Local Online Advertising – What Will it Take?

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Local Online Content: Have you noticed the recent surge in stories, opinion pieces, conferences and acquisitions that focus on that term? In the past year, there’s been much debate over the future of this particular space, with some analysts projecting rapid growth and others suggesting that advertisers may not yet be fully prepared to jump on board.

One example of the confusion: In their local online outlook report (published early last year), Borrell Associates predicted that 2005 would be the year that local online ad spending would take off, and suggested we might see an increase in spending of over 50%. Meanwhile, however, in a document titled “Local Online Advertising Forecast” (issued at the end of 2005), Jupiter Research found that the classified categories still account for most of the local online media spending.

And Jupiter analyst David Card went so far as to add, “Online publishers and networks will find better opportunities servicing national advertisers that are aiming at local audiences than they will servicing true local businesses.”

Who’s right in this situation is hard to unmask. But the burning question remains: If Jupiter and Mr. Card happen to be correct, what will it take to get true local businesses to start advertising online?

Consider the viewpoint of a local business. A recent post on Yahoo’s Search Blog by Bassel Ojjeh suggested that over 80% of offline purchases happen within 10 miles of a consumer’s home. Often risk-averse because they are spending their own money on advertising, local merchants are generally attracted to buying media that has worked in the past, and newspapers have historically been the media-of-choice for local advertising.

According to Robert Bryce of the University of Texas, newspapers typically garner approximately 40% of the local ad dollars—a fact which is certainly understandable when you consider that the penetration of local newspapers generally rests above the 50% mark. The simple fact of the matter remains that until there is a compelling alternative—outside of classifieds and search—that offers competitive market penetration, it will be hard to convince local merchants to break away from newspapers, as well as other reliable sources such as the yellow pages, direct mail, and radio.

Why should it be so hard? Just look at the online options currently available to local merchants. According to Scarborough, the best local newspaper websites add no more than 8% penetration over a 30-day cumulative. And most local newspaper websites add just 3-4% market penetration. When you consider that this is the best available local online advertising alternative, it is easy to understand why local businesses have not yet adopted the medium.

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