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:

Local community news has always been hard to produce profitably with scale. Local news is only relevant to those who live within the community, and it makes cost per thousand based advertising models untenable when readership may log in the hundreds. Without a revenue model to hire editors and writers, the cheapest way to source local news content is either through volunteer reporters, or aggregation of local media by engines .

Problems with Local News Aggregation Technologies

ReadWriteWeb’s Marshall Kirkpatrick recently posed the question “Why haven’t neighborhood news technologies worked out?”

I sure hope someone can nail it. Give me the news about my neighborhood, please... I care about what’s happening in the neighborhood around me and I want to see the fabulous new technologies of open government data, online news syndication, social networking and data mining all put to service to fulfill hyperlocal news wishes and dreams I didn’t even know I had yet.

From the article’s comment stream, it seems news aggregators like Outside.in, Fwix, and EveryBlock have three problems:

1) Local news presented by algorithm isn’t customized to the needs of the reader and therefore, sterile and/or irrelevant.

2) Most local news is inherently uninteresting. Ever watch a local TV station and care about anything about the car wrecks, murders or city council meetings covered? It’s lower grade information that doesn’t enrich or improve our lives as much as the content we generally seek on the web.

3) Aggregated local news lacks the social element, whether it be real reporters or people in the community engaged in local discussions.

1. Local News needs manual curation

The news needs to be right. Fwix often reports irrelevant news; Rocklin is 80 miles north of Modesto, CA (see image)

Engines query for local articles via RSS but they require a human team to identify the best feeds in every city and continually update these feeds. Feeds can be sourced not only from mainstream media, but also blogs, Twitter and other social media links, and eventually Facebook, Yelp, Foursquare and other geo-localized media sources as they attain credibility by reaching critical mass of local participants.

2. Local News needs more content

Again, it’s hard to produce content without somebody paying for it. However, there are new producers of local content that haven’t yet made an imprint as local media sources. Civic organizations, local companies and merchants like Whole Foods have websites and blogs that broadcast timely information people want to know about, but may not have RSS feeds for simple aggregation. Companies like Nozzl Media and DataSift are developing ways to aggregate and filter this kind of content. Finally, locals using Facebook groups, Yelp and Foursquare are documenting what’s happening in their city, and their reviews are starting to be included in sites like EveryBlock. People will eventually find where their friends are congregating and which stores are popular through the aggregation of these geolocational systems (see Checkinmedia image)

3. Local news needs personalization

Although some people may like crime reports for their city, all I really want to know about the 1/2 mile radius around where I live is 1) all the daily deals merchants in my neighborhood are offering, 2) what’s playing at the theaters, 3) the Whole Foods, Trader Joe’s and Safeway circulars, and 4) where all my friends are congregating around San Francisco. That’s it, at least for today. Once the content sources from deals services, supermarket chains and theaters, and geomedia are aggregated, this kind of personalized local portal becomes relevant to daily life.

4. Local News needs to be social

Readers are motivated to participate in social news for two reasons: visibility and content ownership. Just like yesteryear’s “Letters to the Editor”, readers comment frequently on mainstream media news sites like Huffington Post or LATimes simply because they know their input will get read by thousands. News aggregators (like EveryBlock, right image) have a hard time pulling in conversations simply because there is nobody to converse with!

To succeed in gaining participation, hyperlocal news sites need on-the-ground ringleaders in each city to engage their communities and promote participation. But ringleaders need compensation. Fwix and other news aggregators own every city and provide little incentive for others to own and grow content for them. We modeled The Breaking News Network as a kind of franchise that facilitates the creation of a local media resource by individuals and groups in a city, and gives them city/community ownership so they have vested interest to grow their properties.

Patch hires editors for each city who can spur participation in their community, but is currently burdened with a high expense / small revenue model that is under scrutiny by Business Insider among others.

