“Local is huge, it’s the holy grail of the Internet.”
- Sheryl Sandberg, COO, Facebook, on first earnings call
Competing for the “holy grail of local online advertising” are: local newspapers, local TV stations, online-only new sites and… Facebook, Twitter, Google, AOL, and Yahoo.
Are all these companies really competing *directly* with each other for dominance in local? See for yourself:
“Our business is an advertising business, we don’t sell technology.”
- Dick Costolo, CEO, Twitter
“We are excited to offer small businesses the chance to create even more marketing success as advertisers on Twitter.”
- Twitter announcing new ad product for local businesses
“Google has repeatedly tried, and largely failed, to crack the market for local business advertising. As early as next month, the Internet company will try anew, as it trains its largest-ever assault… Central to the effort is Google+, the company’s social network, which it hopes consumers will use to interact with local businesses that now have special Web pages on the network.”
- Wall Street Journal
Marissa Mayer, the newly appointed CEO of Yahoo, was most recently the Vice President of Local, Maps, and Location Services at Google.
“One of the opportunities for Patch…is the ability for us on the commerce side to offer the people the ability to do listings and other things like that locally.” About 90% of Patch’s ad revenue comes from local ad deals, Mr. Armstrong said in the post-earnings interview
- Tim Armstrong, CEO of AOL
You can see where this is headed.
But who is best positioned to win this epic battle for dominance in local online advertising?
Before I answer that, let’s all agree on what will *not* win… display advertising. Display advertising is DEAD. The value of “content adjacent” display advertising is plummeting (ask any ad-supported content site). And it’s happening because the web has virtually unlimited content inventory (thanks, Facebook!). Content adjacent display ad inventory is worse than a commodity, it’s destroying value. Any local site betting its future on CPMs likely will not survive long-term.
But most local businesses have never wanted any part of display advertising. Which is why the vast majority of the $150 billion US local ad market is not online.
Nor is it going to be “daily deals” that claims the holy grail of local advertising. Helping businesses lose money by offering 50% off to deal seekers who will never come back because they’ve moved on to the next deal is not a sustainable business model. It’s value destruction. It won’t last.
So what advertising format can win local? Not search. Google has struggled with local (see above).
The online ad format most likely to win local is… social media. The “social media post” — the short update format pioneered by Facebook and Twitter — is the ascendent information format for the web and digital media. And it has all the qualities you need to win local:
Type your promotion in a box, upload a photo, post, and you’re done. Nothing could be simpler than a social media post. Just about everyone has posted an update on Facebook or Twitter for personal use, and certainly everyone has seen one — it’s universally recognized. A social media post is communication reduced to its simplest, most immediate form.
Social media posts are as simple as… classified ads, the ultimate cash cow of analogue media.
Social media is the web-native format for real-time information. The “social stream” — a simple, reverse chronological list of social media posts, as you see on Facebook and Twitter — is an incredibly efficient way to deliver advertising as real-time information.
And social media posts are indeed information, with immediate utility, just like… classifieds.
In fact, the social media format *is* classified advertising reborn for the social web and digital media.
Social media posts as a form of advertising makes ads inherently social. Along with the content of the ad, each businesses has a profile image, an identity, a presence, a way to connect directly with customers. For a consumer, it’s just like walking into a local shop and talking to the proprietor.
Social media posts can easily be shared by consumers among their friends and family, increasing reach and conveying peer validation through “word of mouth.”
Google proved that nothing scales in online advertising like self-serve. The key to local advertising is the long tail… hundreds of thousands of businesses. Self-serve is the only model that will scale.
The key to self-serve for the long tail of non-tech-savvy local businesses is *simplicity*. Search advertising hit a wall in local because, while it is self serve, it’s not at all simple.
Any business is capable of typing a promotion into a box. A social media post is the perfect self-serve format because of its simplicity, and because business owners have already done it as individuals on Facebook and Twitter.
The ad buying model must also be dead simple. What could be simpler than pay per post?
Social media streams are ideally suited for mobile consumption. Mobile, with its limited space, is even worse than the web for content adjacent advertising (which is hurting Facebook among others). Social media posts also lend themselves to location metadata, as Foursquare has pioneered.
But despite all the advantages of social media posts as a format for advertising, social networks have a fundamental problem as an advertising medium for local businesses. If all the merchant does is post to their existing followers, which is how social media was designed, they can’t do the one thing that every local business wants…
Reach new customers
Businesses can’t reach new customers by posting to their existing followers on Facebook and Twitter. Not for free. Not acting like consumers updating their friends.
What’s missing is what has always been at the very core of the media business… audience, i.e. reaching new customers.
A critical factor in who wins the holy grail of local online advertising is local audience.
Where are the new customers for my business?
