Maybe Print Isn’t Dead
Catering to local businesses, Community Impact, a Texas-based chain of local newspapers, is defying conventional wisdom.
Good Morning!
Here are today’s highlights:
How one guy’s car blog turned into a billion-dollar marketplace.
Digital marketing is easy to track, right? But are we tracking the right stuff?
Credit conditions for small businesses are getting back to normal.
Recession watch: The February jobs report is out, and once again the economy is running hotter than expected.
PROFILES
Turning a car blog into a billion-dollar marketplace: “Bring a Trailer has become the place for enthusiasts like Mr. Felker to buy, sell, and geek out over their dream cars. The platform auctions hundreds of cars every week, spanning thousands of makes and models from Ford to Ferrari and projects under $10,000 to beauties over $1 million. The site’s popularity has less to do with the cars themselves and more with the way that Bring a Trailer tinkered with the underlying mechanics of a business—and it’s worth popping open the hood of the company to see how it works. A hybrid of Craigslist, eBay, Reddit, and Sotheby’s that facilitated $1.37 billion in sales last year was not quite what Randy Nonnenberg had in mind when he started a car blog with a college buddy as a hobby.”
“Before long, readers were sending him their own finds, and Mr. Nonnenberg went from scouring listings online that deserved attention to curating his inbox. ‘That changed my whole world,’ he said.”
“It changed again when members of the BaT community began asking him to list their cars exclusively and he could start charging $125 when they sold. For the first time, the site made money. Mr. Nonnenberg left BMW to focus on BaT in 2010, and the company took off when it entered the auction business in 2014.”
“Bring a Trailer’s financial model depends on actually selling the cars that it curates. Mr. Nonnenberg says the company’s sales rate hovers around 80 percent, and it’s crucial that it remains high because the costs of each auction are so low. Legacy auction houses generally charge sellers a negotiable 10 percent fee and take a roughly 10 percent commission from buyers. But on BaT, sellers only have to pay $99 to list their cars, and the 5 percent cut from buyers is capped at $5,000.” READ MORE
A chain of newspapers based in Pflugerville, Texas, is proving that neither local journalism nor print is dead: “John Garrett, Community Impact’s 47-year-old CEO, founded the company with his wife, Jennifer. He fits the mold of neither ink-stained traditionalist nor digital-media bomb thrower. A former advertising director of the Austin Business Journal, he’s a churchgoing suburban family man who simply thought the big metro papers were failing to provide information vital to many communities—and he devised a business model to do something about it.”
“Community Impact, which launched in 2005 as a single monthly paper covering the far-northern Austin suburbs of Round Rock and Pflugerville, now produces some 36 print editions around the state.”
“Such reach would be attractive to local advertisers, Garrett figured, because it was both comprehensive and geographically specific. If it was too niche for big-budget national and regional brands, that was fine by him; his model counted on lots of little ads from the mom-and-pop shops, the corner restaurants, the dental practices.”
“As the company’s reach has expanded, one of its most important innovations has been ever-tighter targeting, where advertisers can pay to show up only in papers sent to a small subset of readers—down to the level of individual mail-carrier routes.”
Garrett says: “So if you’re a business that’s trying to reach people who like Metallica, and you’re really trying to dig into the demographic and psychographic data on that, Facebook can help you. That’s not for us. But the majority of local businesses are looking for customers who live within a five- or ten-mile radius of the store—and we can compete with Facebook there.” READ MORE
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MARKETING
The big advantage of digital marketing is that it can be measured. But are we measuring the right things? “Chris Walker, CEO of ‘revenue R&D’ firm Refined Labs, recently posted on LinkedIn about the results of an experiment his company ran. For a year, they asked every lead how they’d found out about Refined Labs. For leads who became customers, they then compared the self-reported source attribution vs. what their attribution software reported. The differences were shocking: while the software credited organic and paid search with bringing in nearly 80 percent of customers, only three percent of paying clients said they’d found the company that way. What's more, channels like social media, the brand’s podcast, and word of mouth were all strong sources of customers, according to the customers themselves. The software, though, showed almost zero performance from those channels.”
“According to Chris Walker, the inaccurate measurement happens because when people are ready to buy, they search, click, and convert. It’s really easy for software to measure that. What's hard to measure is everything that happens before that last search.”
“The reality of marketing and branding is that what works is what resonates. And as of right now, the only way to measure what resonates is to ask.”
“Ask customers what they like and don’t like about your product. Ask them what they’d like to see next. Beyond that, ask them about their work and their lives and what kinds of problems they have.”
“These problems are opportunities for your product or service to evolve – and opportunities to reposition and/or refocus your content.” READ MORE
ECOMMERCE
More specialty retailers are launching their own marketplaces—and giving third-party sellers additional options: “Some of the first brick-and-mortar retailers to launch online marketplaces were big-box retailers like Target and Walmart, who were looking for a way to compete with Amazon’s endless aisles. But now, specialty retailers in all sorts of industries are joining the marketplace bandwagon, and leaning into the dominance they have in their own individual categories.”
“Arts and crafts retailer Michaels recently announced the launch of its online marketplace, which would give shoppers access to 750,000 curated new products from third-party sellers.”