5. Local News needs to be easy to read and digest

The  popular Flipboard for iPad validates the concept that people like reading aggregated and personalized news in a newspaper format. Reading within familiar typeset frames is easier than perusing streams of news that characterize news aggregators like Topix or EveryBlock. There’s opportunities for aggregation and presentation technologies like paper.li to make it easier for news to be curated and read in this more reader-friendly format. For example, BreakingSFNews.com (image below) embeds paper.li as another way to read about SF news.

AOL’s acquisition of the Huffington Post firmly entrenches AOL as a journalistic media endeavor eye-to-eye with Gannett, Murdoch and, gasp, the other newspapers. What is strikingly different about Huffington Post is that content is sourced from celebrities – politicians, actors, college professors, locals – and not from the ivory news desks that still embody the fifth estates of NY Times and WSJ. It’s a schizoid tabloid, with entrepreneurs reporting about Davos right next to a photo of Lady Gaga. The articles are compelling because they are sourced socially from people you may know or want to know, not reporters. They’re like Arianna’s friends.

Reshaping AOL’s local initiative Patch.com

AOL makes a smart move by placing Arianna as head of content to reshape the culture of its local publishing initiative Patch.com. AOL has come under fire for lacking a scalable business model where sparse online traffic for each Patch city are limited by the size of each community. Its critics see Patch as replicating the tired local publishing model by hiring editors, and more difficult, building a local ad revenue base from scratch. HuffPo made content social, and Arianna’s challenge is to re-engineer Patch.com so they are mini-HuffPo’s with news sourced by locals known to the community.

Up to now, deals sites have been strictly deals sites. Patch has the opportunity to create social local news vehicles that engage the community in a way the staid newspaper hasn’t done. Deals via AOL’s deals engine Wow can be integrated as part of this social fabric that will make venturing to a local “deals site”, or even an online newspaper’s coupon zone redundant. This is the best case scenario for AOL’s local play; I frankly think the runway for AOL’s local expansion is too ambitious and capital intensive to see the immediate returns that shareholders wants. There’s already a precedent to locally crowd sourced news in Examiner.com that highlights the problem with sourcing consistent good content at the local level.

“Social commerce” became a buzz word in the summer of 2010:

Here are eight new trends in social commerce that will appear in 2011:

1) Demand based shopping applications

Groupon demonstrated how supply in the form of retail inventory can be packaged into deep discount opportunities. Demand is the inverse – how many people in the community want 49ers tickets, a dinner at French Laundry, or the hottest electronic gadget? Applications will develop that meets demands from local shoppers. Requests can be input into an application, and addressed either automatically from an inventory warehousing system like Walmart or manually with a “bid” price and location for pickup.

The implications? By fulfilling demand direct from consumers in aggregate, both large chains and SMBs can fulfill orders far more efficiently and reduce sales and marketing overhead.

2) Identity brokering and qualification

The transparency of the social graph will facilitate transparent match making systems that expose all parties to a transaction. One example of an old marketing paradigm where identity data was hidden is the mailing list – tradeable, sellable, undifferentiated and an acknowledged source of spam. There’s always been a seamy side to traditional lead generation and affiliate marketing systems because one doesn’t get to “opt-in” before receiving spam or a phone call to your request for more information about, say, a home listed for sale.

With the detailed social graph, every match can be qualified. Supply/demand applications will evolve to create matches where both parties to a transaction can easily vet the other party before a dialogue takes place. The “Groupon” concept of offering a kind of reward to attract local business will extend to SMBs like accountants, lawyers and real estate brokers who haven’t yet participated in offering an online “daily deal”. Moreover, advertisers can qualify leads by researching them on social networks like Linkedin or Facebook. In fact, leads will presented not just as a simple name and email address, but as a profile based on their social graph so it’s easy to see whether that lead might be your best friend’s cousin.

3) The reduction of the sales force.

Why? Just as anybody can create a social media presence, anybody can now become a marketer and create a social commercial presence.

Online commerce distribution – getting the exact product to the consumer purchaser as efficiently as possible – disintermediates sales forces, which function as middlemen to provide conversion value. Now social/mobile commerce is set to do for local SMBs what Amazon did for national brand products – create the variegated distribution channels that make it easier for consumers to find and purchase what they want from SMBs.

