As Agencies Feel the Squeeze, Covid-19 Reshapes the Martech Industry

This post is the latest in our “Commerce and Coronavirus” series. It will be an editorial focus for the month of April, and you can see the rest of the series here.

One in four small businesses has temporarily shut down, and 43% believe they have fewer than six months until permanent closure is unavoidable. With the small business community in panic mode, budgets for digital marketing have been slashed, and agencies are feeling the pinch.

“Everyone has been in panic mode, and rightly so. Businesses are worried about who might have to be furloughed [or] laid off, getting their PPP loans, what kind of regulations do they need to comply with, [and] what their contingency plans are for keeping any amount of revenue coming in,” says Simon Schwartz, founder of Locasaur. “Businesses are not interested in being pitched new marketing tech.”

Within the digital marketing community, there are constant whispers about layoffs and furloughs. The tech giants aren’t immune, either. Google has already announced plans to slow down the pace of hiring through 2020, and Yelp—with its huge base of small business clients—announced that it would be cutting expenses and laying off 17% of its staff earlier this month. Yelp also announced 20% to 30% pay reductions for all of its executives. (A representative for the company did not respond to a request for comment from Street Fight.)

Agencies that rely primarily on small business clients are feeling the pain more acutely. SEO agencies are reportedly applying for relief through the government’s Paycheck Protection Program in droves, with some seeing more favorable results than others. LocalSEOGuide.com CEO Andrew Shotland wrote extensively about his experience researching and applying for a PPP loan. But even those agencies that do receive funding will still need to reimagine their offerings if they want to appeal adto small business clients moving forward.

“There’s zero tolerance for companies that don’t start [the] sell with ‘This is exactly how it’s going to help your bottom line,’ and I think marketing tech needs to be super cognizant of the fact that these businesses are facing challenges that ‘having better marketing tech’ might not be the answer to,” says Schwartz.

A coalition of technology companies that includes Alignable, Fundbox, Gusto, Homebase, and Womply, among others, recently introduce an initiative called #paytoday to urge clients of small businesses, especially government agencies and large corporations, to pay their small business vendors right away.

At Locasaur, Schwartz and his team have had to pivot on the fly to serve the changing needs of small business owners. Locasaur recently moved from personal direct messaging to mobile transactions as a direct response to the outbreak.

“Our goal is to give local businesses a platform they can use for digital sales while retaining the personal touch that means so much to their success. Our platform is built to walk that line,” Schwartz says. “I think Covid will leave its mark on consumer behavior for a long, long time, and going forward you are going to see new, creative revenue models for local businesses in between the extremes of brick-and-mortar and internet.”

Educating vs. Selling

Some martech agencies are pulling back from sales altogether during the pandemic and focusing more exclusively on SMB education. Locable, for example, has published a mix of educational materials and resources on its website, along with free webinars and guides for businesses that are selling online for the very first time. Other agencies have followed suit with “response kits” and e-books aimed at helping SMB marketers navigate the pandemic.

“I think you’re going to see a lot of large companies, especially those who rely on advertising, really take this hard. I expect there will be a lot more layoffs and other contractions in the market,” says Locable CEO Brian Ostrovsky. “At the same time, I think you’re going to see growth related to all of these business owners who are now thinking about what they can do on the marketing front whereas they were previously far less interested.”

Expanding Opportunities

That opportunity for future growth is what’s fueling Ostrovsky and others in the technology marketing community who see the current situation as a dip rather than a downturn.

Already, Ostrovsky says he’s seeing opportunity in the growth of “support local” initiatives taking place around the country. With local chambers and Main Street associations leading the charge and providing reassurances to local businesses, there’s hope that the movement to support SMBs will continue even once stores start opening back up for business.

Another area ripe for potential innovation could be delivery and curbside pickup, or BOPIS (buy online, pick up in store). Many consumers are discovering these services for the first time during the pandemic, and enthusiasm for these features could become a marketing strategy that retailers rely on to bring in new customers in the coming months.

“Consumer adoption of mobile and online experiences have allowed brands to communicate with customers outside the physical store,” says Arpit Jain, vice president of cross functional delivery and capabilities at Nerdery. “Keeping customers happy during this turbulent time will also have positive long-term effects.”

Mobile solutions and apps are increasingly crucial tools for retailers to connect their end-to-end strategies. Martech firms that can adapt to the changing needs of retailers by expanding their mobile offerings could see significant growth as retailers search for new ways to create memorable digital experiences outside of the traditional store environment. The most well-positioned agencies are those that offer solutions that are “right-sized and right-priced” for individual clients. That was true before the current crisis, and according to Locable’s Ostrovsky, it remains true today.

“It’s interesting how different regions of the country are both responding to the current crisis differently but also how they view it differently,” Ostrovsky says. “A number of different community leaders in Gulf states have noted that this feels a lot like when a hurricane comes through in the aftermath. Obviously, this has lasted longer; however, the notion of turning off the economy and then turning it back on and supporting one another is much more familiar to them than those of us in California.”

Locasaur’s Schwartz believes that the coronavirus pandemic may permanently alter the SMB market by finally pushing the majority of local businesses to go digital—a welcome change that could spur innovation and lead to a flood of new clients for the industry.

“The ones that make it through this will—and should—hunt down new solutions for ensuring digital commerce as a safety net for when this happens again,” Schwartz says. “It’s my hope that this will be the event that finally gets local businesses to see the light about social networks … There is a tragic misunderstanding in the community about the way social algorithms work to display content, and I have seen examples of businesses desperately putting out pleas on social media only to have those calls get lost in the mix.”

Stephanie Miles is a senior editor at Street Fight.