Tuesday, December 22, 2009

Local, Local, Local

The amount of deal activity in local media over the past few months has been breathtaking. Dozens of startups targeting local advertisers and the communities that support them have announced marquee fund raising rounds; and almost every major media company has made a move to expand their presence at the local and hyper-local level of the advertising ecosystem.

Much of the activity follows the traditional media model of creating compelling content that advertisers will want to attach themselves to. AOL is dedicating significant resources to Patch, the hyper-local news network it purchased earlier in the year; CNN just announced an investment in Outside.in, a fast-growing hyper-local content and advertising platform; and ESPN is planning a national network of local sports news sites. All are capitalizing on extraordinary marketplace efficiencies while newspapers and broadcasters are weighed down by outdated distribution and consumption models. Interestingly, the success of these three initiatives are somewhat dependent on the promotional and content resources of a big mother ship.

Many of the venture-backed businesses are betting on the widespread shopper adoption of mobile apps. It was not uncommon this holiday shopping season to see shoppers snapping pictures of intended items and price comparing. Startups like Groupon (which just announced a $30 million funding round) and Postabon are creating social, online and mobile deal finding networks featuring local retailers. I recently typed my zip code and "jeans" into the iPhone Postabon interface and was directed to a 50% off sale for Lucky jeans in my neighborhood posted by another user.

Google's ambitions in local have been nothing short of schizophrenic. Just two months after launching a new search product for local businesses, they pulled the plug and were rumored for a few hours to be purchasing Yelp for $500 million. When Google initially announced their plans for the new product, many local media experts questioned their chances of success without a large, seasoned local ad sales force to cajole digital-media-resistant small advertisers. Undoubtedly, Yelp's 300 person sales force was a critical factor in Google's interest. The new rumor is that Yelp is planning an IPO.

The weakness of the newspapers, the emergence of mobile, and the ease of entry into the local conversations are driving all the activity in local.

But local advertising is a tough business. As a well-known local media consultant said, "local is sold not bought." Three things are needed for a company to succeed in local: a great product, significant capital to drive awareness and, most importantly, a big local sales force. The Yellow Pages became a $20 billion category, dominating local local advertising for years, based in large part on a famously aggressive local sales force numbering in the thousands.

It will be interesting to see who gains traction in 2010.

Wednesday, December 9, 2009

A Massive Oversupply of Media Impressions

Most advertising is wasted. Billions of media impressions every day hit the wrong people. While there is some truth to the premise that advertising is working subconsciously, the reason most of us glaze over ads, confident they didn't have an impact, is because we are right. They completely missed the target.

Every day we are exposed to a few more ads than we were the day before as advertising invades every nook and cranny of our lives. But when so many horns are blaring, we really can't hear anything. A recent study revealed that online banner advertising click-through-rates have fallen to basically zero.

The big media agencies that control roughly half of the $150 billion spent on advertising each year are desperately trying to develop better tools to plan and evaluate media placements while dozens of new companies are introducing more sophisticated ad targeting technologies.

This will help, but for the foreseeable future there will be, in the words of Martin Sorell, "a massive oversupply of media impressions."

Amidst such clamor, never has good, old fashioned, word-of-mouth ("WOM") advertising been more effective. According to a recent article in Media Daily News, WOM is the single most effective tool to promote a TV program after actual TV tune-in ads.

Every interaction I have had with a brand during the last week was based on a WOM recommendation - from viewing a new cable TV program to buying a pair of jeans at a new store to checking out a new item at Trader Joes.

Seems the best thing a brand can do is delight their customer and do everything they can to get them talking about their experience.

Which is why social media has quickly become a brand's most important marketing tool. After all, social media is simply a platform to monitor and amplify WOM.

The two busiest businesses in my neighborhood are Trader Joes and Whole Foods, both notorious for little-to-no traditional advertising but tremendous WOM buzz and social media savvy.

More and more top brands are assigning their best marketing executives to social media roles, putting even more pressure on the standard advertising formats to hit their marks.