Five predictions on how Daily Deals will change the local advertising landscape in 2011

Before Groupon, the local advertising dollar was spent primarily on local media – newspapers, TV and radio – and the well documented stagnation in media ad revenues put a lid on employment opportunities for local sales reps.  Groupon, with its Daily Deals, essentially spawned a brand new local ad channel in 2010. Here are five trends for local entrepreneurs wanting to build new businesses in the wake of the Daily Deals phenomenon:

1) The new employer: Groupon and other online deals players

Selling local businesses online marketing solutions is high maintenance simply because these programs require SMB owners, mostly mom & pops, to learn a new technology. Google’s complicated Adwords product is simply too daunting for easy SMB adoption and requires a layer of online resellers to educate and run search targeted marketing campaigns.

Groupon is a simpler technology because merchants understand the business concept of discount coupons. Even though deals are a technology solution, Groupon seems to understand that local presence will be important for the hand holding that SMBs appreciate. Now flush with $950 million to spend, Groupon will build a local sales army to educate SMBs on deals campaigns. In addition, Google, Facebook, Yelp, Foursquare are all on record saying local is a top priority, and they’ll be building local sales presence just to keep up with Groupon. The first opportunity to appear in 2011 will be the hiring spree for local ad sales staff.

2) The new local advertising agency

If a local sales professional has greater entrepreneurial aspirations beyond Groupon employment and has built a stable of SMB clients, there’s the opportunity to develop a new business to advise their client base on deals strategies.

This new ad agency will develop deal content and campaign, manage commercial relationships with a portfolio of deals vendors, and place campaigns with these vendors like a media buying service. They will receive performance based compensation by sales and affiliate commissions from deal placement. For example, the agency might create special golf packages for a hotel client that can be run across various deals vendors in different cities, as well as on the new travel and golf vertical deals vendors that we’re just starting to see launch. Think of this new agency business model as an iteration of the travel agency, where commissions are deducted from each consumer sale. This points to the next trend: building a client base that maximizes revenue opportunities.

3) Sales focus on merchants with massive consumer demand

Groupon has proven that travel and event deals – tours, bay cruises, half price ski lift tickets, ballooning, Broadway shows – are among the most lucrative best sellers with consumers. These deals appeal to massive audiences; a Bahamas hotel package deal can be marketed across various Eastern Seaboard deals vendors in cities from Toronto to Miami. Travel and event deals have recurring revenue streams because offerings like hotel rooms or tours are perishable.

4) Lucrative deals will attract deal syndication opportunities

As discussed, most national deals vendors and publishing companies will not have the sales resources to cover deals in every part of the country. New deal syndication networks including Wantsa and DealExchange will source deal inventory for publishers who want to run deals for affiliate commissions. Publishers will naturally choose the most popular deals in syndication in order to attract consumer traffic and revenue to their sites. Deal syndication adds to the bottom line of the new ad agency because the greater the deal distribution, the more revenue for the deal sourcing agency.

5) Building a new national ad agency

Putting it all together, the ultimate opportunity in the deals space may be in developing a national network of local sales professionals who can source and subsequently place lucrative deals. Expect traditional advertising players – ad agencies, media buying networks and traditional media itself – to eventually enter this market, and develop campaigns for corporate brands.

However, today it’s still a greenfield opportunity waiting for local entrepreneurs to build these sales organizations.

About Pat Kitano

Patrick Kitano works with brands in developing hyperlocal engagement solutions and is administrator of the Breaking News Network, a national hyperlocal network devoted to community service. He is the author of The Local Network on Street Fight, and is reachable via Twitter @pkitano and email pkitano@gmail.com.