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.