Local Ads, A Billion Dollar Biz, Some Day

20 Comments

Not a day goes by when we get pitched by one start-up or another that has a new twist on local search and listings. They all want to target the small and medium sized businesses, and tap into the billions locked up in local advertising that currently goes to non-Internet channels. Never mind that the very presence of large number of players creates more confusion.

There are many other challenges as well, and many were discussed at the Kelsey Group Interactive Local Media Conference in Los Angeles. Jonathan Weber, founder of New West said, “It is hard to get local businesses to participate, even if it is free.” Full report at Inside Chatter.

20 Comments

Blair Swedeen

I’m really surprised to not see Yelp mentioned once in this article or thread. They are the only ones who appear to have figured out the right combination of local/national, with a city-by-city buildout model and a national brand. While I think they will have challenges scaling outside of their core demographic (23 – 34-year-old urban hipsters), their traffic growth says that they have hit on a winning formula while their competitors are mostly dead: http://weblogs.hitwise.com/leeann-prescott/2007/03/local_search_update_yelp_up_91.html

Regarding local ad sales, it’s a fairly small number of business categories that people look for online. Yelp knows exactly which businesses to target for sales since they have the searches/reviews. SF is at scale now and here you can’t spit without hitting a business with a “people love us on Yelp” sticker in the window.

Rocky Agrawal

@Tim

I couldn’t find an email address for you on your site. Can you shoot me an email? You can find the address on the sidebar of my blog.

Would love to take a look at the beta. I worked on AOL’s local products for a while and follow the space closely.

Alex

I think the number one reason why local search for SMEs has not completely taken off yet is the medium (ie. PC-based internet). While people are on the internet, they are generally not in the frame of mind to look for local services.

Having said that, I believe the big boom in local search will come from the mobile sphere, especially as more and more mobile devices have GPS (and other location technologies). If companies provide an easy to use service for consumers to use as they are out and about, then they will see significant user adoption and with that will drive the SME retailer and service providers. It is the mobile GPS enabled applications as well as the mobile internet applications that will really drive this particular boom.

Tim Abbott

@Om,

First I want to apologize to Om for extending the conversation where even to me, this is starting to look like an advertisement for Noocleus Media, believe me it’s not, I just love this subject.

@Rocky,
Believe me, I know this all too well :). It’s part of the allure. National Brands that advertise locally is definitely part of what we are after. Hyper localization doesn’t mean you only pitch ad space to local moms and pops, it means that you pitch to anyone willing to advertise in the specific local market. Having been on the management teams of two large Interactive Advertising firms I’m very familiar with this space. Send me an email and you can certainly take part in our closed beta coming up and will get a better feel of what we’re doing.

Rocky Agrawal

@Tim

“While you make good points, they don’t mean this market is dead in the water. Obviously it’s not or ValPak and their competitors would be dead in the water.”

Rip open a ValPak envelope some time. Most of the advertisers in ValPak are national advertisers. I just opened one I had lying around and 17 of the inserts were from local advertisers compared with 30 from national (Netflix, Vonage, credit cards, cell phones, etc.)

The other challenge is that the categories that people seek the most information about online — restaurants, bars, etc. — are among the worst when it comes to ad spend. A lot of local ad spend is directed to businesses like plumbers and contractors. In that same ValPak mailer, only 5 of 17 were restaurants.

I rarely see ads for the restaurants in my neighborhood. Their marketing is the sign on the street, word of mouth and the fliers they stick under my door. A few sign up with promotion companies like Entertainment or restaurant.com.

Tim Abbott

@Toledo Dave:

I think we’re agreeing now :). Since I didn’t want to let the cat out of the bag and tell the whole world the Noocleus Media business model, I figured when people saw it, they’d just get it. However, at this point, we’re done with a couple of products and will go into closed beta next week so it doesn’t matter :). My point is that local search and listings don’t engage, nor do they allow companies to have a limited engagement with people looking for their services. Generally, we have two types of portals on the net, one for listings or one for community. This site is a prime example of that. It’s got TONS of great info and great conversations like this one are happening all the time. However, you can’t make a local play out of this but with cincymoms you can, as you stated, “narrowly focused local play, and that’s why it is working.” My point is there are TONS of these and it doesn’t take the 89 million dollar zillow funding to make it happen. What cincymoms hasn’t done yet is the “niche” local listing. Some low lying fruit with listings might be something like child care providers (sitters, preschools, nurseries, etc) and/or pediatricians that could be rated and still be genuine. Now, what if those care providers could interact with the community on a limited basis and answer child care questions, etc? Also, what if people were looking for a child care provider and they could post their requirements in the same place that they are communicating with other moms. What if those requirements got fed to the child care providers thus making their membership in the community instantly pay off? There are tons of verticals where a play like this would work IMHO. Niche content + niche local listings makes perfect sense, but hey you’ve got to get useful content and drive users which is still a challenge…(among others)

Monte Huebsch

Local search is gaining visibility. I own http://www.AussieWeb.com.au a Hitwise Top 10 local search web site in Australia. (We are number 8). It operates on Web 2.0 principles – that is, it is a WIKI, This is the only way for SME’s to go. Claim their listing and get exposure for free. Yes, you are right – time is the BIG issue, but if the pages are indexed by Google and come up high in the organic listings then participation is worth the time. Comments?