That’s what every local business wants to know. Whoever can connect businesses with new customers in their local market, whoever has the *local audience* and has a strong connection to that audience, has the advantage in the race for the holy grail.
And that is why there will be an epic battle for the local online advertising holy grail:
- Local news sites (newspapers, TV, online-only) have local audience.
- AOL’s Patch has local audience.
- Facebook, Twitter, Google, and Yahoo, using geo-targeting, have huge local audiences.
Nobody is talking publicly about, for example, Facebook competing with local newspapers, or Twitter competing with local TV stations. But it’s happening. And if local players want to win, they need to act. Now.
Do any of these competitors have an inherent advantage? That gets to the remaining elements of the holy grail. If the social media post is the advertising format, what is the right context?
For traditional media, having display ads in the context of high-value content has not halted the precipitous decline of CPMs. Facebook and Twitter have a very different problem with context — a personal social context is the worst place for advertising. The last place consumers want to see advertising is within or adjacent to their personal social space.
That’s why it’s so hard for businesses to get followers on Facebook and Twitter, beyond their most devoted customers. People don’t want commerce filling up in their social stream. The brand promise of social media is *personal* social interaction.
To address this issue, and to seek the holy grail of local advertising, Facebook and Twitter have both launched advertising formats targeted at local businesses — Promoted Stories and Promoted Tweets. These ad products enable local businesses to reach *new customers* on Facebook and Twitter. They are leveraging their huge national audience to geo-target users at the local level.
So businesses that value the native social media context of Facebook and Twitter can reach new customers by buying advertising on those media properties. Google and Yahoo can do the same with geo-targeted ad products, as Google plans to do with Google+ as the social media format.
Facebook and Twitter have the advantage of an ad context where social media is the native content format. And businesses have been introduced to the social media post as a form of promotion through their use of Facebook and Twitter.
All the ad dollars from local businesses that go to Facebook, Twitter, Google, and Yahoo *won’t* go to other media properties with local audiences.
But those other local players? What about the websites and digital products published by local newspapers, TV stations, and web-native publishers? Can they leverage the social media format to compete for the local advertising holy grail?
Yes, because they have the advantage of context, brand, and a local sales force.
What if consumers could get, *all in one place*, the social media equivalent of classifieds — local businesses’ posting social media promotions to a standalone destination, where consumers can seek out and browse a social stream for local promotions by category?
That’s exactly what local media can create to compete with Facebook, Twitter, Google, Yahoo, etc. They can leverage their strong brands, their connections with businesses in the community, and their local sales force to create this destination for social media commerce.
This standalone destination could not only provide unique value for consumers (getting social media commerce all in one place without having to follow hundreds of businesses), it could also provide unique value for local businesses.
Local businesses may prefer to reach consumers when they are *looking for* promotions from businesses in a standalone destination. When they are looking for where to eat, drink, go out on a Saturday night. When they are looking for real estate open houses, new cars, or shopping for fall clothing.
Social media promotions in a classifieds-like standalone destination could have a distinct advantage in competing for the holy grail of local online advertising.
Instead of helping local businesses advertise on Facebook and Twitter, local news sites could *own* the social media advertising destination on their own site.
And a standalone destination could be the key to scaling local advertising by harnessing the most powerful force that motivates local businesses… competition.
The big innovation that drove the growth of search advertising was creating a competitive marketplace — bidding for the top ad spot, and being able to see what your competitors are doing. There’s arguably no space more competitive than local. Local businesses are fiercely competitive, e.g. bars during Happy Hour on a Friday.
The holy grail of online local advertising is harnessing that inherent competition among local businesses and using it to drive advertising volume and ad spending. Competition drives network effects, which is how everything on the web scales.
A standalone destination could create that context for competition, because local businesses can easily see what their competitors are posting, which can motivate them to post in order to push competitors down the social stream.
To sum it up, let’s look at the attributes of the local online advertising holy grail from the most important perspective — local businesses:
- Simple: I understand how to advertise and how it works.
- Real-time: I need new customers in my store… now.
- Information: I want to tell new customers about my products and services, my promotions, offers, and announcements.
- Social: I want to connect directly with my customers, like when they are in my store.
- Self-Serve: I need to do it myself because I can’t afford to pay someone else.
- Mobile: I can take a picture on my phone and use it to advertise. Like Instagram for local advertising.
- Local Audience: Where can I reach new customers?
- Context: Where do I want my ads to appear? Are consumers paying attention to my promotions?
- Standalone Destination: I want to be where consumers are going to look for local promotions.
- Competition: If I see my competitors are doing it, I need to do it.
We designed BreakingPromos to go after the local online advertising holy grail by leveraging every one of these critical success factors. BreakingPromos transforms social media into a hugely valuable consumer destination for real-time promotions from local businesses.
How will you compete for the holy grail of local? BreakingPromos can help you win.