Local is the new black

The essential digital problem for any media company with multiple properties is the inherent conflict between that which is centralized and that which is decentralized. I’ve yet to encounter anybody who does it perfectly, so perhaps there is no perfect solution. But the problem is becoming more acute, because the trend in online advertising is to that which is local, and it’s very difficult to compete locally without control of the mechanism through which advertising is served.

The research company Outsell released new data this week revealing that U.S. advertisers are spending more this year on digital media than on print. According to an article in Forbes on the research, “this Madison Avenue milestone has finally arrived thanks to a 9.6% boom in digital advertising in 2010.”

Of the $368 billion marketers plan to spend this year, 32.5% will go toward digital; 30.3% to print. Digital spending includes e‑mail, video advertising, display ads and search marketing. “It’s a watershed moment,” says the study’s lead author, Outsell vice president Chuck Richard.

Many saw this milestone as inevitable, but an examination of the market itself reveals there’s more to the story. There’s no disputing that, as Gordon Borrell puts it, “local is the new black,” but the extent to which the overall ad picture is shifting to the local marketplace is obscured by overall numbers, such as reported by Outsell. Advertising of all forms, in general, is roughly 50% local and 50% national, but the online marketplace has been largely national since the beginning. That has changed over the last couple of years and continues to change. Here’s a chart from Borrell’s annual estimates based on 2009 Q4 Data that documents the shift.

tracking the growth of online advertising

Take a look at that graph. Our efforts to generate revenue in the mid 2000’s were based on the very real data that national advertising was where it was at. As the shift to local began, however, you can see that a national-driven strategy only partially addresses the market, and that’s why local is such a challenge.

Borrell told me via email that evidence of the shift is everywhere.

That’s why we’re seeing companies like Reachlocal and Reply.com going to IPO this year, and probably Yodle, too, within a year. The geotargeting capabilities–now down to 100 meters with GPS-enbled mobile devices, trump the less efficient capabilities of mass-local or regional buys in legacy media. So some national is becoming local.…and of course a lot of local is still yet to be tapped online. Less than 14 percent of the $93 billion spent on local advertising last year went to online media. Its still way behind newspapers’ local ad revenue, as well as broadcast. I strongly suspect that it will hit 20 percent within five years and trump all other media buys.

The convergence of demographics is vitally important in this, according to Borrell, so it’s not just geo that’s getting attention.

Oil of Olay’s product manager doesn’t just want to drop a coupon or run a 30-second spot in Tucson. She wants to hit women of a certain age in Tucson with an offer that can be immediately measured, like a hyperlink, and drive immediate value, like collecting their mailing addresses for a free sample and valuable coupon. National branding is great, but the end result happens in a local store 90 percent of the time.

And as the money shifts to local, media companies who’ve been primarily serving ads across a network of station.com or newspaper.com sites from a centralized location are suddenly faced with important new challenges, for the ability to maintain and control ad-serving at the local level — and along with it the database of user data — can make or break the success of sophisticated local campaigns. Adds Borrell, “I’d say it’s probably as, if not more, important than controlling the content.”

It goes beyond technology, too, for the knowledge of how to run sophisticated ad programs is more often with the brain trust at the corporate level than at the property level. This has to change, if we’re to be competitive in a world where our real competition (the pureplays, not the guy across the street with another antenna) know much more about this than we do.

If the flexibility for revenue is at the local level — and it sure looks like it is — then the technological and knowledge flexibility has to be at the local level as well. This will not be easy, but do it we must.

(Originally published in AR&D’s Media 2.0 Intel Newsletter)


  1. I’m not arguing with much of the thrust of this piece, but the chart appears to call for the local percentage of total online spending to peak next year, and thereafter remain pretty constant.

    Also not sure I follow the logic of why ad trafficking has to be done hands-on at the local level. As long as the local sales force is well-informed on the system’s targeting capabilities, why can’t the buttons on locally-generated IOs be pushed centrally?

    • It’s not whether they “can” or not, Ron; it’s that running Local Web dominance from afar isn’t as efficient as running it from the market itself. We’re always so busy trying to apply “economies of scale” that we forget that the market is where its at. I say let’s develop what we need locally and THEN see if we can’t develop economies of scale from that. On the first question, I think the growth will continue beyond Borrell’s projections, although I didn’t say that.

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