The ‘Local Paradox’ and IYP Affiliate Network

I moderated a panel the other day at the Where 2.0 show on maps and monetization. We discussed online and mobile. The panel tried (in 30 minutes) to explore all the business models and revenue sources that publishers and developers could use to monetize their creations. (Perry Evans has captured some of the dicussion here.)

The “elephant in the room” was: when is Google going to turn on “AdSense for Maps?” One audience member strenuously objected to that proposition and the general small publisher dependence on Google for monetization. That was a moment that drew a strong reaction from the crowd but the more interesting part of the panel and one that Perry goes into is what I called “The Local Paradox.”

You’ve got a situation where there’s clear consumer demand, most transactions happening locally and increasing technological sophistication re local targeting. But you don’t have the ad inventory to match the demand and/or technological capabilities emerging. The inefficiencies of the local market online mean that “hyper-local” queries aren’t matched with hyper-local ads. There are many potential explanations for this, including the relative lack of sophistication among the advertisers. But there’s also a potential bias among the engines themselves.

Ian White of Urban Mapping (also on the panel) called this “The Keyword Conspiracy.” What he means is: search engines don’t want people to bid on neighborhood queries because they are low traffic terms that may convert at high rates but don’t attract lots of competition. In other words, an engine isn’t going to make money on terms that fall below the city or metro level. Thus there’s limited interest in publicizing these terms and, viola, the chicken and egg problem reappears: hyper-local ads don’t show up so advertisers don’t know they can bid on these terms.

A potential solution is behind-the-scenes location awareness (triangulation, GPS, default location, etc.) that serves ads on a hyper-local basis but that are equally targeted to the metro area. The machine determines where the user is and serves the ad at the hyper-local level (or at the DMA level). Not a great solution but one that potentially resolves the dilemma.

Skyhook’s Jed Rice (on the panel) made the point that local ads perform much better than generally targeted ads (he cited CTRs) but also said that the inventory was hard to find to match the ads with the consumer queries (the point above). He made the analogy to offline direct mail/demographic targeting several times. I’ve also made this argument to several folks and told them the way that online publishers/advertisers will “get” local is if it’s “repackaged” as demographic targeting.

After the session I had a quick chat with Danny Moon of UpNext. We discussed the challenges of monetizing that sites like his. (He’s using Lat49.) But he and I discussed the idea of an IYP affliate local network — essentially a competitor to AdSense for local sites. This is the flip side of my argument about an IYP ad network — or an extension of it.

Yell offers an affiliate network in the UK. The YP publishers (and/or others) would benefit themselves and the ecosystem to pool their advertisers and offer a similar capability in the US. Together they would have well over a million advertisers that they could deliver to local sites. These publishers would also likely welcome the option to participate in such a program. Two caveats: it would take a sophisticated platform to slice and dice and serve the ads and it would take cooperation among the publishers.

10 Responses to “The ‘Local Paradox’ and IYP Affiliate Network”

  1. mikeok Says:

    I agree that a local ad network is required. I just don’t see it flying yet. We have a fundamental problem with website adoption. Your Palore post from May 8 demonstates this perfectly. Why in a category as competitve as restuarants, only 22% of them have a website in NY. When companies will not even adopt the most basic of internet marketing, what hope is there for an ad network.

  2. Greg Sterling Says:

    Landing pages is a potential solution.

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  6. Tim Cohn Says:

    I have think you have isolated the two greatest known attributes here: “…the relative lack of sophistication among the advertisers. But there’s also a potential bias among the engines themselves.”

    I would wager 80% of Google advertisers haven’t tapped more than 20% of features/power already at their fingertips via Adwords.

    I think there is also a third factor that isn’t as obvious but contributes equally to the problem – the lack of sophistication in the average searcher and their query.

    If 1/1000 of all Google search queries are hyper local I would be surprised.

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