Commentary

Location-Based Web Services Will Devastate Local Media Scene

by Dave Morgan , Featured Contributor, August 5, 2010

I know the last thing that local media companies need is another Web-driven disruption in their markets, particularly one that could take a big chunk out of their revenues in the next few years. If local newspaper, yellow pages, radio or local TV companies thought that Google, Yahoo, eBay and craigslist were disruptive, they are now going to face down a competitor that will have an even bigger impact on their businesses than any one of those companies did.

I believe that location-based Web services will take 20% to 25% of the annual revenue out of local media's current advertising base within four years. Yes, 20% to-25% of their revenue base will be lost by 2014. That spend will be displaced by promotion and marketing fees paid to these new location-based services or applications that run on top of them. To the incumbent companies, these new services will be like craigslist on steroids.

Here's why I believe that location-based services will devastate the local media scene:

Mobile user base has massive scale. Everyone has a mobile phone today, and virtually everyone knows how to use it. A great majority of those phones support enhanced services, like SMS, and virtually all will support that and much more over the next few years.

Powerful and valuable person-to-person-to-place connectivity. People care about where they are, who they are with, and what is happening to their family, friends, acquaintances and colleagues. Mobile-connected devices running location-based services can deliver enormous value in connecting people and places that they care about.

Most "relevant" media platform ever. When you have a device that is personal, social and can be made relevant to location -- store, child's school, local softball game, movie theater -- you have the most relevant media platform we've ever seen.

Convenient, easy-to-use. Mobile phones, smartphones, and the applications that run on them are getting more convenient and easier to use by the day. We are already at the point that receiving and redeeming a "special offer" on your phone from a Foursquare advertiser is easier than reading through pages and pages of slick coupons in the Sunday paper or the Val-Pak, cutting them out, carrying them around, and then remembering to present them to a cashier.

Cheap. The cost to build, run and redeem digital offers through location-based services is a tiny fraction of doing it in newspapers, radio or mail. Everyone should learn from the craigslist business model. When your operating cost structure is so low, you can give away 97% of your listings for free and still have an incredibly profitable business.

Fun. Using Foursquare is fun. Enough said.

User-controlled. With location-based services, users are in control. They like that. Not so with virtually any other local commercial promotion platform.

Just getting started. Today, the location-based services and the advertising and promotions that run on top of them are still pretty immature. However, they have advanced light years over the past months, and given the funding that these companies are receiving, will probably be getting robust very fast.

What do you think? Will location-based services totally rearrange the local media marketplace?

commentary, location-based

16 comments about "Location-Based Web Services Will Devastate Local Media Scene".

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Mark Burrell from Tongal, August 5, 2010 at 6:21 p.m.
I'm not so sure about this one. I'm already starting to grow weary of checking in everywhere I go and unless it starts to add real value, and soon, like a company like Loopt does, I'm not sure it's going to be as big as people think. I
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Karri Carlson from Leadtail, August 5, 2010 at 6:31 p.m.

Dave - great post. The only point on which I disagree somewhat is the timing... I'll be shocked it if takes 4 years for location based services to take that 20 - 25% bite out of local media. Given the funding in play, and the rewards for the companies that get it right first, I think local media will feel the pinch harder and sooner. Craigslist will feel like a love tap by comparison :)

Pamela Tournier from Focus: Productivity, Inc., August 5, 2010 at 7:08 p.m.

Location-based Mobile ... sounds good, but it's all in the execution. Specifically -- "user controlled." A couple of factors might mitigate hockey stick growth:

1) Foursquare might be 'fun' for guys, but ladies have real concerns about broadcasting location. (Although stalkers and vengeful exes might also agree that using 4square is 'fun'). Mark makes a good point: unless you get off on digitally collecting friends' scalps for the helluvit, checking in everywhere gets tiresome unless the rewards start to justify the effort.

2) Imagine walking down the street and having local merchant offers flashing, popping, jiggling and streaming at you from every corner of your 3rd screen. Might be amusing in Dubuque, less so in NYC or LA. Web pop ups that talk or whistle at you are annoying enough. Imagine being assaulted by new Mobile offers every time you walk a few feet.

3) This may not be the biggest national program. Isn't this application best when on foot? In certain 'walking cities' ... NY, Boston, Chicago ... yeah. How about LA -- you come to a screeching halt on the freeway when the ad pops on? And ... just where do you walk in Nebraska or Dubuque?

On the other hand, inviting someone to join a community that pushes information relevant to their interests and tastes IS useful.

Just not sure "location" is that magic point of relevance.

Max Gladwell from Max Gladwell, August 5, 2010 at 7:29 p.m.

I agree in so many ways. Have seen this coming for a while. I published a whitepaper recently on the topic (http://www.momentfeed.com/whitepaper).

But this could also be an opportunity for local media companies. They have the ad sales staff and client base. They have the media channels and audience. The way I see the LBS space evolving is much more like publishing than social networking. This has everything to do with geographic density, critical mass, relevance, and economics. These are not web-based businesses. They are geographically specific businesses built on smartphone platforms.

So who has a bigger advantage in getting critical mass in Los Angeles, Foursquare or the LA Times? I'd go with the latter. But it's a matter of whether or not they have the leadership and vision to seize the opportunity.

Either way, I believe there will be a handful of big players, hundreds of mid-sized players, and thousands of small players in LBS. It will not be winner-take-all like social networking.

