Nieman Foundation at Harvard
GateHouse Media claims to serve 219,000 small- and medium-sized businesses in its hundreds of markets. Like most of its newspaper chain peers, GateHouse expanded its ad selling to “marketing services” more than a half decade ago. Unlike those peers, the company now aims to move profoundly beyond selling ads.
He makes the case that America’s burgeoning base of 29 million smaller businesses — those with 20 or fewer employees — want a one-stop shop for help with everything from financing to IT to human resources. The company’s UpCurve division leads this new charge.
For the first quarter, UpCurve generated $19.4 million in revenue, an increase of 36 percent compared to the first quarter of 2017. Yet it’s a small revenue — and profit — contributor so far, accounting for less than six percent of revenue.
Mike Reed’s hope: Small businesses “want to deal with a local business partner. So why can’t we be their business partner?”
We started with ThriveHive [formerly known as Propel], digital marketing services, and that’s the biggest.
We sat behind the mirror — kind of like a Law & Order episode. We were able to listen to the entire conversation. We left with two things. One is that the business owners had major issues dealing with employees and HR. They had major issues trying to access capital; banks aren’t lending to them anymore. Multiple banks are gone. And they had issues with IT services. Sometimes they would come in in the morning and the computer didn’t turn on: “What do I do?” Or, “I want to have a CRM system but I don’t know anything about it. I don’t have time to do it. I don’t have an IT department.”
Digital marketing services was also still a very high priority for them. They knew they needed to be in the digital world, but they didn’t really know how, or what to do.
The second thing we heard: “We want to do business with somebody local that we trust, that we can see. It doesn’t mean we want somebody calling on us every day in person. But we want to do business with somebody here in the community that we can get to if we need to.” And so I thought, “Wow.”
We have these media brands across the country. We’re in the local markets. We have the ability to continue to market these new businesses through our print and digital products. We have buildings that are too big. We have space to add staff for these new businesses.
So let’s develop a business that solves for all of these issues, and then we can have a customer in Peoria, Illinois, who buys our HR services or who gets a loan through the financial services and we’re able to connect them on the back-end to [lender] Kabbage. And just developing our B2B business in that manner will then allow us to have a business relationship with the customer that we can then maybe transcend into other things.
We’ve sold over 100,000 licenses on behalf of Sugar, the CRM system company. So now we’re incredibly sticky with those customers. And we can talk to them: “Hey do you need capital? Do you need HR services? Do you need your website? Does it need to be mobile-enabled?”
The thought was really just to convert our B2B business from one where we sold advertising. We’re never going to beat Google and Facebook in advertising. Let’s focus on what we can beat them at, and that’s being local and selling business owners something that they need terribly, that they want. That’s how it developed.
I was also looking at the data of who small- and medium-sized businesses [SMBs] were. Part of the reason our advertising declines have been so severe and continue to be so severe is that newspaper advertisers, historically, are merchants and retailers who are pushing product to the market — hardware stores, department stores, grocery stores. Those guys are not robust on a local level anymore. They’re all big-box stores. On top of that, Amazon has hurt the big-box stores.
The Small Business Administration put out a report in 1997, saying there were 15.4 million SMBS that had no employees. By 2014, that number had grown to 23.9 million — no employees, so they’re sole-proprietors.
There are 29.6 million SMBs in the country. 29 million have less than 20 employees. And so, I think everybody is trying to sell services to those 600,000 that have more than 20 employees. But nobody is really going after the 29 million with less than 20 employees.
So that was thought that I had. Those are the customers that we have to win over. They’re not historically newspaper advertisers.
What we’re undertaking, nobody’s done before. The bigger companies have the capacity to do business with lots of vendors; there’s not somebody that does that broad-base service scope for the bigger companies. There are too many individual companies that already dominate the space.
But nobody 29 million that have less than 20 employees. We say they want to do business with somebody local. We know they don’t want to deal with 20 different vendors; they want to deal with a local business partner. So why can’t we be their business partner?
