The typical online strategy for small business is to set up a website, a Facebook page and maybe a Twitter account to broadcast the day’s deal or menu item. The marketing method is essentially passive like traditional advertising; it requires that customers find the sites, usually via search engines, offline knowledge or a referring link. In today’s social marketing, once the customer finds the business’ social marketing channels, online conversations can take place as if they were physically behind the counter. The diagram below demonstrates how local marketing has evolved from advertising to social marketing, where the instigator of the transaction is the vendor and the recipient the consumer. With the growth of social media, the power to initiate transactions can start shifting to the consumer.

In my previous Local Network article “Hyperlocal Media and Collaborative Consumption Services”, I described how the “shared economy” trend has empowered the consumer to share their belongings and services via new online and mobile marketplaces. The flip side of  consumer supply is consumer demand. It’s intuitive that instant gratification in the form of the instant answer will be a powerful new way consumers will use these marketplace applications.

New startups like LocalMind and Zaarly are set up for locals to ask questions about the neighborhood or request items they need. Larger networks like Twitter and Foursquare are also peppered with these kinds of inquiries. The hope, for both consumer and the startups, is a relevant answer is returned quickly to validate application usefulness.

When consumers are asking to buy something, or for a recommendation for lunch, there is a lead generation opportunity. In the Zaarly example above, a local photographer can manually set up lead notifications for any local inquiries for photographers. As consumer demand apps proliferate (and here’s a big list, find examples under the Neighbor Support and Errand & Task Networks categories), leads will get generated across a vast network of independent, siloed services.

It’s plain to see that it’s beyond the scope of most small businesses to sign up for notifications for the slew (hundreds?) of new consumer demand services coming online, in fact they don’t even know they exist! There’s a huge opportunity to aggregate potential leads across these siloed services in real time, and notify or proxy respond on behalf of local businesses so they can service leads immediately. In this online new paradigm, small business no longer needs to wait for their customers, they cherry pick on demand.

The Business Insider report that local merchants can purchase a Google Adwords ad at 1/10 the price on Patch.com’s rate card, and still get Patch.com placement isn’t a revelation. It confirms the reality of excess premium inventory that plagues traditional media display advertising, and the ease of gaming the media buy system to get the lower rack rate. The trick is to purchase a Google Adwords ad, target the zip code of the desired Patch.com site, and specify Patch.com site as a “managed placement” in the Display Network.

According to the Patch salesman in the BI article, his client qualified for a $2 CPM rack rate that beat the salesman’s $20 book rate.

The worst part is my client is getting ads at a $2 CPM and getting impressions. I saw his dashboard. The whole point of Patch was that it was local but Google just has you put in your zip codes and then your ads launch.

My client did the math and they paid $20 for a cpm when I sold it.

I don’t know how Google gets Patch ads cheaper than I do but I can’t do this any more. It isn’t fair to the clients that pay the whole amount from me.

The divide between book rate and rack rate threatens publisher credibility at a time when local businesses are demanding two types of advertiser accountability. First, they want relevancy that their ads are being displayed only to their target customer bases, not shotgun to the annoyance of the general public. Second, they want to pay only for results. CPM based display advertising, like commercials and banner ads, focuses on traffic quantity over traffic quality and delivers neither the targeted relevancy and nor a guaranteed performance based pricing schema beyond “minimum pageviews”.

Google Adwords, Twitter’s new Promoted Tweets product for SMBs, Facebook ads, and even Groupon, all deliver relevant geo-targeted consumers on a pay per performance basis. These social media ad networks will pressure traditional local publishers to match their offerings on price and accountability. The inherent dilemma is local publishers need to connect to these established social networks for the consumer profiling required to deliver relevant advertising. How do publishers staunch the flow of local ad dollars to these ad networks when they can’t offer the same kind of Facebook profile matching services?

The media companies are building their own marketing services groups to show their clients how to advertise, and use social media. The Hearst Corporation, the owner of media properties including the San Francisco Chronicle / SFGate.com, developed Local Edge, a Hearst Media Services company, to provide a comprehensive portfolio of local business marketing services ranging from Search Engine Marketing to premium directory listings. Local Edge has succeeded in signing on the media marketing arms of other publishers, like DMNMedia tied to the Dallas Morning News.