Max Gladwell from Max Gladwell, August 5, 2010 at 7:37 p.m.

Dave: We're also planning an event on this topic for Social Media Week LA (Sept 20-24). Let me know if you'll be in town!

Paula Lynn from Who Else Unlimited, August 5, 2010 at 7:42 p.m.

I don't want eveyone to know where I am all time. It's none of their business. And I don't need to know where anyone else is all the time and stalk them. Cut the apron strings. Unfortunately, people are fickle and will follow like sheep and without protection, they will fall to the wolves.

Mark Moran from Dulcinea Media, August 5, 2010 at 9:47 p.m.

Count me as a skeptic. I know plenty of avid FourSquarers, but I just don't get it. As others said, I don't want others to know where I am all day. It gives me the same creepy feeling that NebuAds did. And it often crosses the line into "TMI." I'm going to start a business in two years about "how to reclaim your privacy and create a sense of mystery." Great story: a colleague's FB status one morning said "Going all-in on marathon training today." An hour later, the status reported that he checked in at McDonald's. He received a dozen comments such as "Wow, didn't know Egg McMuffins and Hash Browns were part of the marathon diet." Who needs this? And the cyber stalking possibilities are endless. I know the younger generation is not as sensitive to "personal space" as I am, but if any of my kids begins to announce their every location to the broader world, I will confiscate their cell phone.

Max Gladwell from Max Gladwell, August 6, 2010 at 1:01 a.m.

The last couple comments illustrate a major perception problem with LBS. Foursquare is just part of it. In fact, it's a part of a part of it...the geo-social part. LBS is much more than broadcasting your whereabouts.

Imagine having access to a rich history of what happened (content) at any given place? To stand in a spot and look deep into its history. Or to access valuable information about what is happening around you (where you're standing or driving) in real time.

We're at the dawn of a revolution in computing, content, communication, and (yes) marketing. Thanks to smartphone platforms, mobile broadband, and location-aware applications.

Jon-Mikel Bailey from Wood Street, Inc., August 6, 2010 at 9:17 a.m.

I am not 100% on the numbers here but I do think you make a very good point. Local-Based Web Services are gaining momentum and relevance by the minute. People seem mostly confused by Gowalla and Foursquare but just wait. Remember when they didn't "get" Twitter?

Dave Morgan from Simulmedia, August 6, 2010 at 9:33 a.m.

Max ... I totally agree. Location-based web services is about much more than what we see with FourSquare and Gowalla today. It is a whole emerging eco-system where location services can be integrated into virtually everything we do - if we want. I also agree that this is a great opportunity for local media companies, not just a threat. However, their history in dealing with these kinds of things - and truly embracing, leveraging and extending new disruptive technologies - has not been a good one.

John Kim, August 6, 2010 at 1:18 p.m.

Dave - Love your hypothesis. You should share the calculus behind your prediction even if it is simple. I'd love to iterate on your model.

Dave Morgan from Simulmedia, August 6, 2010 at 2:21 p.m.

John ... my guesstimate is based on my belief that location-based services are likely to displace one-third of Free Standing Insert spend, one-third of local retail print spend, take the better part of one-fourth of all local financial services spend and at least one-fourth of all local establishment and local services spend. Thus, that comes out in the ballpark of 20-25% of the money that local media gets.

Garlin Smith from Crisp Wireless, August 6, 2010 at 2:28 p.m.

Thanks for the conversation Dave, enjoy seeing the feedback surrounding LBS and other emerging technologies.

I agree there are some initial concerns around LBS applications such as someone's security/privacy disclosing their location, or marketers inundating consumers with local offers as they pass a retailer’s location. However, when this service is placed in the user’s control, it can and will become an incredibly powerful tool. Savvy mobile marketers have began providing offers within their mobile ads which then allow interested consumers to grant access to their current location, and immediately be shown a map with the closest VW dealership, Wells Fargo ATM location or Best Buy retailer.

As marketers continue to develop ads that are engaging, informative, entertaining and most importantly, RELEVANT, to consumers...LBS and other services will endear themselves to the mobile consumers.

tristian lacroix, August 8, 2010 at 9:58 p.m.

IndoorLBS published a report on what Apple is doing with LBS and 50 other companies. See www.IndoorLBS.com . Checkins need more accurate location. GPS fails in most places like malls.

Leonard Zachary from T___n__, August 9, 2010 at 11:52 a.m.

Local really needs to be approriately defined- most of the current business models cater to large advertisers and therefore the meaning of being local to a person does not match what is being offered by these models. Privacy concerns with the current models are also a major headwind not addressed. I agree with your outlook but not with your basic underlying assumption- that the models today will be the ones that work. Scale "locally" is not the same as scale "nationally".

Marsha Strickhouser from Valpak, August 10, 2010 at 2:04 p.m.

Valpak agrees that mobile will continue to grow as a driving force in local advertising. For example, we launched mobile apps for digital, location-based couponing. More recently, Valpak’s consumer savings pulse survey, announced last week, stated that mobile coupon redemption has seen a 250 percent increase in just one year.

With Valpak’s apps for iPhone, Blackberry, Palm Pre and Android smartphones, consumers can access local coupons for restaurants, retailers and service providers no matter where they are so consumers have options. They can print, clip or run home to grab the coupon - or present their phone, whichever works best for them.

We will continue to grow our digital offering, especially our location-based coupon app, in local markets, while offering our tried and true Blue Envelopes to more than 40 million households across the US and Canada each month.