Dan

Om, There are a lots of startups in India & China for local search. Indian market saw a lots of local search startups getting funding this year. It would be great if you can throw some insight on if anyone is making money and inroads in this segment. And how will scenarios change post google local.

Simon

Om, what are your thoughts on the one area that local is beginning to dominate – local video advertising?

Toledo Dave

@ Tim Abbott: You say “how many people go online to shop a mortgage, it’s a bit of a stretch”, but that’s exactly what these local search services are trying to do. They’re taking a local activity, usually done offline, and moving it online to try and gain economy of scale. And unless they are going to pump millions in local promotion to create consumer awareness, it isn’t going anywhere.

The http://www.cincymoms.com site is a good example of a narrowly focused local play, and that’s why it is working. I’m sure a lot of its success is due to word of mouth, not online but offline among mothers sharing information.

Pete

I agree…when I first started this internet game, I also thought…WOW, you can take over the world. But I learned otherwise, quickly. You can, but it has to be, one city at a time. The internet is still a very scary, faceless place for millions of people. So when you can have an internet business, that is focused in your local community, and your customer/client, can come in and see you, face to face, I think your success rate increases a thousand times.

Om Malik

@ Tim Abbott

I think the execution of the local search and local advertising online leaves a lot to be desired. I have to tell you, the Yellow Pages are much easier to deal with even now, despite all the money that has been poured into the market. I can off course use them online and find quick information on what I am looking for.

If the start-ups want to get our attention, they need to figure out a simpler way not only for people looking up information, but more importantly for small business owners.

You might be onto something with cincymoms – local search (online) by smaller local Internet operations. The ones who understand the local market best.

Tim Abbott

@Toledo Dave and @Om,

While you make good points, they don’t mean this market is dead in the water. Obviously it’s not or ValPak and their competitors would be dead in the water. Also, LendingTree isn’t the best example. Honestly, how many people go online to shop a mortgage, it’s a bit of a stretch. Also, I agree people don’t go online looking for merchants, just like I don’t listen to Jim Rome to hear Clear Channels advertisers. That’s where Merchant Circle is in a losing fight. There has to be GREAT content, another channel perhaps, for merchants to advertise. Going to a merchant portal for the hell of it isn’t going to cut it which I’m not sure they realize. The real challenge in my opinion with hyperlocal ads is the cost benefit analysis of putting someone in front of local merchants so they buy advertising.

A good example of this model is, http://www.cincymoms.com. While they aren’t raking in the millions, they have done a cool million in their first year without much effort or staffing. That’s one city and while I’m not saying that we can imply that this model would work accross all major/mid-major cities, I think if you imagine the possibilities, it’s not that hard envision some positives and opportunities that exist.

Om Malik

@ Toledo Dave

That exactly is my point. I don’t think this is a market – except in the power-points of start-ups who have made themselves believe that that is a big business.

Toledo Dave

The problem – “Not a day goes by when we get pitched by one start-up or another that has a new twist on local search and listings.” SMEs don’t have the time or desire to weed through ALL the “twists” on local search and listings to find one that works, even if it’s free. And for those that try the free listing service and invest their time entering their data, that’s about the extent of it because local consumers don’t know about it. The SME thinks why continue to invest valuable time, even if it’s free, when they got nothing from it. The listing quickly becomes out of date and basically inactive leaving the latest twist on local search full of outdated listings that has no appeal to local consumers.

If I didn’t read gogaom, techcrunch, etc. I would never have heard of Merchant Circle and even though I am aware of it, I don’t go there looking for a local merchant. How do they expect local “non-techie” consumers to know about them or use them. Lendingtree spends millions of dollars a year promoting their service and they only have about 2% of the lending business. It would take hundreds of millions of dollars annually to get the local consumers to becomes aware of the service and then just like me, that doesn’t guarantee they’ll use it.

Eugene Rudkevich

I run a laptop repair business in Tucson, and my listing in Merchant Circle is consistently higher in Google search results than my actual website. This is my primary reason in investing time in Merchant Circle.

Tim Abbott

Om, I read the report and while this is some great information, I’d take it with a grain of salt. Also, while I love the design of the site, Merchant Circle is a poor example. Think of it this way, I never EVER go to CNN tech/money, or Yahoo/MSN, etc when I want to hear the latest about tech startup news, sites, etc. I type, http://www.gigaom or http://www.techcrunch in my browser because, well, you and Arrignton are much more informative. Merchant Circle is the Yahoo Portal of local businesses and there’s no value for me. While I’m not sure how well they are doing, I think Trulia and Zillow are much better examples to follow for hyper localization. Local SME sites have to be informational, authoritative, and solve my problems, certainly not couponic (not a word) in nature. What’s the purpose of having a SME if I have to dig for his content and similar SMEs aren’t on one blog instead of individual ones. Getting page views for local businesses have to be horrible using this approach. While, we may crash and burn, Noocleus Media will never take this approach because it just isn’t sound.

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