Beyond big media’s foray into developing a new marketing services layer, a new generation of startups will help local publishers compete by adding value to the ad placement supply chain. Patch.com and a number of media companies, have partnered with PaperG to facilitate the ad creation process in real time so their sales teams can accelerate closing the deal with local merchants. Many publishers work with white label deals publishers to deliver daily deals to their readers. We see new social media marketing agencies like Hearsay Social and Main Street Hub competing with big media to supply local business services. In sum, these solutions make it easier for small business to participate in a new world of social marketing that extends beyond the banner ad.

The advent of Klout and other new forms of social influence tabulation mirrors the power shift of media influence from traditional to social channels. Anybody with a voice can build a following, and the new business models evolving around influence metrics allow businesses to reward influencers with the hopes of converting them into advocates.

Klout’s first foray into monetization, called Klout Perks, rewards influencers targeted by their client “advertisers” with products like Windows Phone or Moo business cards. The company is focused on delivering a rewards product like this to national advertisers like Microsoft and Moo because it is easier to scale campaigns nationally, as opposed to working with local advertisers in smaller markets.

So how can rewards programs based on influence be developed for local markets? When local influencers are identified and curated for either public or private display to a community, local businesses can “perk” them. Courting local influencers will have a larger impact for local business simply because the influencers’ networks and their target customer base are equivalent. There’s a reason why Klout focuses on the scalable national rewards model; most local businesses don’t understand social media marketing and daily deals strategies, and getting them accustomed to offering rewards is simply a huge education effort.

Local influence metrics are calculated differently than the simple adding up Twitter followers and Facebook likes. Johnny Lee, co-founder of LoClout, a company building a database of local influencers as a B2B service, says that local reach and engagement as the key influence metrics. Local reach defines activities within a geographic radius (i.e. how many followers are located in the same city as the influencer), and engagement defines how many of these followers, say, click on the influencer’s Yelp review.

Lee suggests several heuristic methods to assess engagement without access to the raw traffic data held by social networks. Popular user lists, bookmarks and “elite” memberships developed in Yelp, Foursquare and other networks can elevate influence status and be incorporated in the algorithm. Yelp and Foursquare checkins published on Twitter and Facebook can also be analyzed for retweets, shares and comments.

LoClout focuses on supplying this kind of local influencer data to brands and companies for marketing and analytical purposes. On the consumer side, Roost has developed a metric called Scorecard that measures local influence of Facebook accounts and pages. Kred.ly is also developing a consumer facing local influence metric.

The main hurdle associated with developing influence-based programs for local business is simply the challenge of marketing another new promotion method to a merchant inundated by pitches from Groupon, Yelp, Foursquare, and many others. Leveraging local influence will eventually become a powerful marketing tool, but it will likely take the field sales forces of social media marketing agencies and companies that channel local influencers like Yelp to develop these new business models.

Klout is known as a metric for assessing social influence. Like Google Page Rank, few understand what else Klout can do beyond being an iconic metric. One overlooked practical role that Klout faciliates is influencer curation. Through curation, brands garner good will by providing recognition, even rewards, to influencers who have synergetic relationships with that brand. Brands accomplish this on Klout by 1) developing lists of influencers and 2) giving influencers’ Twitter or Facebook feeds the “+K” as a badge or recognition.

For example, The Breaking News Network is a local media network devoted to community service and promoting local businesses, civic groups and nonprofits. As part of the mission to recognize their communities, managers of each city in the Network develop a portfolio of +K’s. First they import their curated Twitter lists based on topics like Events, Sports or Foodie.

Next, individual social media accounts are given +K based on a specific expertise. The more liberally +Ks are given, the more good will the brand collects.

By using Klout, brands like @breakingsfnews position themselves as curators and hubs for social media sourced local news, a role that traditional local media has not yet embraced.

The Revenue Agenda for Klout and other Social Influence Metrics

Klout can also be used to deliver good will in the form of “perks” with their revenue product Klout Perks. Perks reward high Klout score influencers with freebies that hopefully will induce a quid pro quo commentary or endorsement.

