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Summary:

Local advertising is web’s ultimate chimera, but things can be different when you combine geo-location with an offer-based, needs-based advertising system. A slew of companies — TeleNav and Poynt being the latest — are trying to capture the billions of dollars that come with “foot streams.”

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A few weeks back, I spent time with Ian White, CEO and founder of Urban Mapping, a San Francisco-based start-up that’s been in the geo-local trenches for nearly seven years. Not surprisingly, our conversation centered around the consumer geo-local services. A key takeaway from our conversation was something White said (and I paraphrase): The long tail is the enemy of local advertising.

That statement pretty much sums up why almost all local advertising efforts have been non-starters. It’s the web’s ultimate chimera. You see, anyone can start a local website, but in the end, because local content is relevant only to a very small section of society, national advertisers can’t take those local markets very seriously. Both the end customers and the best-suited advertisers are very local, and hence are limited in numbers. To sell to them, one needs a local presence.

This is one of the reasons why many local publishing efforts have failed to grow. The ones that are succeeding are essentially small businesses with limited ambitions.It’s an interesting quandary: Local advertising is an untapped market, yet the odds of a national player making a go of it are virtually impossible. In the past, phone companies used to rule the local advertising business by publishing Yellow Pages, but that business isn’t going too well these days. Just check out the declining the latest quarterly report from Dex One, the company formerly known as RH Donnelley. It reads like a page out of a vampire novel.

So what is the answer? GPS-based local offers which push you into taking action based on where you are. In other words, a needs-based location-aware mobile-based advertising platform that’s a part AdSense and part Groupon. Many companies are ready to go after this market, like Multiplied Media, the Calgary, Alberta-based company behind the Poynt Local Search app, which today launched the Poynt Offer Engine, a location-aware advertising and offer platform.

Poynt isn’t the only one with that idea. TeleNav, a Sunnyvale, Calif.-based company that makes location-based search and navigation applications has launched a new advertising platform for on-the-go users. The platform will allow advertisers to target their messages based on a person’s location and get more context from their search query.

TeleNav has also developed action-based metrics such as “Drive-to Rate,” a metric that captures the number of users who viewed an ad and chose to drive to the advertiser’s business location. Sort of like how Google provides the click-through rates for its AdSense customers. I like this advertiser-centric, data-driven approach, as it makes the advertising platform more accountable.

TeleNav says its navigation services log about 700 million minutes of usage each month. Users of TeleNav’s search and mobile GPS navigation services view more than 40 million mobile search pages each month. The ad platform is going to target those users. TeleNav’s platform combines need (search) + location + local + offers, giving it a fighting chance in the market that is very crowded.

Everyone from Geodelic to Whrrl to Foursquare is targeting the local advertising market. Each has their own twist. Of course, giants Yelp, Apple and Google are lurking in the background, each hoping to get a piece of $3.8 billion mobile advertising market. So far, I give Foursquare the edge over others, mostly because it had the brand recognition and tractions with brands and advertisers. That doesn’t mean others aren’t going to try. (Read: The Great Open Database of Place Pages in The Sky)

As Jeff Holden, founder of Pelago, the company behind Whrrl app, recently said local advertising is really about “foot streams” and not “click streams.” Companies that can turn foot streams into dollars are going to be the likely winners.

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  1. How much of this might get replaced by AdWords? Google’s already got a huge number of local businesses advertising with them, and they’ve got location aware search on mobile devices. If they added offers as an ad-unit that local businesses could purchase (setting location/etc. filters), that could be damaging to the other players in the space. Since search intent on mobile captures a pretty high intent-to-purchase, offers might be even more valuable to consumers than on the web.

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  2. @Om,

    I not only agree with Sutha’s comments regarding the AdWords and its’ huge scale in local markets, but i’ll also add that Facebook likely has millions (if not 10′s of millions) of local businesses with a presence on Facebook. Just as Google can connect AdWords with mobile, Facebook can do the same with mobile AND their recently launched Facebook Places. Respectfully, I’d say most of the other players are not very likely to succeed.

    My $.02,

    Best.

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  3. [...] a post today, GigaOm’s eponymous writer pens “Is Geo-Local the Answer to the Local Advertising Quandary,” citing Urban Mapping CEO Ian White’s perspective on how hyperlocal advertising models [...]

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  4. I see the groupon competitor dealon.com uses adblade to market themselves. The ads look more like editorial.

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  5. I agree somewhat with Sutha and Curtis. But I wouldn’t say there isn’t a space for others to succeed. Maybe not in a Google or Facebook way (as in a multi billion $ business). But there is certainly space for niche players, where the niche markets can be worth several 100 of millions of $.

    Each of these sites have different target populations. The Facebook social graph is certainly different from the Twitter, Foursquare, or Qype one (leader in Europe). Smart advertisers will be keen to spend their $ on the networks with the best ROI for them.

    In addition to the need-based approach mentioned above, personalization will also play a big role in making this happen. The ability for a global advertiser to become relevant at a local level means they have to understand individual users’ taste as well as where they are. The personalization magic is what we enable at LikeCube. We can use checkins, ratings, reviews, lon/lat and other form of user generated content to predict places people might like. We wrote a post about this topic here: http://likecube.squarespace.com/blog/2010/6/18/where-next-for-location-marketing.html

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  6. [...] Is Geo-Local the Answer to the Local Advertising Quandary? [...]

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  7. [...] services company that is trying to break into the local advertising market using new methods. I recently wrote about Pelago, which along with the likes of Foursquare is going after location-based marketing campaigns, [...]

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  8. [...] are evolutions of the old — email marketing — and some of them are pretty novel, like GPS-based targeting. But these services are all run separately, even though if they were integrated together they would [...]

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