Take group buying as an example. Hundreds of competing “Groupons” (including all the local media/news who advertise with Daily Deals) can’t all be knocking on every cafe in every city to source a deal. Deal aggregation engines such as Wantsa, TheDealMap and Yipit are/can create deal syndicates that present publishable deal inventory. Now publishers can trade off sales staff and marketing overhead for affiliate income from deals sourced by others.

Social commerce facilitates this trend because literally any business or media outlet can be an ad publisher. For starters, they can publish a free deal on Facebook Deals or Groupon Stores, and then escalate their marketing presence by adding their deals into syndication.

4) Social Commerce conversion – the call to action returns

Marketers have always tiptoed around social media marketing. They need to message their product, but not bluntly pitch it. Group buying succeeds at creating a call to action in the form of a time sensitive deal, but the most efficient social media marketing strategy is to engage the customer into discussing your product. Here are the methods for social commerce conversion:

The simple one-click Facebook “Like” (and corresponding “share” buttons on social media) is the quickest way to market deals across the Social Graph.

For consumers, checking reviews is the due diligence step. They already want what the business offers, and the 4-5 star reviews just converts them.

Conversion can be triggered by influencers, just ask any teenage girl. Marketers will court influencers with perks. New analytical applications will ascribe dollar value to the referral or “like” of individuals and groups.

Customer service becomes a marketing channel. Consumers respond to Zappos – inspired great service. Every business/brand should have a customer service landing page, whether it’s on-site or on GetSatisfaction.com

5) The emergence of the pure social commerce campaign – game changing brand marketing

Have a new product? Can’t get it into traditional distribution channels? And even if you can get it into Target, how do you market it to get consumers to notice it? This was the challenge facing entrepreneur Dr. Robert Wagstaff with his simple tongue scraping invention to counter bad breath. Expect more products to template the Orabrush marketing approach in the same way Zappos has become a beacon for great customer service. Here’s the ABC/Nightline video:

If you don’t watch the full video, here is the takeaway:

• YouTube = TV commercial
• Facebook = National media buy
• College business class = Business incubator

6) Facebook is a defacto platform for social commerce, but it may be too massive for local socialization

Facebook is just too big for most users. A Facebook page for a city or neighborhood can’t be customized to the individuals of the community. Granted, every business may eventually have a Facebook page for their customers because Facebook has become a defacto platform, almost like the archaic World Wide Web, or more loosely AOL in the 90′s. But social commerce will become relevant at a local level when online meets offline, creating virtual town squares where communities of local folk congregate. But they need on-the-ground participation and management to flourish as social vehicles, otherwise the sites are ghost towns.

How does social commerce become social at the local level? To get the consumers to aggregate around local commerce offline, there needs to be a relevant community overlay on top of the deals. For example, Japan has a social network of housewives who input the best shopping deals that day manually for the benefit of others in the community. Unlike a one-off Groupon deal where buyers are unrelated, the housewives form a local social network tied together initially in their pursuit of a deal.

2011 will see further development of these niche networks based on geographies, culture and industry. You can see this development happening with the launch of more exclusive social networks like Namesake, Quora and Path.

7) Globalization of social commerce

More than half of the Asian-Americans living in the US today were born in their native country. Melting pot Americans use applications like Skype to maintain their connection, but getting products they grew up with is still done by overseas shipment from relatives (personal note: we get CARE packages from Japan all the time). The next frontier for social commerce could be descriptively coined Cost Plus World Market 2.0. Overseas trading firms / commerce entrepreneurs can source timely products at lower prices mirroring native country labor costs, utilize just in time shipping and warehousing systems, and market via their global cultural social network systems. This is not an iterative variant of global, undifferentiated trading marketplaces like eBay or Alibaba, it’s a new window of opportunity for building the next set of global commerce properties that focus on very specific sets of customers. Here’s a good example of a social commerce site for Indian women – Exclusively.in

8 ) And obviously, location based apps will drive social commerce

I saved mobile commerce for last just because it’s the most obvious, and the trends have been well documented and recognized. Here are some of the things that consumers can already do on a location based app:

Check-ins are being monetized with deals and other perks on every LBS. But we all know that.                                                                                       .

