Climbing the charts of linkbait headlines these days are all things AI… and anything that Elon says. The former is an even mix of PR stunts and genuinely-revolutionary advancements. The latter is a can’t-look-away train wreck as Elon reinvents himself from tech visionary to cultural sideshow.
Now, the latest Elon-based fiasco has intersected with the Localogy-verse. X has proclaimed that one of the ways it will resolve the revenue gap from its recent F-bomb-ladden advertiser exodus is to pursue ad dollars from the long-tail SMB segment. If the company is serious, the question is if it can pull this off.
Backing up, the SMB sector has long become a catch-all for wide-eyed optimism from tech startups. The thought is that it’s so large and unsolved that it’s ripe for disruption and fresh thinking. The problem is that these efforts often lack the SMB market experience to anticipate its longstanding challenges.
CAC Fight
For example, as those in the SMB marketing world know, the market is woefully fragmented. Revenue scale requires a massive volume of deals that tap into smaller marketing budgets. And that brings in classic SMB unit economics like the neeed for lifetime value (LTV) to exceed cost of acquisition (CAC).
Taking those one at a time, the LTV piece is challenged by traditionally-high SMB churn rates. CAC is meanwhile difficult to keep low, given the prevalent need among SMBs for high-touch consultative sales. Few have cracked the code around self-serve at scale (Google, Meta, and a few smaller players).
Coming back to X, the question is if it can address these and many other issues inherent in SMB ad sales… or if it’s even aware of the challenges. To be fair, it has made various attempts at SMB ad dollars over the years… however, there isn’t much in the way of institutional memory at X these days.
Virtuous Resistance
On the bright side, SMBs are less influenced by the tech-world politics that the rest of us obsess about. So their political aversion to X advertising could be muted, relative to the big-brand world. As a historical example, Meta’s societal missteps (election drama, etc.), had little impact on SMB ad spending.
Part of this is because SMBs are mostly too busy running their shops to get caught up in politics and virtue-signalling. They just want ad performance. More accurately, they want things bottom-lined: foot traffic and ringing cash registers. So in that light, X may find less virtuous resistance from SMBs.
That aside, challenges remain in the sand-gathering exercise of SMB ad sales. And if X is serious about the claim to pursue this segment, it will discover that harsh reality soon. Though it’s a massive pile of money, the SMB ad market often invokes hard-fought “juice isn’t worth the squeeze” sentiments.
Strategically Nuanced
Of course, this isn’t to say the SMB ad market is a fool’s errand. Many companies in the Localogyverse have corralled this fragmented addressable market. But it’s strategically nuanced and doesn’t just happen by flipping a switch… especially in the style of X’s schizophrenic strategic positioning lately.
We’ll see if X follows through, and if it can pull it off. Despite the skepticism, we’re rooting for it to do something unlikely here – something that could produce lessons for the rest of the SMB SaaS and media/marketing landscape. It does at least attack this market with a fresh eye and disruptive mindset.
