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 All are capitalizing on extraordinary marketplace efficiencies while newspapers and broadcasters are weighed down by outdated distribution and consumption models.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.