Klout Perks currently only delivers offers to a national audience. If Perks could be delivered to local audiences, local merchants would see Perks as an alternative to Daily Deals by delivering value to recipients of influence, rather than the one and done coupon clippers. All in the name of good will. Over at MediaBistro’s Socialize conference, Megan Berry, Klout’s Marketing Manager, says self service perks are on the product roadmap.

Companies measuring social influence like Klout, including Peoplebrowsr with Kred and Roost with Local Scorecard, are developing products that are ostensibly metrics but are really solutions to identify, target and reward consumer influencers as potential marketers. This will lead to wide ranging partnerships between online vendors and companies providing influence metrics data. The new metrics of influence will become more refined and tangible: influencers will be tracked for how many dollars their tweets and updates garner.

Twylah is a service that aggregates a Twitter feed and compiles the articles they link into a Flipboard like display.   Many reviewers have explained the mechanics of Twylah in far more detail than I can:

• Robert Scoble: “Twylah lets media brands and celebrities monetize their Twitter stream”
• Neal Schaffer: “Twitter SEO? Think Twylah“

We’ve been working together with Eric Kim, CEO, and Twylah to create “breaking news” Twylah pages for the Twitter feeds across our 300+ city Breaking News Network. These Twylah rendered pages are subdomains of our Breaking News cities, and can be viewed on many of our Breaking News cities by including the subdomain title “news” preceding the Breaking News URL, such as news.breakingsfnews.com.

The current iteration of Twylah pages sit separately from our Breaking News websites and don’t have a direct link to the website itself, only the Twitter feed. We’ve been waiting for Twylah to unveil their embed system so we can embed the page directly to the site itself. Thus, all of these subdomain pages are completely hidden, findable right now only through search engines.

So our experiment simply measures how Twylah performs to drive search engine traffic based on breaking news to hidden Twylah pages. Here are the results:

Approaching 900 uniques per day

Number of Google indexes over span of 3 months for selected news sites:

CONCLUSIONS:

1. It’s well documented that Twitter has become the leading social media for broadcasting “breaking news” nationally and locally. People constantly search for breaking news about a city. Twylah’s service allows breaking news tweets to be indexed and discoverable persistently, not forgotten as most tweets are (according to bit.ly, the average half life of a link on Twitter is 2.8 hours). Simply put, Twylah delivers organic traffic from sets of older tweets even when the pages it directs to are hidden (and therefore not discoverable by any other means).
2. Twylah automatically facilitates conversations around brands. Through Twitter, we can curate the key influencers associated with a brand and, through Twylah, deliver their commentary to an audience who wants this information in a coherent published format. For example, a well curated Twylah page can deliver real time information about specific movie openings by aggregating content from the media, arts and events publishers on Twitter whose use Twitter to monitor movies. Moreover, on the Breaking News Network, every city already has a set of curated local influencers across a variety of topics, so it’s possible now to develop hyperlocal Twylah channels devoted to movies, the arts, sports, or any other topic. This approach to hyperlocal branding is still in its infancy, and we’ll be focusing on this subject extensively over the next few articles.
3. Twylah, via Twitter, delivers a broadcast solution to brands that other social networks can’t. Eric Kim states: “We are targeting Twitter publishers (brands and personal brands), who consistently create and curate valuable content on any topic.” This type of “broadcast” branding is where Twitter excels over Facebook, which seems to moving towards developing its news feeds favoring personal transparency over commercial branding. It is especially powerful for delivering ticker tapes of breaking news and media feeds that wouldn’t be as effectively distributed across platforms like Facebook where such news might be perceived as excessive.

Journalists continue to search for a viable business model that supports online hyperlocal publications, but they won’t ever reach the threshold of revenues to maintain operations if they rely solely on traditional advertising fees from local merchants. That doesn’t mean local advertising is also poised to fall off a cliff. On the contrary, BIA/Kelsey states the prospects for online local advertising will double by 2015, but much of that growth will come from new mobile applications and daily deals category vendors. Here are five reasons why hyperlocal news faces hurdles to profitability:

1) Hyperlocal audiences are too granular to support traditional revenue models. Local banner ads aren’t economically viable. Traffic to online hyperlocal publications is inherently small due to geography, and total ad revenue based on CPM (cost per thousand views) won’t even cover the costs of the ad sales force.

