• by Tameka Kee , October 1, 2008

Just over 40% of companies are spending at least a quarter of their online ad budgets on geotargeted campaigns, according to new research from Sterling Market Intelligence. But brands and their agencies are still stumped when it comes to figuring out how to use those local online advertising dollars most effectively.

Greg Sterling, founder of Sterling Market Intelligence, and Ed O'Keefe, vice president of performance marketplaces at Marchex, offered some best practices and case studies for how to capitalize on this growing trend during a webinar on Wednesday.

Marchex and Search Marketing Now (a division of Third Door Media), commissioned Sterling Market Intelligence to survey more than 150 companies in verticals ranging from travel and transportation to personal care services. Participants, who were polled in September, included national and regional advertisers, with marketing budgets ranging from less than $1 million to more than $100 million annually.

Nearly half of the marketers said they knew at least a quarter of their in-store sales could be attributed to their online marketing efforts. But while companies understand the correlation between their online campaigns and in-store sales, they are having problems deciding which traffic sources to use, how to best track their efforts, and even which metrics they should be tracking.

For example, almost 60% of marketers are using core search engines for their local campaigns, while about half are tapping into business directories. Around 40% of respondents said they were using localized search engines (such as local.com) and city guides or local review sites like Yelp and Citysearch. Roughly a third said they were using Internet Yellow Pages (IYPs), and a quarter said they were geotargeting their ads across various ad networks.

According to O'Keefe, the smorgasbord of tactics is a good thing, because marketers should not send all of their local online ad dollars to one channel. "You have to diversify your traffic beyond paid search," he said. "Online campaigns are not just about search engines. There's about 40% more high-quality, lead-generating inventory out there, and you're missing out on it if you stick to just Google, Yahoo and MSN."

O'Keefe said that marketers in search of local online advertising success should shift a percentage of their budgets to on-site SEO efforts and submissions to local search services, directory assistance and even the increasingly available swath of mobile inventory. "You can reduce your media spend by double digits, and increase leads exponentially," he said.

In terms of gauging the success of those local campaigns, the primary metric is sales. Almost half of the respondents said they were using sales by location as an effectiveness barometer. But about 43% also said they were using visits to the corporate Web site as a success metric, and over a third of marketers said they were measuring calls to a local number, or visits to a local store. "Most companies are using a range of things to indicate whether or not a campaign is successful," Sterling said. "And in a sense, that's because there's no single best metric."

Marketers are also using a variety of ways to track those metrics, as roughly half of the respondents said they were using Web site analytics, call tracking or email programs. Meanwhile, a third of companies were using online forms or online appointments to track their online campaigns, and about 20% said they were using coupons.

"From traffic sources to metrics to tracking, companies are experimenting with a lot of things to see what works," Sterling said. "Strategies and tactics are all over the place, because there's a general absence of best practices."