Commentary

Where the Small Businesses At?

by David Koretz , August 25, 2011

If local advertising is the future, where are all the customers?

$137 billion will be spent in local advertising this year, yet only $22.9 of it will be online, according to BIA Kelsey Group. That $22.9 billion includes not only display, but $5.9 billion in search advertising, $3 billion in Internet yellow pages advertising, $1.1 billion in email marketing, and additional money in voice search and online classifieds, among other areas.

That's a pretty small pie on a relative basis, cut into several smaller pieces. For online publishers reliant largely on display advertising to keep the lights on, these are not encouraging numbers. What gives?

Three major factors are constraining the growth of online local advertising, specifically the portion that should be spent on online display advertising:

1. It's (really) hard to try.

2. The Creative Gap.

3. Most small businesses don't measure ROI, they measure the number of times the phone rings.

It's Hard to Be a Little Bit Pregnant
The biggest challenge is getting local advertisers to try online display advertising. This is hard for two reasons. First, these businesses are largely ignored by most publishers, because it's not cost-efficient to have a direct salesperson call on them. Second, many publishers and rich-media providers set campaign minimums that create an enormous barrier to letting local advertisers dip their toe in the sand.

Strategically, this is a mistake. Local advertisers can be every bit as profitable as national advertisers, and they are far less likely to chase "the next new thing."

Publishers should create a very low-cost inside-sales team that can represent your brand in a way that no third party ever could. You can efficiently dial for dollars with a different style of sales organization hyper-focused on high volume local sales. Each of these salespeople should be dedicated to no more than a few cities -- so they can really get to know their audience. They should be reading the local daily newspaper and sifting through its weekly business journal.

Further, publishers should eliminate campaign minimums. If you really believe in your product and its ability to meet advertiser goals, then you should not create an additional barrier to an already monumental challenge: getting the first sale.

The Creative Gap
The challenge of trying online display is further complicated by what I call The Creative Gap.

The average local business has either no advertising agency representing them, or a small generalist agency with limited online display experience. The current publisher model favors national advertisers with big creative budgets; selling to local advertisers is going to require you to narrow the Creative Gap.

Advertisers need to take a page out of the playbook of Yellow Pages advertisers: offer in-house creative services to local advertisers. Whether you use your own staff, or partner with a digital agency, you need to be able to offer a one-stop-shop.

Publishers should also partner with firms like AdReady, pointroll, ReachLocal, Adventive, and others (disclosure: I'm on the board of Adventive), that are working to dramatically reduce the cost for local advertisers to create compelling display ads.

Seat of the Pants ROI
Small businesses are not going to look at click-throughs, impression charts, website traffic, or other boring display advertising metrics. They are going to demand commonsense ROI.

Local advertisers are driven by ringing phones, ringing cash registers and butts in seats.

The advertising needs to be designed around driving an in-person action. This is a sharp departure from traditional display advertising that is too much digital billboard, and not enough direct response.

Know Thy Master
Small business owners are smart, busy, multitaskers who are balancing the demands of being both CEO and the whole marketing department.

They can't afford to take big risks, so you need to eliminate minimums. They don't have creative agencies, so you have to give them a one-stop shop. They only value instant ROI, so you have to cater to transactional advertising.

It sounds like a lot of work, but luckily, there is a $137 billion reward.

advertising, online publishing

3 comments about "Where the Small Businesses At?".

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Mike Blacker from Quova, August 25, 2011 at 12:26 p.m.
Hey David - Once again, great post! You are absolutely right, Local advertising online is a HUGE opportunity. Local businesses determine success by who walks in the door or calls because they saw the ad in the local yellow pages, Google, a local publication or, as Warren Webster likes to point out, a local flyer on a community board.
The issue is not the savvy of local businesses or their need for eliminating minimums.....it is accuracy in delivering impression at the local level. Local businesses want to reach people in THEIR community. Until we solve the issue of targeting impressions at the neighborhood or zip level (ACCURATELY) then local advertising online will continue to fall on its face.
Reply

Frank Rocco from Global Marketing Services, August 26, 2011 at 4:14 p.m.

Great article and well-put. We noticed this not long ago and created a new online ad unit called the Videobar® which includes National Branding videos AND Hyperlocal supplier videos all in the same online ad. Using IP addresses, we're able to include the nearest agent's video and contact info instantly while giving the national brand a push as well.

If local businesses (and national brands) begin to see how innovative tools like the Videobar can deliver instant leads and get the phone ringing, I think we'll see a faster rise in web spending.

Michael Ho from Bering Media, August 31, 2011 at 3:40 p.m.

Thanks David, great article. I love the point that local advertisers can be every bit as profitable as national advertisers. We find the idea of moving offline dollars - online - much more exciting than simply moving the same online dollars around.

Local business owners want to know they aren't wasting their money. To date, traditional IP geo-targeting has been too unreliable for local budgets. Local advertisers want to know their budgets are targeted to their neighbourhood, local trading area - they want zip+4 accuracy - something our privacy technology is bringing online.

Since many local advertisers are sold advertising, mobilizing traditional feet-on-the-street sales forces (TV, newspaper, YP, etc) with the right online tools is key to unlocking the $137B.