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This is an edited version of an article. Where text has been deleted, you will see "..." substituted. Click on the headline link to read the publisher's original article.
Published: February 17, 2009
Local Advertising Isn't Jumping Online
For at least a decade, Web startups have spun visions of conquering local ad markets. Their dream is to tap that vast array of attorneys, lawyers, dentists, shoe shops, restaurants, and other close-to-home businesses that tend to advertise in the yellow pages. No single local business spends a lot on ads, but in aggregate, they represent a lot of money.
... so all those advertisers who used to place ads in the classified sections of print newspapers will flock to the Web, right?
MARKET GROWTH MAY DECLINE
Not exactly. Local interactive advertising is headed for a big slowdown this year, according to Borrell Associates, an online advertising researcher. This year "will be the first in many in which some components of interactive advertising show little or no growth, or may even decline," Borrell said in a November report. The market will grow 4.7%, to $13.3 billion in 2009, after 50% growth in 2008, Borrell says. And don't expect a rebound when the economy recovers. The market shows "no sign of improving quickly, irrespective of upward movement in the nation's economy," the report goes on to say.
Local small businesses will likely curtail spending on Web software, too, and that's bad news for OpenTable, the online restaurant reservation company that in late January filed to sell shares to the public. After being in business for a decade, the San Francisco company eked out operating profit of just $261,000 on sales of $41.3 million in the nine months through September 2008.
Bright spots in the local market are rare. Even Craigslist, arguably the most successful of the handful of Web companies specializing in local advertising, has taken off in only a few cities and monetizes less than 1% of its users. ...
THERE'S NO HERE, HERE
What happened to the "everything is local" adage? The concept of local is morphing quickly in a world where instant global communications and social media widen our circle of friends and acquaintances to include the world. In essence, we've become national—if not international—citizens.
Thanks to the myriad of online communities from information aggregator Digg to social network Facebook to niche blogs about everything under the sun, we can identify and coalesce around similar interests and shared passions with anyone in the world. You no longer have to be best friends with your neighbor or co-worker when a site like Twitter recreates a feeling of intimacy, if only a passive kind, online.
So if you're an advertiser and want to reach a particular geographic region, good luck. You can target a group, whether it's young singles, men between the ages of 35 and 50, or women climbing the corporate ladder—but increasingly, they're scattered across the country, not lumped into one city vs. another.
NEWS DAILIES DROPPING LIKE FLIES
It's against this backdrop that local newspapers are in decline, even in major cities. ...
... Whatever the root cause of the upheaval among local papers, local advertisers are not rushing to online local sites to fill the void left by this moribund industry. And that means Web sites hoping to profit from local Internet advertising may be in for as big a struggle as their counterparts in print.