The Role of Owned Media in a Digital Pivot
It took a lockdown to get the last of the small businesses out there to pivot to digital.
With COVID-19 infections down and US residents half vaccinated, small business reopenings spiked in Q1, according to the 2021 Yelp Economic Average Report.
But is this a return to business as usual?
Or should small businesses be adapting to a new generation of digital first customers who prefer online to in person transactions?
For those small businesses without their own digital presence, the lockdown was an existential crisis. Many had to pivot to digital overnight, driving exponential growth at firms like Zoom, Shopify, and the food delivery apps.
Now, small businesses are realizing that the apps they pivoted to as a means of survival came at very steep cost.
Small businesses without organic web traffic to a top level domain that they own and a solid conversion optimization program in place, saw their margins erode.
It’s one thing to have to buy ads to acquire new customers. But paying a recurring commission of 20 to 30 percent on every sale – like the food delivery apps charge restaurants – to retain a customer, is simply unsustainable.
But when your foot traffic is gone overnight, and your trade shows are all cancelled, digital’s no longer a nice to have. It becomes the only way to sustain deal flow. And if you’re reliant on a platform for every sale, that comes directly out of your profit margin.
The restaurant chains are well aware of this. That’s why they have their own custom mobile apps. So they don’t bleed out margin to an intermediary, like the food delivery apps, which are kind of like modern day affiliate marketers.
The pandemic shook the last of the digital laggards from the trees, leaving us with a fresh crop of woke digital immigrants, all clamoring to compete online but not quite sure how to do it. Before the pandemic, many small business owners sat the digital revolution out.
They were ecommerce deniers. Now, it’s tough for anyone to say with a straight face that you don’t need a way to sell direct to consumers.
At the height of the pandemic, the food delivery apps gave independent restaurants a digital solution for scaling their ‘to go’ order business.
All you needed was a smartphone and you were in business. And if they had Square for Restaurants, they had an integrated kitchen display system that accepted orders from all the food delivery apps.
But since payment gets made through the app, the platform providers are able to wedge their way in between the restaurant and the consumer, withhold the customer’s contact information, and charge a commission fee on every sale forever.
It’s those small businesses with an owned media presence and organic traffic who aren’t reliant on a digital marketplace that connects online buyers and sellers, that are building sustainable digital businesses.
Uber, AirBNB, and UpWork are building a recurring base that is entirely their own. Sure gig workers can eek out a living. But they don’t participate in any annuity.
When Uber expanded into new markets, they subsidized rides as much as 300% to increase supply by luring on board more drivers, only to pull the rug from under them once they achieved critical mass.
For small businesses, it’s time to wake up to the reality that relying exclusively on tech brands to get found by customers is a lopsided, unsustainable equation. And the same is true of aspiring influencers, looking to build an audience on social media.
“I love the bullshit lie that people are making money off of YouTube. There’s a small 0.01% of people making money. And they make a lot. But everyone else is subsidizing the content, so YouTube can capture all the margin,” says Scott Galloway on a recent episode of The Prof G Show.
Post-pandemic, building a sustainable small business online means having your own digital destination, ecommerce, and customer database, so once you’ve acquired a customer, you can earn your keep over the long haul without forfeiting your profit margin to a digital middleman. And this arrangement leads to healthier customer relationships, since the provider has a vested interest in making the customer happy.
App-based user rating systems never achieved that, because a negative provider rating cancels out and negative customer rating. Everyone knows that, so it’s 5 stars or nothing.
So if you’re a small business pivoting to digital, you should know that the technology you use to do business can make or break you.. If you’re reliant on a food delivery app to bring you customers, Uber to bring your riders, AirBNB to bring you renters, or Upwork to bring you gigs, you’re not building a small business. You’re building their business.
That’s why 41.2% of all websites run on WordPress, an open source web content management application whose source code is in the public domain. Shopify, the second most popular platform runs 3.5% of all websites. If you use open source technology to host your online presence, you never have to worry about anyone getting between you and your customer.
So as you survey the options for establishing a way to compete online, think about getting your owned media presence right first. Because on your own website, you retain your customer data, and you control the layout.
And whoever controls the layout, controls the payout.