A Better Local Ad Model

Excerpted from SearchEngineWatch:

Searching for a Better Local Ad Model
by Michael Boland

Local search is a paradox. At least, its current ad models are. In one sense, online pure plays, such as search engines, have done the best job building local search products with online mapping, social search and Web 2.0 appeal.

Local search products from online pure-plays eventually hit a wall. Ad models rely on self-service. Advertisers sign up and manage search-based ad campaigns on their own. The vast majority of doctors, restaurant owners and bricklayers are simply too busy being doctors, restaurant owners and bricklayers to become search engine marketers.

On the other hand, yellow pages publishers with fleets of eager young sales reps knock on every small business' door in town to sell, launch and optimize their online ad campaigns. If only that were the case.

The truth: yellow pages companies have this capability, but haven't yet fully executed. Why? They're staring at the potential loss of core offline revenues. Undermine a model that brings in 40 percent plus margins? Not the lesson taught in B-school.

More to the point, yellow pages publishers have what online pure plays are missing (physical sales channel), but lack what they do have (better search-based products).

The fact remains: local search players have an edge from a product development standpoint. The natural tendency to cram an offline model into an online product doesn't work.

Worlds Collide

So, local search players lack sales channels, while yellow pages publishers lack the Web 2.0 gene. Can't we breed them to create some kind of mutant super local search monster? (I call him Yattoogle.)

Buy or Build?

As for building from scratch, we're also seeing a lot of action. Citysearch announced the launch of a 150 person Atlanta-based sales center in January. Online marketing firm ReachLocal received a $55 million investment to continue building out its own feet on the street earlier this month, while Weblistic continues to staff local sales reps.

Meanwhile, hyper-local site Smalltown has built up a small but successful local ad sales strategy in the San Francisco Bay area. The company brings local businesses online with low barrier "Webcards," a de facto Web presence that is easier and cheaper than starting a Web site. Webcards also have the portability, functionality and social elements of being easily e-mailed, shared and embedded with pictures and video.

Taking it to the Streets

To put the local ad sales opportunity further into perspective, it comes down to the wide swath of local advertisers -- representing billions in untapped ad dollars -- who aren't advertising in the yellow pages. Local advertising in the print yellow pages is a $16 billion industry, according to The Kelsey Group.

"In the century or so that the yellow pages has been around, the industry only has about a 30 percent penetration of the small-business marketplace," said Marc Barach, CMO of Ingenio. "There is an opportunity to grow this with new products."

Given that many of these businesses don't have Web sites to begin with, low barrier ways to get online such as landing page or microsite offerings (i.e. Smalltown's Webcards), could complement this product bundle.

Throw in hosting and other services, and this could represent the opportunity to be the trusted source that provides the training wheels for SMBs to get online and advertising. Develop this hand-holding relationship early in a company's transition to the Internet, and you could have an advertiser for life.

My Take

A new model is inevitable. In my opinion it will be completely contrarian.

But I do not think the next model will require an army of sales representatives. After all, who sold you on using Google? Or Facebook?

It will grow like Craigslist, involve people like MLM and benefit the community like SETI.

The infrastructure (persistent broadband, mobile messaging, etc.) is in place. Users are already conditioned and ready to accept it. Advertisers would dive in to be the first ones to benefit.

The only thing stopping this is the creativity of marketers.

Tags: localsearch, socialsearch, yellowpages

Friday October 19, 2007 - 11:50am (EDT)