Report on AOL’s hyperlocal network Patch.com’s traffic sourced from Business Insider “Leaked Reports on Patch traffic”

Article comment:

Chris L on Jun 24, 1:18 PM said:

If their page views really are only 783K for a month in So Cal, that translates to less than $5K in revenue for a month. I doubt they can build a sustainable business on that. Revenue = (783,000/1000)*3*$2 Assumptions: $2 CPM (generous) and 3 ad slots per page.

2. Local advertising alternatives are proliferating. Newspapers lost their classifieds revenue to Craigslist. The growing number of pay for performance business models including paid search, daily deals and the new mobile ad applications are cannibalizing media spending. Advertising options will continue to expand for local merchants, leaving a smaller piece of the pie to hyperlocal news.

3. Hyperlocal media resources are proliferating. Traditional media has relegated the business community to being simply the “advertisers” and not involving them in content sourcing. Yet on the local social media, many committed bloggers are the business owners who want to discuss their industry and community, and by extension market themselves. Traditional media needs to incorporate the business community as journalistic partners instead of trying to sell to them all the time.

New community service business models are developing that focus on engaging the community around local news and providing free advertising to businesses, adding further pressure on traditional ad sales. Facebook and other social networks may also evolve into hyperlocal community platforms that center on community sourced and shared news. In sum, hyperlocal news resources will proliferate as alternatives to traditional local media, simply because it’s easier to build these properties now.

4.  Local merchants are learning how to self market using the social media. Roost reports merchants believing it is four times more effective than paid search. Those merchants that can’t do it will be taught or be serviced by local social media / ad agencies, or even the traditional media publishers themselves. Gannett wisely set up GannettLocal.com to engage with local businesses as their social media marketing educator and partner.

5. There is a visible example of an unworkable local media model. Patch.com, AOL’s effort to build a hyperlocal news network from scratch even when local news revenues were falling, demonstrates and even confirms the high hurdles in building a profitable local ad model.

After a year and $150 million, Patch doesn’t seem to be gaining the revenue traction it needs to warrant further investment, and AOL is working with investment bankers on restructuring. The Patch exercise may shut the door on the idea of building a scalable hyperlocal network based on paid content.

My article “Hyperlocal as Community Service Media” on Streetfight discusses why building local media resources to serve the community makes sense. Creating local media is no longer the province of media companies, curation and aggregation tools make it easy for anybody to develop a simple local media resource that maintains itself 24×7. The disruptive concept behind “community service” media is to scrap the classic advertising business model. Why? Simply for the good will of the community. Business owners, not relegated to being the target of ad salespeople, can now contribute local content topical to their business. Publishers of this new local media can provide access and guidance to any contributor in the community, and make sure that this access does not veer into spam.

I believe the pool of local advertising revenue will continue to slide because more local merchants will realize they can control their brand distribution via social media, and cut their ad buys. Real estate agents, once the cash cow of local classifieds, have cut back drastically because they are learning social media marketing, one of the crazes of current brokerage training. The real estate industry, with its intense focus on community marketing, tends to be the bellwether for local marketing practices.

Free local advertising also puts pressure on traditional local publishers’ fee structures. The comments on the Street Fight article demonstrate how foreign the community service concept is to local publishers who rely on ad revenue, and can’t imagine otherwise. What they miss is hyperlocal media does not necessarily need a traditional business model to thrive as long as the community is engaging in it. There are benefits to providing good will to the community.

The classic, and perhaps only business model supporting hyperlocal journalistic efforts like Patch.com and other local media is local advertising. On StreetFightMag.com last week, Ted Mann, Digital Development Director for Gannett NJ, discusses why Gannett’s hyperlocal experiment InJersey.com failed. The main and obvious reason is simply local advertising cannot adequately cover expenses. So…

What if local media were positioned as a community service without the advertising model?

Can hyperlocal media thrive and engage the community as a good will service?

