The web agency playbook: Mastering revenue diversification and adapting to future trends

In the fiercely competitive world of web agencies, owners recognize that success hinges on adaptation. The rapid evolution of technology, especially in the AI domain, alongside shifting client expectations, underscores the crucial need for agencies to adapt.

To help web agencies understand the big picture, we had an open conversation with Jeff Leibel, our Director of Enterprise Sales. Jeff generously shared valuable insights and strategies, steering agencies through the AI-dominated landscape for sustained success.

His advice stems from years of experience, offering a unique perspective on the evolving nature of web agencies and the strategies successful owners employ in navigating the current landscape.

Here’s what you can expect to learn from the interview:

1. Nine trends that are reshaping the expectations clients have from web agencies.
2. The current and anticipated impacts of AI on web agency business models and client relationships.
3. Practical tips for web agencies to overcome barriers, enabling them to become holistic service providers, thereby boosting sales and enhancing retention.

 
Explore these insights in our video interview with Jeff or delve into the Q&A below for an in-depth understanding.
 

How have you observed the web agency industry evolving, particularly concerning SMB client demands?

It’s ever evolving, so we’re seeing a number of different trends - some impacted by AI which we’ll touch on - but a lot of them are around specific aspects of what a small and medium businesses (SMB) expects when it comes to the services a web agency provides. There’s nine in particular I want to point out:

1. Holistic digital solutions: Many SMBs now seek comprehensive digital services beyond just website design, including SEO, content marketing, digital ads and social media management.  They want one digital expert to look to for advanced solutions and someone to trust.
2. Mobile-first approach: There's a shift towards mobile-responsive designs as smartphones become the primary device for online access. People are busy and they want to be able to search from their phone, tablet, wherever they are, and they expect real-time results.
3. Local SEO focus: SMBs emphasize local SEO to appear prominently in local searches and Google Maps.
4. E-commerce integration: Even traditional SMBs are adding e-commerce functionalities to their websites using platforms like Shopify and WooCommerce.
5. Personalization: SMBs want personalized content and user experiences to engage customers effectively.
6. Data-Driven insights and simple or complex reporting: Analytics and data insights are crucial for SMBs to refine their strategies.
7. UX/UI design: SMBs recognize the importance of user-friendly design for customer satisfaction and conversions.
8. Security and compliance: SMBs are concerned about cybersecurity and data privacy, demanding robust security measures and compliance.
9. Affordability and flexibility: SMBs want cost-effective solutions without compromising quality.

 
In essence, web agencies need to recognize that selling point solutions 5-6 years ago may have been a great idea, but they have to now evolve into a holistic provider of marketing services and that the relationship with an SMB can’t start and end with websites.

What impact is AI having on both the business and client side of web agencies’ operations? What do you see as the possible impacts of AI on this industry?

It’s obviously front and center right now - when anyone is searching for AI we’re seeing lots of suggestions that AI will replace everything - pictures, video, content, analytics etc. The truth of the matter is it can do some of those things, but it can’t do it all and it can’t certainly replace human creativity.

With that in mind, AI can play a role in how web agencies operate on both sides of the equation. If we start with the business side, we’re already seeing web agencies use AI in various ways:

• Automated processes: AI can automate repetitive tasks like data analysis, customer segmentation, and even basic design elements, freeing up human resources for more creative and strategic work.
• Cost efficiency: Over time, AI can drive down operational costs by replacing or augmenting roles traditionally performed by humans.
• Scalability: AI can handle increasing amounts of work or transactions without proportional increases in staffing or costs, allowing businesses to scale more efficiently.
• Predictive analytics: Machine learning algorithms can analyze trends and patterns, which can inform business decisions such as the best times to launch marketing campaigns or how to allocate resources.
• Talent augmentation: AI tools can act as a force multiplier for existing talent, enhancing the productivity and effectiveness of your team.

