Finding Success as a Digital Agency, DAC Group Expands Deeper Into Europe

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Toronto-based DAC Group has undergone a pretty remarkable transformation over the past five years, making a shift from its legacy print yellow pages business to a digital agency model. In that time, the company has doubled its headcount and revenue, even while shifting the mix from 80% print to 90% digital.

Norm Hagarty, joined the company in 1996 as President and has served as CEO since 2000, spearheading this investment in hyperlocal digital campaigns that has borne fruit in recent years.

Today, DAC Group is announcing the acquisition of German marketing agency ad×media, which comes on the heels of the company’s acquisition last month of Edinburgh-based Ambergreen (which was named Scotland’s Digital Agency of the Year in 2016),

Street Fight recently caught up with Hagarty to talk about the acquisitions and his broader vision for the industry.

In the past five years, your revenue has gone from 80 percent print to 90 percent digital. Tell me a little bit about how that process has gone.
I’ve aged and I have no hair left. (laughs) The deal is: it was not easy.

Obviously, we thought we had a really good idea on agency-with-tech. About eight years ago, we had landing page technologies we developed and that landing page technology pushed us into the local area. It was pretty unique, so we built out a lot of content for clients with unique local landing pages that Google indexed and then we learned how to put media specifically on a search and behind those local landing pages. And that has driven tremendous results for our clients — taking them tenfold increases in conversion rates.

The main thing they’re looking for is a phone call or a form-fill into the store or the service at the local level and we were looking at these local one-off, franchisees at that time. We just weren’t making any money with that, and we were able to talk to the enterprises about how we can make them more competitive at the local level through this landing page and then client search optimization, getting strong organic results.

They really listened and we were able to capture some clients on that. So be it in the automotive business, or in the retail or in the airline business, in the insurance business, we captured their imagination.

And then, at the same time, when Google put a map on their search engine results page, and I ran into my VP of Operations at the time and I said “we just found the world’s largest directory” and that’s the business we were out of — name, address, phone number. There are more moving pieces, but it’s still a map and transaction-based, and … I said “We’re going to own this process.” And it’s turned out to be a good decision on local listings.

Today, you’re seeing all that converge. We can go from very sophisticated content at scale at the local level where every page can get indexed and become an organic search result, all the way down to simplification of landing pages where we push out content and that content is often tied to our listing product, and now listings are being monetized, and that plays into our agency service.

So we pushed out this agency-with-tech concept at the local level, and it just grew as we developed the various opportunities. Now, we’re looking at wanting a whole review technology at the local level from responding to reviews to local sentiment analysis, competitive analysis, to everything that happens at the local level, that we sell to an enterprise.

Would you say that most of your agency-side clients are enterprise?
On the agency side of our business, it’s enterprise-level clients. Now, we deal with some clients in the insurance business, we’ll deal with some agents or we deal with a lot of agents, but the enterprise helps us do that. We do not play in the SMB local space.

But where we do make a difference is at the enterprise level by getting the enterprise to understand how important local is so you know as we move forward, it’s understanding online-to-offline, not attribution, but at the local level. And we’re building some technology that will augment other technology and that’ll help us understand that attribution there. You know there’s still multi-touch attribution at the local level and clients need to understand that and where it’s coming from, and there’s a great deal of interest in understanding that.

And then, you know, we have our traditional pieces of business. We have a fairly large media operation and where we make a difference, again, is playing at the local level in media because we’ve built out all the technology around that and it gives our enterprise clients an advantage to the market on that.

DAC Group CEO Norm Hagarty

As you think about building out your suite of services, do you have a preference in terms of build versus buy?
If there’s existing technology out there that’s strong, that’s competitively priced, and there’s more than one player in the market we’re probably going to use them, incorporate it into our suite of services. Where we build is where we think we have a real advantage or an opportunity to tie new tech and new opportunities to the services that are existing, such as going broader and deeper on the ability to manage and respond to reviews. That made a lot of sense to us. Getting a better local understanding of attribution makes a lot of sense to us. But we’re going to use Adobe or other services where it makes sense. We’re not going to build that out.

