Agency-as-a-Service: Digital Agencies are a Broken Business Model

By Josh Gross

Having freelanced for 12 years and run Planetary for an additional six, I’ve worked with hundreds of companies of all sizes—from the single-man startup to the global corporation.

If there’s one thing I’ve realized, it’s that there remains a gap in the market between WYSIWYG site builders like Squarespace and hiring an agency for built-to-spec work. With over 30 million small businesses in the US alone, it’s hard to believe that the options are to spend $20–50 per month, or a few thousand dollars all at once.

This is the nature of the digital agency business though: you pay us now, we’ll build you a website (or ad campaign, or mobile app, or …). That works well when you have deep pockets to fund a big investment, but with most small businesses making under $400k in revenue each year, the cash to pay for a non-cookie-cutter website all at once just isn’t really there.

In the past decade+, the web has seen the rise of “everything-as-a-service.” Your bookkeeping, your bill pay, your payroll company, and every other product you use to run your business are pay-by-the-month.

Except how you hire and pay someone to build you a website. The tools to develop websites have gotten dramatically better in the past decade and the costs of getting a to-spec website built have certainly dropped, but small businesses are still stuck with one of three choices for custom website design and development:

  • Do-it-yourself: Get a free template or buy one from somewhere and spend time setting it up yourself on Wix, Squarespace, or a similar WYSIWYG service.
  • Hire a freelancer: Find a freelancer that can design and develop a website for you. Provided you can find a reliable and cost-effective freelancer, this is a good option, but hiring someone good, trustworthy, and well-priced can be very difficult.
  • Hire an agency: Find an agency that can design and develop a website for you. It is often easier to find a reliable agency but you will be paying a significant cost premium.

The biggest issue with the latter two options is simply the burden of the cost. You’ll easily spend $4,000+ for a freelancer, and $10,000+ for an agency, with all of it due by the end of the project.

Speaking to a small business owner recently, she said,

I think people like me have just accepted that we can never get a great site with our budget. So we just accept what we can get and settle [because] we’re afraid that we’re going to go down a path [of] spending so much money and ending up with nothing.

With small biz owners feeling like that, it’s no wonder that companies like Squarespace and Wix are cleaning up: in 2017, Squarespace pulled in over $300m in revenue and has continued to grow. Small businesses clearly want to spend their money on a quality website and are willing to invest if they know what they’ll get, but the risk of spending several thousand dollars all at once and maybe getting screwed simply isn’t worth it for most.

With these WYSIWYG services, small business owners get a website that is “good enough,” and have access to help through dedicated support staff, even if the site design itself is a mildly-customized cookie-cutter template.

In this day and age, the needs of the business owner are not in alignment with how we are manufacturing websites. There’s a reason you can finance a car, use a mortgage to buy a house, or pay off expensive hardware with a business loan—these are burdensome costs that most people or businesses have the cash-on-hand to pay for.

But agencies? “We’re different.” (We’re not, but the full payment and Net 30/60/90 model refuses to die.)

“The work is difficult and complicated.” (It’s gotten markedly easier; producing the average SMB website really…isn’t either of those.)

We haven’t even talked about how many agencies will charge hefty fees for ongoing maintenance, and a freelancer may disappear or become unreliable, leaving you to fend for yourself.

So with all of this, despite the wild success of companies like Squarespace, agencies have steadfastly stuck to the way in which they work with their customers. It’s an industry that talks about innovation—for their customers but when it comes to their business model? It’s the same. Even as the concept of the Agency of Record is disappearing and companies like Toptal are eating their lunch.

This, in my not-so-humble opinion, needs to change.

So, we’re trying something new and introducing the Agency-as-a-Service model. Using learnings from Just-in-Time Manufacturing methods, we are taking advantage of intelligent automation, distributed design and engineering, and custom tooling to make it easier to rapidly execute projects that fit the needs of many of these businesses with consistently high quality. This isn’t a new idea; in 2012, the Financial Times was talking about Services-as-a-Service as a necessary directional shift in the wider market.

By changing the billing and service model to something akin to your typical SaaS business, we will change the financial and support dynamic—allowing small businesses to take advantage of the services that we offer, while demonstrating that we are aligned with their needs and will be around to support them as necessary into the future, and reducing their up-front financial burden.

I’m hoping this is the start of a sea change in the way agencies run their business, but that’s likely to happen slowly. Most agencies aren’t set up to make the margins necessary to run something like this as a profitable business; others simply don’t want to deal with small business customers.

That being said, others, like us, will forge ahead and give this a try in service of helping the thousands of Small and Medium-Sized Businesses across the US and abroad that want a higher quality website.

If you’re a small business and you’re looking for something new, come talk to us at Regular, where you can work with us under one of three packages for your site built-to-spec.