Does Internet Advertising Drive Work for Online Businesses? Lessons for Virtual Law Firms, Courtesy of E-commerce

How do you find clients for an online business – whether it’s an e—commerce shop selling a product like shows or magazines or gift baskets, or a website that offers services like web design or job placement or even legal services, through a virtual law firm?

Not surprisingly, many online business’ customers come from heavy investment in straight-up search engine advertising rather than social media, as discussed here in New York Times’ You’re the Boss Small Business Blog. And somewhat counter-intuitively, there are some online businesses that don’t spend money on online ads at all.

Two of the online proprietors quoted in the article — Paul Shrater, co-founder Minimus, a site that sells travel-sized toiletries and other mini-products and Sam Zaila, chief executive of SubscriptionAddiction that sells discount magazine subscriptions — are big spenders on Internet advertising campaigns.  Zaila, whose company had $1.3 million in 2013 reported that he spends:

…about $400,000 a year on online advertising — 70 percent on Google AdWords, 20 percent on Bing/Yahoo, 5 percent on Facebook ads and 5 percent on “display remarketing,” which helps businesses reach consumers who have previously visited their sites. Mr. Zaila also attempts to engage existing customers with a custom email marketing platform.

Meanwhile, Shrater also found that Google AdWords has been the best source of referrals for his web business, which had $5 million in revenue in 2013.  Shrater describes:

We started with public relations,” he said. “Then we advertised with Google, Yahoo and MSN. Our products have such low margins so traditional advertising didn’t work for us[…]Mr. Shrater said he spends $3,000 to $5,000 monthly on Google AdWords, but the strategy has changed over time. “At one point, our spend for one year was 10 times what it is now, but analytics showed that there was a lot of money being wasted.” Now the company focuses on the most lucrative keywords. “It means less sales but more profitable sales.”

Interestingly, for all the buzz about social media as a tool for marketing, Zaida and Shrater hardly touch the stuff.  Zaida spends only five percent of his online advertising budget on Facebook ads, in comparison to 70 percent on Google Adwords and 20 percent on Bing/Yahoo. Meanwhile, Shrater discovered that “It’s hard for distributors to leverage social media the way brands can.”

By contrast, Mitch Goldstone, CEO of ScanMyPhotos — which generates $5 million in annual revenue — opted for a different approach. Goldstone explained that:

 “For years my company invested thousands of dollars in Google AdWords, Facebook ads, Referral Candy and the return was only 2 to 3 percent, and it was so expensive[…] After he looked at his analytics, he realized his best referrals were coming from satisfied customers — word-of-mouth referrals. In 2013, he took his online marketing budget of $40,000 and invested it in customer service […] Rather than advertising, ScanMyPhotos offers live support 24 hours a day and seven days a week, and it tries to respond instantly to customer inquiries.  Goldstone concluded that: Having tried it all, from AdWords to Facebook,” he said, “the single best way to promote our online photo digitization service is investing in customer service. Online businesses are all about credibility and word of mouth.”

So what are the take-aways for virtual law firms? First, Internet marketing can be effective — but even though it’s less expensive than traditional tools like print ads or PRs, it still doesn’t come cheap.  Zaida, whose online magazine subscription site arguably faces the most competition of the business owners interviewed – spends roughly 30 percent of total revenues on advertising.  Shrater’s spend – just $60,000 a year – is now comparatively small to annual revenues.  But starting out, Shrater spent 10 times as much – roughly $600,000 a year. Extrapolating from those figures, a virtual law firm looking to rely on online advertising to find clients to generate $100k in revenues would need to spend between $10k and $30k each year.  Yet as this recent ABA Journal (April 2014) piece describes, many virtual law firms rely on websites and Internet presence as a primary source of business –  and admit that building a virtual firm takes time (partly because most online firms don’t have a large enough ad budget starting out to drive business).

From my perspective, virtual firms might be better served adopting Goldstone’s approach and offering top notch customer service. Perhaps a virtual firm couldn’t offer the same live 24/7 support that Goldstone’s business does, but it doesn’t cost much (except time) for a lawyer with some hustle to make service available at odd hours and invest in a reliable live answering service for the remainder of the time. Virtual firms should also heed Goldstone’s observation that “Online businesses are all about credibility and word of mouth,” – and work to serve clients professionally ethically.

As for social media – well, let’s just say, it may not be your best bet. Don’t get me wrong; I co-authored, with Nicole Black the book Social Media for Lawyers; I blog and Tweet, and enjoy residual visibility and SEO from my social media participation.  But it’s always been my instinct – now confirmed by other business owners – that social media is most effective for lawyers or small businesses to build connections and establish a reputation organically by producing and sharing content (which can both be accomplished by blogging or on Twitter). Used purely for SEO, social media is a wasted opportunity (not to mention, an annoying intrusion).

If you operate a virtual firm, what’s your experience been with online advertising – and what’s been your best source of clients?  And do you think that these lessons apply with equal force to marketing a “brick and mortar” law firm as well as a virtual one? Share your comments, below.