As people continue to search for more local business information online, it is inevitable that local advertisers will follow. Over the past year, we
expanded our startup's offerings to address local advertisers, a segment comprising
hundreds of thousands of local businesses in the U.S. We originally launched with a simple dashboard for search advertisers, but recently introduced a white-labeled technology platform for online
advertising service providers that serve thousands of local businesses.
Through our development, we gained a unique perspective on the challenges the local marketing industry face as
dollars continue to transition to online at the expense of conventional, offline channels, like print directories. For years, analysts forecast an explosion in local online advertising, especially
search. But we saw firsthand tremendous friction preventing faster, sustainable growth. With a stake in this market, we wanted to gain a much deeper understanding to improve search-marketing
performance for local businesses.
That's why we asked Borrell Associates, a research and consulting firm that tracks local ad spending, to study the economics of local search advertising,
and surface key challenges, solutions and opportunities. Though its research was underwritten by our startup, we agreed that Borrell would approach it independently to strengthen objectivity and
explore new territory. To be sure, this work has prompted
healthy debate and
valuable commentary, mainly because it's called out key challenges like high customer attrition, questionable sales
practices, and an infrastructure unable to scale. We believe such candid examination and discussion is the best way to surface market friction, identify opportunities and improve search-advertising
performance, for everyone.
The key findings?
-- First, local search advertising is a big market, and it can work very, very well. And that's why Borrell projects locally placed
search advertising in the U.S. to grow 30% over the next five years, from $4.1 billion in 2008 to $5.3 billion in 2013.
-- Despite growth forecasts, the local advertising industry
needs to change to achieve long-term sustainability. Many online advertising resellers and affiliates, who service local businesses, churn half their customers within a year's time, and some lose as
many as 90%. This is often due to missed expectations and a lack of return on investment for local-business customers. In fact, many advertising resellers have business models that rely on applying
aggressive customer acquisition strategies to overcome top-line losses due to customer attrition.
-- Importantly, Borrell says that advertising products and value must be easily understood
by local businesses. That requires a shift from selling Web site visits to selling measurable leads and phone calls. Indeed, Web site visits aren't worth anything unless they're the right visitors.
Moreover, if you're only selling visits, how can you optimize advertising investment to reach profitability goals? The short answer: you can't. Local businesses, just like large sophisticated
advertisers, expect the profit needle to move -- and there can be no mystery about the way this is accomplished.
-- Finally, according to Borrell, growth in the local search advertising
industry will be led primarily by advertising service providers that adopt scalable technology infrastructure and recalibrate their economics to allocate more customer investment to search media
spend. The study revealed that it's not uncommon for local service providers to pocket half or more of their customers' investments, while applying the rest to poorly optimized media spend. That's not
sustainable.
Don't be mistaken: Local search advertising will be massive, but the segment must reform and innovate. There's friction to overcome, yet the opportunity is tremendous. In the
end, there will be many winners.
Where do you see local advertising headed?
(You can download a free copy of Borrell Associates' research report
here.)
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We understand local search and are actively mining sponsors and dollars accordingly. Our internally funded search engine tyBit www.tybit.com has had local search built in since inception. Our advertising module Ad Parity www.tybit.com/adparity manages local search and web real estate ad campaigns with the ability to localize and make the ads (text, audio, video) relevant to the content of the site. We have launched this week a cross channel collaboration with local radio stations online and via broadcast. We have test market proposals pending with national advertisers looking to support their local retail outlets. Thus we are targeting on each side of the equation, the consumer and the advertising sponsor.
www.GripOffs.mobi ~ that's where we see local advertising heading everywhere in the world. Why?
GripOffs is a mobile site that allows the local advertisers to create and post their own ads with links, click-call, videos, barcodes and more to offer consumers who are on the go to simply go to this one site on their mobile devices to see all of the deals in the area, choose the ones that are preferred, and save money instantly at the point of purchase.
The offers are created by the advertisers and the site is supported by the advertisers, so it's free for the users.
The businesses can advertise locally to globally.
It is instant.
There is NO question as to how many people used the offer as the backend of the system gives the advertisers INSTANT analytics when a user views or redeems the offer.
Since the advertiser can edit the ads in real-time, and it's a mobile system, we believe that the hottest market for local advertising anywhere in the world is mobile e-coupons!
Great article Max. Because of audience segmentation, on a local level, and the internet's ability to deliver highly targeted ads to those potential customers, we are very bullish on the future of local advertising. Borrel is right when they say that it has to be easily understood, easy to implement and able to scale, either up or down. Look for this to be offered in the not to distant future.