“Paperless Post, which built a business around sending online invitations for over a decade, unveiled an online marketplace for event-related products in July. In January, David’s Bridal unveiled Pearl, a planning platform and vendor marketplace that could help brides find venues, photographers and caterers, among other services.”
“‘What specialty retailers can do is offer this as a natural extension to the service that they have always provided,’ [Matt Moorut, director analyst at Gartner] said. ‘In a sense, the specialty retailers can really leverage their own brand credibility in a way that Amazon and the likes can’t.’” READ MORE
Bad weather will boost U.S. online spending this year by $13.5 billion, Adobe said in a report Wednesday: “The study, the first of its kind by the software provider and its e-commerce research unit, is based on an assessment of past shopping patterns combined with data on rain, snow, and wind compiled by the Weather Co., a unit of IBM. ‘A modestly rainy day can push more people to shop on their phones or computers,’ Adobe said.”
“The exact effects will depend on the exact weather conditions, of course, and the impact is sprinkled throughout the year.”
“But Adobe estimates the cumulative total of sales sparked by bad weather outweighs Cyber Monday, the largest online shopping day of the year, which generated $11.3 billion last year.” READ MORE
THE ECONOMY
The February jobs report is out, and once again the labor market added more jobs—311,000—than expected: “A hot job market has emerged as one of the biggest economic surprises among many twists since the Covid-19 pandemic hit three years ago. With the Federal Reserve aggressively raising interest rates to tame inflation, many economists had expected job gains would cool or even turn into losses by now. ‘The labor market’s definitely been stronger at this point than we would have thought maybe six months ago,’ said Veronica Clark, economist at Citigroup.”
“Large parts of the economy—including restaurants, hospitals and nursing homes—are driving the growth. Those service providers were hit hardest by social-distancing measures at the onset of the pandemic. Now, nearly three years later, they are hiring at a rapid clip as they find it easier to recruit and fill openings.”
“The new jobs are more than offsetting cuts announced by huge employers such as Google parent Alphabet, Amazon.com, and Walt Disney Co.” READ MORE
Economist Mark Zandi is relieved:
FINANCE
Credit conditions for small businesses are getting back to normal: “More small businesses are returning to pre-pandemic norms, according to a new survey by the 12 Federal Reserve Banks. And the share of firms operating at a profit rose from 35 percent in the 2021 survey to 45 percent in 2022. That doesn’t mean there aren’t challenges. Almost all of the respondents struggled with operational issues and 40 percent hold more than $100,000 in debt. They’re also looking elsewhere for money. The majority turned to personal or government sources for funding rather than financial institutions.”
“Revenue, employment and profitability each improved from 2021, but expectations worsened year-over-year. Firms remain less likely than those in pre-pandemic surveys to expect revenue or employment growth in the coming year.”
“The share of firms that applied for a traditional loan, line of credit or merchant cash advance increased to 40 percent in 2022, up from 25 percent in 2021. The top reason for seeking credit was to meet operating expenses, though business expansion saw the biggest year-over-year increase.”
“Applicants at small banks were most likely to receive at least partial approval (82 percent), followed by finance companies (76 percent) and online lenders (71 percent).”
“Some 81 percent of those who applied to small banks said they were satisfied with their lending experience, compared with 48 percent who turned to online lenders.” READ MORE
Meanwhile, there’s a bank run in Silicon Valley: “Panic swept through the start-up industry on Thursday as investors at some venture capital firms urged portfolio companies to move their money from Silicon Valley Bank over concerns about the tech industry stalwart’s financial stability. Silicon Valley Bank’s spiral was set off by its surprise announcement Wednesday that it would take extraordinary and immediate steps to shore up its finances amid a dimming economic environment for the start-ups and other technology companies that dominate its client base. The bank disclosed that it had sold off $21 billion of its most liquid, or easily tradable, investments; borrowed $15 billion; and organized an emergency sale of its stock to raise cash.”
“Banks are loath to take any of those steps — let alone all three at once — and when they do, the moves are typically carefully choreographed. Silicon Valley Bank’s stock price plummeted 60 percent on Thursday as investors rushed to sell shares after the announcement.”
“Greg Becker, chief executive of Silicon Valley Bank, urged venture capital firms to stay calm in a conference call on Thursday. But a number of investors, including Arjun Sethi, an investor at Tribe Capital, advised companies to move some or all of their money from the bank.”
“Other firms made similar moves, according to four memos viewed by The New York Times.” READ MORE
HUMAN RESOURCES
This video offers a cautionary tale for those trying to check resumes—as well as a little insight into what’s happening at Twitter:
THE 21 HATS PODCAST: MARKETING WORKSHOP
Turning a Failing Nut Shop into Nuts.com: This week, Shawn Busse and Loren Feldman talk to Jeff Braverman about why he walked away from a career as an investment banker and went to work in the family’s nut store, the Newark Nut Co. “My dad and my uncle told me I was nuts,” says Jeff. But with an instinct for taking calculated risks—like acquiring the URL Nuts.com—Braverman has turned the family business into a direct-to-consumer juggernaut, unleashing years of explosive growth. And despite being a former investment banker, he’s managed to do that without taking any outside capital. And he’s far from finished. “To this day,” he says, “we're doing deep brand research: What is Nuts.com? What can it be? Can it scale? Can it transcend just the word nuts?”
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Thanks for reading, everyone. — Loren