1. The value of hyperlocal is in the information

I paraphrase from Alex Salkever’s June 24 article Hyperlocal’s Automated Future. The website platform and curation tools now exist for any individual or business to develop local media cheaply. A WordPress blog is an easily customized platform for anchoring the news system. Curation and aggregation tools, plus hyperlocal social applications like See Click Fix can provide a panoply of local interest content.

Although still an immature technology, an automated news aggregation and publication service like paper.li or Twylah can be embedded to display in newsprint “Flipboard” format.

2. It’s not just the website… hyperlocal spans across social and mobile media

A community media service must now span across all social media for hyperlocal engagement. Twitter, a perfect media for broadcasting real time local news, can be used to curate the best local Twitter feeds into lists.

Facebook is becoming the arena where the locals will gather to discuss local news, events, even the Daily Deals around town. (Ted Mann’s point #9 – use Facebook as the local watering hole). The social “metrics” for engagement are high for local news:

3. Partner with everyone

Ted Mann’s #4 recommendation for developing hyperlocal content. Companies developing applications serving hyperlocal audiences, like SeeClickFix above, want to partner with local publishers to gain traction. Local publishers want to partner with new application developers to deliver unique local content to their audience. It’s mutually beneficial to overlay new social content, even social commerce applications across national hyperlocal networks. Even better if there is a business model associated with the application for revenue share opportunities between publisher and application provider. One long term mission of a national community service network is to create exposure for a variety of social hyperlocal applications that would not normally get exposure from traditional media.

4. Support the business community

Local businesses are integral to engaging the community because they have the commercial incentive to create content that helps to publicize their business, directly or indirectly. Local food critics own restaurants, real estate columnists are Realtors. Yet, the classic advertising model forces them on the sidelines because that kind of publicity has tangible dollar value that traditional publishers need to extract. So why not support the business community by embedding the most compelling websites and blogs of local merchants into hyperlocal media as content free of charge?

A full website presence has far greater utility for the featured businesses and for the reader than a tiny banner ad selling at $500-1,000 per month. Engage the business community, and they will make the effort to engage locals because 1) it’s free to them, and 2) it’s their marketing vehicle.

5. What is the business model anyway?

Hyperlocal media systems like Breaking News are easy and cheap (often less than the cost of a one-month banner ad) to develop for individuals and groups wanting to create a community media presence in their city. The business model for the owner is not to make money, but to serve the community and be positioned as a local media star in order to enhance the business development prospects of their “day job”.  It’s the same rationale for serving as a Chamber of Commerce president, or even 50 years ago, starting your own local newspaper; it just helps your career. The owner of the community media service pays it forward.

6. What is the impact of hyperlocal media as community service?

The greater impact of the community media service model may be disruptive. The perpetual discussions revolving around how to monetize local journalism have yet to point to a cashflow positive solution. An automated media model that requires few resources and supports the local business community can put pressure on traditional local publishing models. Yes, the content is curated, aggregated and automated, but it’s real time local information that readers want. In time, the new social local applications now being developed can be easily added to supplement the information stream and generate the local engagement needed to survive, even prosper within the hyperlocal media landscape.

Reference:

With Facebook Deals and Google Offers launching the exact same service as Groupon (and have been tagged “Groupon Killers“), pundits are questioning Groupon’s sustainability and market share. Deals have become commodities, and Groupon will certainly lose market share simply due to the growing volume of deals being distributed by a wider array of publishers. So how does Groupon differentiate their deals from Facebook, Google or other mass media?

Simply put, Groupon is becoming a consumer brand, not a social network or search engine that offers deals as another revenue play. Its main asset is its compelling and generally beneficent position as a consumer savings portal. Groupon can sustain the power of this branding by continually offering new ways to save money, and bringing in new corporate partners and publishers to share in and expand its consumer distribution pipeline. Note that although Facebook and Google can do the same things, it is Groupon’s cachet as a consumer brand that is the tappable asset.

Here are a few example opportunities Groupon might capitalize on in the future.

