Building vertical-focused performance marketing agencies
Leveraging AI workflows to increase net margins.
I think there’s a great opportunity at the moment to build vertical-focused performance marketing agencies, powered by “AI workflows”, where the client value proposition is priced on “outcomes delivered”.
Across performance channels, whether that be paid, organic, owned or SEO etc, many of the legacy workflows can be re-designed today, through taking a more data-driven, and less labour intensive, approach.
Historically, these companies run at 20-40% net margins, but through taking a tech-driven approach, the profitability could be driven higher.
My notes on how I would approach such a venture, whether as a standalone business, or as a new business line, within an established organisation:
-> Picking the industry
I'd start by selecting a vertical where there is an already well-established revenue pool for performance marketing solutions (e.g. finance, home services, legal, education).
This way, I would reduce the risk around whether there's market demand for the value proposition, and instead seek to build a better solution than incumbents.
Over time, I would identify industries which are underserved today by performance marketing solutions (i.e. no or little existing revenue pool), but I wouldn’t start there.
-> Pricing
To create a compelling value proposition, I’d price on “outcomes generated”, whether that be leads, booked appointments, live transfers, signed contracts or even sales.
If I wasn’t initially confident in committing to the delivery of an outcome very close to the end sale (to offer “risk free acquisition”), I would start by committing to outcomes further up the funnel, with the intention over time, of moving closer to the sale.
-> Channels
To build momentum, and to deliver outcomes fast, I would start with paid traffic, and choose to work with only one channel between social, search, native, and display etc.
The intention would be to fully automate and dominate this channel, before over time, adopting other marketing channels.
-> Technology / data
When building out the technology, I would start with the “quick wins”, and then automate the entire end-to-end workflow over time.
For example, with “social”, I'd start by automating the research process, before automating the creative brief itself, before moving onto the creative production, and then finally the media buying itself.
With more clients, and experience, would come more data. I would leverage this data to complete the loop in evaluating the success of the technology being built, and over time strive to drive more volume (“results”) of a higher quality, at lower CPAs.
-> Branding
In whatever vertical is chosen, I would build a trusted consumer-facing brand in the marketplace. This would develop brand equity, and overtime lower the overall cost of acquisition, whilst acting as a competitive moat.
If anyone is building solutions around the above, always enjoy discussing these types of topics...feel free to reach out! :)
