September 12, 2019

A Letter from the MD: Ethics and Profit in Digital Marketing

Earlier this year the ACCC took an interest in rebates & discounts in outdoor advertising and more recently into ‘opaque’ media agency pricing. The ACCC is concerned about “excessive margins” that ad agencies retain from media spend and how this might incentivise agencies “to act in ways that benefit their own interests, to the detriment of advertisers”. The ACCC is recommending an inquiry and the government is yet to respond. However, Treasurer Josh Frydenberg said the report was “ground-breaking” and action sounds likely.

Having worked in digital marketing and web design for over 17 years, I’ve been wondering when the day of reckoning would come. The world of digital marketing has matured and it’s no longer the wild west it once was, but there are still cowboys out there. And it should be no surprise that the biggest players are also the baddest.

We are constantly surprised every time we win an account from the big end of town that this is where we find the most mismanagement. There are lots of reasons why, but a key factor has to be numbers-driven profit-seeking that comes with demanding shareholders and CFO’s. When your primary goal is a net profit %, sacrifices must be made.

At Alpha Digital we could be more profitable. A lot more profitable. And it would be easy; we’d just have to be less ethical.

In the world of digital marketing these are 3 of the fastest ways to improve the bottom line:

  1. Get your team to work longer hours and set 60hr+ work week expectations
  2. Negotiate referral commissions from platforms and partners
  3. Charge clients a % of media spend

Very simply, we could load up team members with as many clients as they could handle and see who survived. We’ve had team members come to us from other agencies with stories of:

  • Executing work for over 100 clients per month
  • Staying back past 9pm was the norm
  • Making recommendations to clients that benefitted the agency – not the client

But at Alpha, from our inception in May 2011, we decided to do it differently. For example:

  • We discourage long workdays and the checking of emails/slack at night or over the weekend.
  • An Alpha employee has a max 80% billable time ratio. That means a minimum of 20% of their time (or 1 full day a week) is available to learn, grow, share knowledge and support each other.
  • We have wellness programs, with free gyms, mindfulness subscriptions, health-related documentation, office fruit and ‘doona’ days for when you just need a day to recharge your batteries

We invoice by the hour and we track time to the minute. We do this to ensure:

  • Clients get what they pay for
  • Team members are not overworked

We are transparent and detailed time logs of exactly what work was done, when it was done, and by whom, are available to every client. However, we’ve never had a client ask us to produce a time log.

Probably because clients trust us. Clients talk directly to the team member who works on the account and that team member is given the time, space and support to focus on that client’s long-term success.

Alpha Digital team at work

Now, I can guess what some of my fellow CEO’s and MD’s are thinking… A transparent, time tracked ‘fee for service’ business model as your only source of revenue is a challenge to scale.

When you have a growing team of 23 full time, part-time, and casual employees; plus, interns and specialist contractors; allocating a max 80% of billable time to resources creates a hefty and complex amount of resourcing administration.

Is it worth it? Definitely. Our team member retention is 92%, well above the industry average of 72% and our tenure is long. Alpha is only 8 years old but our 23-person team is made up of a 7 year, 5 year, 4 year and multiple 2-3 year-long employees.

Our client retention rates have consistently been over 90% and amongst the highest in the country. We enjoy partnering with clients over the long term. Most of our top spending clients having been with us for 3-5 years, on month to month contracts.

I love seeing highly intelligent, disciplined and motivated individuals flourish. If fills me with pride to see an Alpha team member confidently apply their best selves to their clients advanced digital marketing needs. And then exceed their client’s expectations. Happy clients have always been way more personally satisfying than the numbers at the bottom of the P&L.

But at the end of the day, Alpha is a business like any other and must be profitable to continue the good work. Has being focused on our values over net profit been profitable?

Yes. Staff turnover is expensive. Client churn is expensive. These are costs we’ve minimised over the years.

In fact, for 7 out of our 8 years in business, we spent exactly $0 on advertising. We’ve only recently hired Business Development Managers, entered awards and starting writing blogs like this one.

For 7 years, we grew purely on our reputation for outstanding results; on positive word of mouth. It honestly feels strange typing this, as blowing our own trumpet has never been Alpha’s style. But It’s about time we did. We’re different and we’re proud of this difference.

We’re here to HELP. These are our values: Helpful, Ethical, Loyal, Passionate. If you need help with your digital advertising or if you’re interested in joining a team with these values, then please get in touch. We’d love to hear from you.

Matt Cooper 

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