Credit card / banking partnerships to data mine deal opportunities

Financial institutions will seek partnerships with Groupon to create opt-in deals systems based on analyzing consumer purchase history. For example, Groupon could work with American Express to data mine credit card data (by consumer permission), and customize offers based on confirmed personal needs. Consumers loyal to Applebees, Home Depot, Hilton and American Airlines may receive targeted deals to switch from Olive Garden, Lowes, Sheraton and Jet Blue. The consumer will accept the concept of leveraging personal purchase profiles in order to save money and will give rise to social consumption, the sharing of purchase history. Blippy is already an example of the sharing of personal consumption data.

Real time mobile deals platforms

Groupon and Living Social have already started paving the way to real time services with instant deal services that alert consumers to same day nearby deals based on their location. These deal discovery services, as well as check-in deals like those offered by Foursquare, Yelp and Facebook Places, will change consumer buying behavior en masse by making deals ubiquitous wherever one is. Purchase decisions – where to eat, what to do, where to buy – become more logistical and will require less planning.

Real time inventory liquidation

Groupon can develop relationships with industries dealing with perishable product – airlines, hotel, cruises, car rental, events producers, theaters – to create real time inventory clearance systems. These systems would optimize inventory control as well as provide consumer last minute bargains. See my March 19 article on real time inventory systems.

Expand consumer brand to other consumer categories

As a consumer brand, Groupon can expand its product categories to daily life products like groceries, nutritional supplements, drug store items, and hardware. Like Amazon and Priceline, Groupon can carve a consumer niche by providing deals across a full spectrum of products, and become established as a one stop shop.

In this age of Groupon, consumers are ostensibly looking for and testing new business relationships with coupons. Price has become a commodity, and now local merchants need to distinguish themselves based on service in order to build and maintain a loyal customer base. I myself have been witnessing a vast sea change on how banks, rental car companies, and even cable companies are empowering their employees to provide immediate solutions to problems. Thank Zappos for instilling a refreshing brand of “customer is always right”, and the social media for making corporations aware that rigid policies or bad employee behavior will produce a wave of outraged public feedback.

So what is the best way to get great customer service now? In today’s wired society, the answer is not obvious. THE CONSUMER NEEDS TO NURTURE PERSONAL RELATIONSHIPS WITH THEIR LOCAL BUSINESSES. 800 numbers and online contacts don’t solve problems because their “operator” staffs can’t make exceptions to their standard business practices to solve problems. Here’s a starter list of five local businesses where building a personal relationship pays off in spades:

BANKER. Everybody thinks the banker has become irrelevant with online banking and ATMs. Get to know a banker because only they can credit an overdraft fee, clear a check quickly, or simply confirm a bank action in less than one minute, something I can never trust an 800 operator to do. My holiday wine gift to my banker pays off in  fees he’s credited over the year.

CAR MECHANIC. Trust is critical with mechanics because they can screw with you so easily. Dealership mechanics are generally tasked to profitability by their managers so it’s important to find a good local mechanic. Just as important is to return a quid pro quo service; if you’re a restauranteur, offer a free dinner. And don’t forget to post 5-star reviews on Yelp, AngiesList and Google Places and Facebook… all of them!

RENTAL CAR AGENT. Once the most rigid of service species (“your gas tank is only 7/8 full”), your “personal” agent can get you great local or under the counter pricing, a car upgrade, or even reserve that special car just for you at rack rate. The secret? Always ask for the email address of their regional manager, request a corporate phone call followup (Enterprise does this) and give them props. Their ascent to management is much quicker with good reviews.

HARDWARE STORE CLERK. Home Depot is good for projects but their employees may as well as work in a grocery store. For minor home repairs, a good local hardware clerk will save a lot of time by giving you an exact solution. They’re underappreciated; their reward is the recognition of their incredible usefulness.

NORDSTROM SALES PERSON. Nordstrom has a liberal return policy that allows consumers to reasonably return any product no questions asked long after the purchase. That policy makes Nordstrom the Zappos of department stores. Simply purchase everything through your personal Nordstrom clerk; take advantage of the three big sales events. Your commission based sales clerk (averaging 7% of sales) will go the extra mile to find desired items at other stores and make returns much easier.

Obviously, the new customer service movement can be extended to any business beyond the five above. Any stories from the local front?