Online Advertising Slowly Moves Local
Important Details: Online advertising is growing quickly, but the challenge of getting smaller businesses into the online advertising mainstream is still a work in progress, according to several speakers at this week’s Kelsey Group’s Drilling Down on Local, 2007, held in Santa Clara, California.
Hilary Schneider, EVP for local markets and commerce at Yahoo!, is in the midst of expanding a consortium of newspaper partners, all around advertising, search, and local content. She provided a glimpse into how the company sizes and segments "local." According to Schneider, Yahoo! divides "local" into three segments:
- "National" Local: A $22.4 billion ad segment in which buying is done largely on the national level for local brick-and-mortar locations. Schneider estimated advertising is purchased by national decision-makers for 17,000 retail locations.
- "Regional" Local: A $48.3 billion ad segment, the buying is done beyond a purely local level, usually at the metro or super-regional level. Around 85,000 retailers purchase advertising in this manner.
- "Local" Local: A $33.6 billion ad segment, the buying is done largely on an individual basis. Schneider estimates that the market consists of around 22 million decision-makers, all small businesses.
She called this last segment "the long tail of commerce." In pitching what Yahoo! brings to the table "as a media company," Schneider made clear that this segment has a "diverse" set of needs, and laid out Yahoo!’s programs in keyword searching, targeting, branding campaigns, billing, and content in context.. Yahoo!’s goal in this is "to make ad content as relevant as any other kind of content."
Steven Aldrich, vice-president of strategy and innovation for Intuit’s Small Business Division, was one of several speakers who made clear the fundamental nature of the challenge of getting small business into the online ad pipeline. It’s not about metrics — yet. "The small business wants to know in their gut that they are getting results. Over time, there will be more sophisticated tools." Intuit received a good deal of coverage last year for a partnership in which it is offering access to Google’s AdWords program to its seven million QuickBooks and Quicken customers. As Intuit tests the program, it is finding that simplicity is key — "make it simple to try, buy and maintain" — and low-cost. He cites $1000 as a barrier that will stop many small business advertisers before they even get started.
Aldrich’s numbers suggested that 22% of small businesses had marketed online in the last year, compared to 60% that had spent marketing dollars overall, and he claimed that around 5% of small business marketing is online. One other stat he cited is sobering for anyone approaching the smaller business market: while six million new businesses are created each year, 5.5 to 5.7 million existing businesses go under.
Barry Parr, an analyst and proprietor of his own long-standing community blog, Coastsider (serving the small Half Moon Bay community on the Bay Area coastline), brought it all home. "I can talk about cpm with advertisers, but they don’t know about cpm. I tell them it’s $80 a week, and they’re happy. That turns out to be a $20 cpm."
In Outsell’s Opinion: It can be a dizzying world of tools and technologies as the advertising world gets upended in the Internet age. But simplicity still wins the day. Businesses want customers, and they want to have the sense of who is driving them to their door. As Outsell’s own Annual Ad Spending Study shows, the real drivers of ad spending need to be understood as big and small companies alike try to shepherd small businesses online. For news publishers, it’s a reminder of the importance of their community business relationships. The battle for local ad dollars is still in its infancy. Those who combine real small business community knowledge with well-packaged, easy-to-understand tools will have the best shot at retaining and winning ad dollars.