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Local advertising – a market destroyed by the web?

Sarah Lacy has an interesting on Business Week today: Local Advertising Isn’t Jumping Online.  In it she points out that few web companies have made much progress in this market – with leaders Yelp and Craigslist only successful in a handful of cities.

She also points out that local newspapers are suffering as their ad dollars dry – listing a host of US city papers that are either for sale, delisting or in danger of going under.

Putting these two facts side by side raises the obvious question of what is happening to the ad dollars that local businesses used to spend with local newspapers, as it clearly isn’t going online.

At this point I think that the answer is that these local companies have migrated to free offerings like Gumtree and that therefore the market has been effectively destroyed by the economics of free (ok, ‘destroyed’ is be a bit strong, but the statement is directionally correct).  There are strong parallels here with the decling sizes of the the music and video markets.

The reason I say ‘at this point’ is that the relative success of Yelp and Craigslist shows that if they are offered a good service local businesses will be happy to re-open their wallets if they are offered a decent platform.

Taking a lesson from our old friends Google and the thinking of John Battelle I think that a ‘decent platform’ will include a ‘database of intentions’ – i.e. it will incorporate data (think searches or tweets) that give advertisers some way to see what their targets are thinking about/intending to do.

On a related note Sarah pointed to this earlier post of hers which has a lot of interesting info about Yelp.  Picking out two nuggets – 1. they had 9m uniques in August last year, and 2. rather than a self serve platform they have a sales team calling local businesses one by one.

Update: Some are accusing Yelp of dodgy sales practices.  Thanks for the pointer Joel.

  • http://www.creativeagencysecrets.com Rebecca Caroe

    There's an interesting parallel here with the dilution of local registers of businesses – Yellow Pages and Thomson used to do ti for us all in the paper age but now searches throw up lots of local sites claiming to be a business register with weak, incomplete information. Users have not yet been 'guided' to the best place to find stuff by a dominant player.
    Maybe this is a market waiting to be exploited.
    But also remember that local consumers are not yet using online to search for locally available products / services.
    Conundrum.

  • http://tipped.co.uk Joel Brazil

    I can tell you first hand it is difficult to get money from local businesses and it makes sense. If you're a saavy business you would simply ‘cleverly game’ local review sites like http://tipped.co.uk, http://qype, http://trustedplaces.com, etc. You can effectively ensure you show at the top of their search results, as well as Google with just a bit of work. I think the local advertising business model is in trouble. Here’s a story about how Yelp is strong arming businesses into ‘paying or else’ – http://www.latimes.com/news/columnists/la-fi-la

  • http://www.theequitykicker.com brisbourne

    Thanks Joel – very interesting.

  • http://www.BuildYourROI.com Michelle Collins

    Working in co-op advertising management, we're still seeing local retailers spending money on advertising. While newspaper is down somewhat, and online is up about the same percent, generally, dealers are spending as much money on local advertising as ever. Direct mail, email campaigns, and other customer-driven and personalized messaging is still a focus of local advertisers, as well as in-store signage / promotions, specialty publications, and mailers such as valpak. Most retailers have only about 30 minutes a month to spend on marketing, and most that we deal with avoid free sites all together. I agree that there's a space for a local retailer “shopping mall' so to speak, but even when / if there is one, many small retailers will be slow to itegrate it into their marketing plans on their own.

  • http://www.theequitykicker.com brisbourne

    Thanks Michelle – that is very interesting data

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  • http://www.ichoosr.com Bart Stevens

    Nic,

    Good morning. Have a chat with Joe Andrieu of Switchbook. He is building such a db of intentions.
    All well here at iChoosr. We are also working on our intention aggregation platform, and we are doing quite well actually.
    Cheers,

  • http://www.theequitykicker.com brisbourne

    Hi Bart – good to hear from you. Thanks for the pointers and please drop me a line when you are ready to talk.

    Best,
    Nic

  • http://www.famebook.com famebook

    Hi Nic – Although you know me for Famebook, it's principals are founded on and for three years have been proven by our bread and butter model at http://www.lymington.com and a couple of recent additions in other local towns. With a population of only 23,000 we generate a renewable ad income in excess of £200,000 a year and are the de facto source of information in that town. It is a model that we are in the process of turning into a 'business in a box' so that people anywhere can create their own town profile and replicate what we have done in their local area with the benefit of a great format and a support mechanism to help them establish themselves similarly.

    At the risk of giving away the crown jewels, the key to our local success is because we make it personal. We are in the business of personalising places and people and that cannot be done from a centralised office somewhere' rather it has to be delivered by people within each community. We don't have Google adsense in our format and furthermore we have set our own pricing model and ignored the CPC/ CPM metrics which so many assume is the only marker. In our case we have shown the best marker of all is relevance. So if anyone is having a problem translating themselves, its because they've allowed third parties to dicatate their own business model and de-valued their brands by allowing them to sit within their websites. They have also forgotten to ensure the websites are relevant.

    I'm not here to plug the busines, but our modest efforts which my Wife mostly runs on a day to day basis, proves on a hugely scaleable basis that newpapers can survive and our Famebook model is also equally sound when it launches this summer based on those very principals. I'm even being quoted now in Silicon Valley would you believe on this very subject – http://tinyurl.com/ddnfeu

    I'd also lastly say that my concept of user-generated advertising is the only way that big organisations will be able to access on a hyper-local basis and that means sharing profits within individual social networks.

    Jan

  • http://www.theequitykicker.com brisbourne

    Thanks Jan. Very interesting. Those are big ad revenues for a population that size.

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    I think you can find some great stuff almost every week about Craigslist online.

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    Interesting post. Appreciate it as I have seen something new now.

  • http://www.club-penguin.org/ ClubPenguinCheats

    Yellow Pages and Thomson used to do ti for us all in the paper age but now searches throw up lots of local sites claiming to be a business register with weak, incomplete information. Users have not yet been 'guided' to the best place to find stuff by a dominant player.

  • http://www.club-penguin.org/ CLUBPENGUINS

    Yellow Pages and Thomson used to do ti for us all in the paper age but now searches throw up lots of local sites claiming to be a business register with weak, incomplete information. Users have not yet been ‘guided’ to the best place to find stuff by a dominant player.

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    All very true. I use both Yelp and Craigslist for locale finds.

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    There's an interesting parallel here with the dilution of local registers of businesses – Yellow Pages and Thomson used to do ti for us all in the paper age but now searches throw up lots of local sites claiming to be a business register with weak, incomplete information. Users have not yet been 'guided' to the best place to find stuff by a dominant player.
    Maybe this is a market waiting to be exploited.
    But also remember that local consumers are not yet using online to search for locally available products / services.
    Conundrum.

  • http://www.cutmedia.com/ Jonathan

    Good article Nick. We are finding this out for ourselves as we focus on our first local titles.

    Local businesses don't have deep pockets. But if provided with a platform and different packages, local ad spend will move more online.

  • http://www.cutmedia.com/ Jonathan

    Good article Nick. We are finding this out for ourselves as we focus on our first local titles.

    Local businesses don't have deep pockets. But if provided with a platform and different packages, local ad spend will move more online.

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    CraigsList is actually great for finding apartments to lease. Definitely avoid anything without a phone number, when looking for available apartments for lease or rent. Canadian Payday Loan

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    Uh no. Google and Facebook are getting into the local act. Local advertising on the web is big!