emailed, and cold called by competitors offering to do more for less.
Even if you can do a better job than they can, how can you be sure? Even if you can, they will eventually try someone else and now you aren’t getting paid.
They are a client not family and that means they have to see if they could get more for less just like you would.
The odds are against you, and you have to sleep with one eye open.
Let’s talk about the second force.
Alternatives and Substitutes.
Because the info is so widely available, almost everyone knows a relative that does marketing in some form.
Think about your own family, how many people do you know that practice digital marketing?
I will give you a hint, if you don’t know any in your family, look in the mirror. You are it.
You have relatives and the DIY people who get tired of being screwed and figure it out for themselves. Oh and then, they start a side business competing for profits in your niche.
These are called five forces because they are relentless, they will not stop till they take all your profit away.
Let’s talk about the 3rd, powerful buyers. Your buyers are powerful because they have options.
When people have options, they want the BEST possible deal.
They ask you to lower your price, or they ask for more for the same price. Or you have to take the entire risk burden of the working relationship.
How much profit you make is a simple formula. Price - Cost = Profit. Lower prices or additional work decreases your profit.
4th. Powerful suppliers.
Who are your suppliers? They are Google and Facebook.
They have the undisputed monopoly on traffic for generating leads for your clients.
Now let me ask a simple question. Has it gotten easier or harder to rank sites? Has Google’s CPC's gone down or up?
Has Facebook’s CPM gone down or up?
It’s gotten harder and more expensive across the board. Because they are taking a larger share of the cost, it is harder for you to charge retainers.
Think about a dentist. If you used to get him the leads, he wanted for $500 a month in ad spend, and now it takes $1000, who is going to eat that loss?
Because they are powerful buyers, they will find someone who will take the traffic costs and either you have to lower your price or lose the client.
It’s the same story with ranking sites and running Adwords.
Now maybe your head is above water now. But you and I both know media costs are going to continue to rise. Facebook’s costs have risen 171% and will continue to rise.
It comes back to the same principle I discussed.
The number of google searches and Facebook users is not increasing as fast as new advertisers are hitting the platform.
How are you going to get a premium retainer when your ad spend accomplishes less and less every year? It’s a loser's game.
Sure some new platform might appear overnight. But that's highly unlikely, and hope is a terrible business plan.
Let’s talk about the last one. Threat of entry.
Now I already touched on this, but I want you to understand how easy it is for someone to enter the space.
Because all the platforms change fast, it does not matter as much how long you’ve been around.
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BE PROSPEROUS 2018