What Aren’t Local Ads Coming Online?

Microsoft’s Eric Picard has a thoughtful column at ClickZ about how predictions of the death of traditional (local) media are premature:

[Analysts] seem to believe that all traditional media budgets will get eaten by digital media in the next few years. This doesn’t seem like a bad assumption. It sounds logical, after all.

But it’s completely wrong.

The report talks about dollars moving from local newspapers to online display advertising. It concludes that the trend will continue forward with ad dollars from local advertisers moving online because of diminishing distribution.

Another report I read from another analyst this year suggests that radio dollars will move to search.

Both of these conclusions are wrong…

Picard goes on to discuss the various sales challenges and disincentives to work with small advertiser budgets vs. nationals who want to do geotargeting:

Imagine this scenario: You’re a local auto dealer with $5,000 to spend annually, and you call Yahoo, MSN, and AOL. You request geotargeted inventory that will match the newspaper circulation numbers of some local designated marketing area (DMA). You won’t get a phone call or e-mail returned. There isn’t a sales force today set up to go after the local market at any of the majors online, so the salespeople you’re trying to engage with are the same ones handling national budgets that are significantly larger. If you were a salesperson on commission, whose call would you return: Ford’s national ad agency media buyer or the dealership ad manager at Sweeney’s Ford in Greenfield, MA?

Picard is absolutely right that most analyses of traditional vs. digital media are superficial in key areas. I’ve spoken to many Wall Street analysts and my sense is that they often have limited insight into market dynamics when it comes to local. However, I disagree with Picard in some respects and think there’s an irony here that he’s missed.

Picard says that local SMB ad dollars won’t shift online (as quickly as predicted) and portals/engines won’t go after them for the reasons mentioned in the excerpt above. The layer missing from the analysis is what’s happening at the traditional media companies themselves. Indeed, the irony I alluded to is that yellow pages publishers and newspapers, to an increasing degree, are themselves the vehicles of the shift of SMB ad dollars online. I’ve written here many times about the “agency” role of yellow pages publishers (and increasingly newspapers) vis-à-vis SMBs: helping local advertisers buy online media beyond what the publisher itself has to offer.

The publishers must do this to remain relevant to their advertisers, as audiences continue to fragment and migrate online. The publishers’ challenge is to manage the SMB spend and the relationship between all the traditional and online products being sold (as well as margins). Newspapers, for their part, actually can use some of these local SEM products to capture SMB ad dollars they might not have gotten independently.

Some number of SMBs are experimenting themselves with various online advertising options (depends on the industry). But a larger number of SMBs are finding their traditional advertising publisher is the “onramp” to online marketing.

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9 Responses to “What Aren’t Local Ads Coming Online?”

  1. frontporchforum Says:

    Good points. Additionally, SMBs are buying advertising from local sites that aren’t part of a larger distant corporation. That is, local online start-ups seem to be bringing online a fair number of their neighbors who own and manage other local small businesses. We’re seeing some of that with our Front Porch Forum, as well as other authentically local sites, like iBrattleboro.

  2. Soniac Says:

    I agree with the irony here and with TV and radio getting into social networking, this self-induced shift will only become stronger. I also think that Eric may have underestimated the power of self-procurement and that SMBs are in many cases, past the experimentation phase. He’s right about inventory though…for now.

  3. Greg Sterling Says:

    I would also point back to this post and related discussion: http://gesterling.wordpress.com/2008/01/11/kelsey-less-bullish-on-print-yp/

  4. Chris Says:

    I tend to agree with you Greg, changes at the traditional media companies will play a big role in getting local advertisers online.

    I will add that the biggest game changer will ultimately be the market. Yes, media companies that fill the agency role will ease the pain of a transition online, but the real shift will occur when local businesses are sufficiently motivated to move online, which will occur when they begin to see their revenues falling and ask why. When they discover that their traditional methods of newspaper advertising are no longer working because the newspaper doesn’t have sufficient readership, they will make the effort to create a Google campaign. The leading indicator to all this is consumer behavior. How is the consumer sourcing their local purchases of goods and services?

    I think you have your finger on the pulse to that question which is why I read your blog.

  5. Greg Sterling Says:

    Chris:

    Clearly the consumer is using the Internet now “in earnest” to find local goods and services (see Webvisible and TMP Directional Marketing research, etc.). The Internet itself isn’t always good at capturing user intent and delivering what the consumer wants however. My argument is that “local” isn’t about SMB ad dollars and IYPs (only); it’s about transactions in small businesses, in big boxes, between individuals and so on. The future of the commercial part of the Internet is about connecting people online with offline sources of products and services (mobile is a key component here ultimately).

    Local is much much bigger than any other category because it’s where the “money changes hands.” Why can I make that argument? Because the Internet increasingly influences local/offline transactions (whether products or services).

  6. Short End of the Ad Stick « eNeighbors.com Blog Says:

    [...] Greg Sterling also comments. [...]

  7. Tim Tevlin Says:

    Hi Greg, at a high level I am in the ‘non-zero-sum’ camp regarding traditional local advertising media and the new media of search advertising, meaning I believe local search and internet advertising will coexist in the overall mix with traditional local media for a long long time.

    At the trenches level in terms of getting local advertisers to adopt local search marketing, YP publishers in particular will act as on-ramp but really in an awkward way. Their mission is to protect their lucrative legacy print ad businesses more than anything. How hard are they really going to try to sell you Google AdWords if it might compromise the golden goose? I have some anecdotal evidence about return-on-ad dollar-investment along these lines that would really scare the crap out of them!

    And then there are the handful of local search marketing agencies you regularly mention, who it turns out are mostly in business to sell local businesses hosted software for a monthly fee that lets them run their own local search marketing activity. Got to be a pretty tough sell to the vast majority of time-strapped small biz owners who have no clue how search campaigns work and don’t want to invest their time learning to do so.

    May I humbly submit that local search ad agencies such as mine that do all the hands-on work for you to get your business showing up in local Google or other major engine searches on both the main page and on Google Maps (plus other key local directories) that can make a pretty powerful inducement offering.

    So how does a little guy like me get to the ocean of potential local search advertisers? By setting up its own telesales force and pursuing high-potential advertiser categories with an entry-level ad program the local advertiser can understand and easily buy into over the phone. A program that by the way does not try to hoist the advertiser with unnecessary monthly managment fees, another discussion in itself. A program that does not force the local advertiser to get into the deep end of search marketing and stuff like landing page conversions and the rest of the eye-crossing complexity involved for an everyday local business. Keep it simple and low risk in terms of time and money involved and a mass market for local search advertising can be had. thx

  8. Greg Sterling Says:

    One of the challenges for the SMB is trying to find a trusted source for online marketing, with all the noise and claims out there. There isn’t anyone helping evaluate the different offerings and making recommendations.

  9. Jack Says:

    Keep an eye on Local.com (LOCM). they are a pure play on local search and mobile 411 telephone advertising. I expect them to grow significantly this year, they already ranked #1 in 2007 advertising revenue growth at 138%. If they grow very high and/or get bought out, you will have your answer on whether Eric is right, I think he’s wrong and think it would be smart if Microsoft bought out Yahoo, Local.com and Marchex before Google/IACI or others do make these deals. I think there’s no stopping the GOOG machine but Microsoft has the cash and brainpower to slow it in some area’s.

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