If you can get a price advantage by building your own tech, we’d do that — but the prices come down so quick in this business that it’s usually the question of “Do we see an opportunity by building this tech and owning it, or is it better to use somebody else?”

What’s your take on the push to integrate artificial intelligence into local search services?
Right now it’d be quite hard to monetize that. A lot of stuff we do has artificial intelligence just built into our technologies. We have new technology coming out or we actually have a test with one of our clients where we’re in a market where there’s a number of agents that compete in the same market, under the same brand. And what we’ve done, we’ve been able to put them all into the same search campaign, give them an equalized cost-per-acquisition, but be able to manage various budget levels, various start and end dates through an algorithm and artificial intelligence that manages the monetization of what happens on a search page. …

And we think we can take this into markets where, you know, you have 500 plumbers in a market, you’ve got 300 electricians and 50 percent of the costs go to administration and 50 percent go to media. We can drop that administration cost significantly through this kind of AI and that will only get better over time, so it depends on the category you’re in where something like AI will work and the opportunities that exist today.

What do you think about the future of voice search?
I think voice search is a big thing. Everything we do takes that into account, because we build content at scale, right down to the local level, so that if you pull up [a voice app] and say “I need to find a garage in Tampa Bay that can change my brakes” the content is built for that already. It’s very important as we continue to stay on top of that. So content at scale — and meaningful. It’s called meaningful content at scale that ties into your client’s business.

Do you think that enterprise clients are starting to really “get” the issues in local marketing?
Yeah, I do. But you’ve got to use the right terms. If you talk about local marketing, many folks still think you’re giving coupons out around the store. You’ve got to be able to talk about meaningful content at scale, down to the local level where there’s a performance element attached to that and you’re bringing the power of the network to the local business. So yes, there’s an appreciation for the business tools you can bring down to the local level. It still gets caught up in simplification of marketing if you will.

I still worry just as a conversation about how we position ourselves because I think they hear it too simply and they don’t understand the complexity of what we do and the opportunity that we have to drive their business forward because once you get into the last yard, last foot of marketing to that single consumer, it’s quite powerful.

Do you think there is going to be consolidation coming to the industry in 2017, and how is that affecting your strategy going in?
Yes, I believe there’s going to be continuous consolidation because it’s quite a competitive marketplace and you’ve got a number of small-to-medium-sized players and it’s becoming more and more expensive to compete in this marketplace. So you know there’s going to be a requirement for some scale opportunities, right. You’ve got to not just invest for today but you got to invest for the future, so capital becomes quite critical.

For us, that’s why we’re expanding outside of North America to be able to be relevant in each of the markets. When you go to England or Germany or Spain, the local, the geo-local discussion for enterprise is very, very similar — just it’s in a different language. The requirements to compete locally are very similar, so we think we have a good opportunity to make our differentiation work for us in those markets. Also, it allows us to spread our costs.

Tell me a little bit about how your two recent international acquisitions came about.
It started three or four years ago when we began to look at Europe, and we chose England because, for me, it was a relatively safe market — because they spoke English, and I really wanted to make sure the clarity of communication was there. We did a market analysis. … I think there was about 150 different, 180 different digital agencies from large to small competing in the U.K. at the time and while we made the acquisition of Make it Rain in London. And then to complete the footprint in the UK, we hired a guy called David Jowett who had come over to North America to run Cossete’s media here in Toronto ,and he’s quite knowledgeable in media and in the digital space. And he saw what we were trying to do and he moved back to London with us. And then to complete the UK footprint, we put Ambergreen in place. Now, it’s literally the local opportunities in the various markets we have in Europe.

We have some joint venture opportunities in Europe as well where a company sees our technology and says “Geez, that can play.” And so we’re close to announcing one and we have some other discussions in the pipeline.

What else do you think you’ve learned about the process of digital transformation?
You need to invest ahead of the curve. The market never declines as fast as people tell you. Somebody told me in 1999 that I would be out of business in print in two years. That was ridiculous. However, when it starts to decline at 25 percent a year, you can’t stop it. It’s a lot slower to start than people think, but once it starts, you can’t stop it.

David Hirschman is a co-founder of Street Fight. This interview has been edited for length and clarity.