There's No Place Like Home

Over half of all traditional “measured media” spending in the United States goes toward local advertising, accounting for about $75 billion annually, according to research firm The Kelsey Group.

Newspapers, radio, outdoor and Yellow Page directories rely on local advertisers as a major source of their revenues. Billions more are spent on direct mail, card packs, free-standing inserts and other direct response vehicles targeting local audiences.

But on the Internet, local advertising has received little attention. To date, few of the “usual suspects” of local advertising (newspapers, radio, and Yellow Page directories) have met with much success on the web. So let’s talk about that, and think about the following:

  1. Why local advertising accounts for a much smaller slice of the web ad spending pie than the local/national spending ratio in the traditional media world; and
  2. How advertisers can use the web effectively to reach local prospects and customers.

Two types of marketers must reach local audiences:

  • National and regional advertisers promoting local franchisees, outlets or stores. Ford spends local ad dollars (primarily through co-op programs) to promote local dealerships. Wendy’s spends a portion of its franchisee dollars in the local markets where the individual franchise is located.
  • Local merchants advertising to customers and prospects within their home markets. Supermarkets, restaurants, specialty retailers and leisure/entertainment providers are heavy local advertisers. Recently, legal and healthcare services have discovered the power of promoting within their markets.

The Hurdles

Like buyers of national advertising, local advertisers want to use the web’s unique ability to connect with customers quickly, easily and powerfully through response and interaction. In addition, local advertisers are value-driven, so the measurability of the web should be a natural choice. Despite obvious advantages, there are several hurdles to successful local web advertising programs. These include:

  • A shortage of sufficient levels of locally oriented content.
  • Fragmented local audiences spread across many individual sites.
  • Difficulty implementing geo-targeting at the individual viewer level.
  • Inexperience in buying web advertising. Many local advertisers don’t use an ad agency, and they are intimidated by the web.

Although the existing providers of locally-targeted web advertising offer some partial solutions, they are vulnerable to one or more of these issues. Online versions of local entertainment guides and directories can be a great way to reach local consumers. But they are “impression bound” and cannot, therefore, increase their level of geo-targeted inventory without substantially increasing the traffic levels at their sites.

Key content categories may be sold out or otherwise unavailable. And despite loyal usage among a core audience, the reach among local web users may not yield the critical mass needed to justify the ad campaign. Like local content sites, the locally-oriented networks (e.g., Knight Ridder’s Real Cities or Cox Interactive Media) typically work with one or two sites in each market they cover, so they cannot easily expand their local reach. Finally, very few sites or networks have the sales and customer support infrastructure needed to service local advertisers profitably. These can be very small-ticket purchases that don’t justify the expense of a sales call.

The Solutions

Web advertising “business as usual” will not solve these issues. The industry has grown up serving national (and global) advertisers. As we speak, new models are emerging to meet the needs of local advertisers, including:

  • Innovative partnerships designed to aggregate and sell geo-targeted campaigns to local merchants. Both Flycast and DoubleClick have partnered with local telephone companies to “resell” local ad packages to their Yellow Page advertisers. These arrangements rely on sophisticated geo-targeting across multiple sites to enhance the reach of the media buy, as well as the Yellow Page sales force credibility and account penetration to sell and support less experienced advertisers.
  • Self-service media buys targeting small business. Technically savvy local advertisers will be able to create and buy their own ads over the web using a credit card. For an example of a program existing today, see www.digitalwork.com/tools/bannerad/index.asp
  • Traditional co-op and dealer locator services extend to the web. Look for major retailers and national brands to unveil web strategies “starring” their local franchisees. They know that consumers spend 80 percent of their disposable income within 20 miles of their homes. Using the web to drive consumers around the corner makes business sense.

If you must reach local audiences to succeed, the web probably hasn’t been your weapon of choice. But that’s about to change. Ultimately, all categories of advertisers will be able to take advantage of the marketing potential the web has to offer.

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