 
On the client side, we think AI actually adds value to what a web agency brings to a client. Here’s some examples of how:

• Personalization: AI enables web agencies to offer a more personalized user experience. For example, machine learning algorithms can analyze user behavior and adjust the content displayed in real-time to better meet individual preferences.
• Chatbots: These can handle a variety of customer service tasks, freeing up human employees to deal with more complex issues.
• Enhanced UX/UI: Advanced algorithms can help in the automatic adjustment of website layouts, color schemes, and other elements to maximize user engagement.
• Content Creation: AI can assist in creating more relevant and engaging content, leveraging data to understand what resonates with specific target demographics.

 
Overall, we think AI is a great tool that web agencies need to incorporate into their everyday operations or they may risk falling behind.

Retaining clients is crucial in a competitive market. What specific challenges do web agencies face in retaining long-term clients?

Attraction and retention of clients is front of center of every web agency’s mind. From our perspective, one of the problems web agencies have had in the past is that they position themselves as a point solution provider.

Effectively a customer comes in and pays a lot of money to build a website. But after that big project is completed, a web agency is making very little ongoing revenue in the form of hosting and security services from that client.

But there are actually many more solutions that SMBs need going forward - the website really is just the start, and that means there are many different revenue streams obtainable by providing ongoing services that help them strengthen their online presence.

What are the barriers preventing web agencies from offering more services, and how can they be solved?

Good question! We have a lot of discussions with web agencies on a weekly basis and I’d say  their reluctance is driven by a number of factors.

One of the main ones is that web agencies often lack the necessary skills or knowledge for diversification. They’ve hired a team of professionals predicated around selling and building amazing, beautiful websites with complex hosting and security solutions, but haven’t thought of having the right people in place to manage what comes after the initial website sale.

And often, it’s also not having the right tools and toolbox to be able to help take the SMB’s online presence to the next level.

As far as solutions go, I’d suggest web agencies look at the following avenues:

• Skill development: Invest in training or hiring experts to guide diversification.
• Pilot programs: Test new offerings on a smaller scale before a full-scale rollout.
• Partnerships: Collaborate with other agencies or firms offering complimentary services.
• Client education: Communicate the benefits of diversification to clients and emphasize comprehensive solutions.
• Data-Driven decisions: Use data analytics to identify market gaps and client needs for informed diversification.
• Modular approach: Design new offerings for easy integration with existing services to reduce operational complexity.

We’ve also done an internal study, and you’ve seen it from your own teams, that when web agencies grow their basket size, there’s a positive impact on churn. Can you talk through that?

The implications are profound. I'm passionate about discussing basket sizes because it transforms the perception of a web agency from selling ingredients to selling fully baked cakes.

The advantages are vast, impacting every aspect of a web agency's business model and I’d list those out as follows:

• Value proposition: Expanding the range of solutions in a basket size diversifies value for clients, reducing the likelihood of switching providers and embedding the agency deeper into client operations.
• Relationship strengthening: A broader basket size leads to more touchpoints with clients, fostering trust, reducing misunderstandings, and building a strong foundation to reduce churn.
• Financial stability: Larger basket sizes result in more significant revenue streams, providing financial stability to invest in resources and cushioning against downtimes, ultimately reducing churn.
• Reduced price sensitivity: Clients who see value in multiple products are less likely to quibble over individual pricing, minimizing pushback and churn.
• Competitive edge: Agencies with diverse offerings are better positioned to deter competitors, making it cumbersome for clients to replace them.
• Feedback loops: Larger basket sizes lead to more feedback and data, which can be used to improve services, predict client needs, and preempt potential issues, reducing churn.

 
Expanding and refining offerings is crucial for web agencies to stay relevant and solidify client relationships in the dynamic landscape of digital marketing and technology. This strategic approach not only positively influences reducing churn rates but also widens the range of clients they can attract.

Moreover, it transforms their business model. In a world accustomed to subscription models, where monthly fees are the norm for services like Netflix, web agencies shifting from focusing solely on project fees to a more sustainable and recurring revenue-oriented approach is a good thing.

In conclusion, my advice to web agencies is to diversify your offerings. While websites remain a primary focus, supplement them with a suite of digital services to enhance online presence. This allows you to charge clients monthly, providing better financial planning and stability in your business.