The Christmas 2010 shopping season goes down as the year of the in-store price check. The store is now the showroom, and the phone app the cash register.

Here’s what’s coming in the future:

Mobile device as credit card. Obvious to anybody who knows mobile services in Europe and Asia.                                                                             .

Local shopping search in real time. Couldn’t find that sold out product at Best Buy? Apps will provide real time inventory to find what you need.

Extend real time demand based applications across other industries beyond retail – hotels, airlines, concerts. Looking for a hotel room at 10pm? The new apps will find you a good deal, mainly because any hotel inventory at 10pm is open for negotiation.

Related articles:

10 Media Predictions for 2010 – 12/17/09

How did I do? Reviewing 2010 – based on 2009 Media Predictions

10 Trends in Social Media 2009 – 1/1/09

Facebook announced yesterday that businesses can add deals and rewards for their customers who check in through Facebook Places. The impact on local advertising is huge:

1. Deals will be everywhere

The “Deal” becomes the currency of local advertising because it is performance based, efficient for reaching the customer and isn’t burdened with the CPM-based campaign costs of traditional commercial or banner advertising.

2. The merchant cost for placing a deal drops to zero

Any merchant can add their own deal to Facebook Places free – see the Facebook Deal video. Groupon introduced their self service Daily Deal system called Groupon Stores only two weeks ago, and charges 10% of coupon value, a deep discount from the 50% fee they have been charging for their Deal of the Day promotion. At zero cost, running a deal becomes a no-brainer for merchants. Note that Facebook states they can reject frivolous or low quality deals so it can create a value-laden brand that can’t be dismissed like those junk mail coupon books we always throw away.

3. Deals = instant gratification

Facebook Deals immediately rewards consumers based on where they are. No need to print out a coupon beforehand. Every mobile app – Foursquare, Yelp, Groupon – will be forced to follow suit with a similar instant rewards program in order to remain relevant.

4. The “Check-In” becomes the proxy for the “Like” button

Simply put, the better the merchant deal on Facebook Deals, the more Check-ins it receives. The more Check-ins, the more exposure the merchant receives. Again, Yelp, Groupon and Foursquare will need to incorporate Check-in deals within their product offerings, but they will have a hard time competing with Facebook’s massive database of users.

Expect a lot of market adaptation from these mobile players to create business models that can coincide with Facebook Deals or work together with Facebook. For example, FourSquare can’t really charge merchants to add Check-in deals now that it’s free on Facebook. They may need to partner with other local deals services, i.e. Groupon or LivingSocial, to help promote their deals within an affiliate arrangement based on FourSquare check-ins (see next point).

5. Deal exposure and syndication becomes the value-add premium

Imagine the day when every local business has a deal up. How do they stand out? Groupon has created two tiers of promotion for their merchants that takes cuts of 30% or 50% of coupon value based on campaign reach:

Facebook is well equipped with targeted Facebook Ads to assist merchants in promoting their deals for a premium. Expect seamless integration of Deals and Ads in future Facebook marketing. Expect Yelp and other local ad-based businesses to create a similar tiered advertising model.

6. Deals open up affiliate opportunities

Everybody craves a deal. But the Deals landscape is very fragmented (anybody who receives loads of coupons and deals in their inbox will attest to this) and will become even more so with new channels like Safeway.com Personalized Deals and mobile rewards apps rapidly coming online (see points 8 and 9).

Deal aggregation systems like TheDealMap that expose every deal on a map and Yipit that emails a list of local daily deals to subscribers are positioned as deals portals to the consumer. Online systems that can connect deals with customers will be rewarded.

7. Local media well positioned for deal syndication and affiliate relationships

Local media outlets – TV, radio, newspapers – have been watching advertising dollars inexorably move online over the past decade. They now have the opportunity to leverage their local consumer brands to connect deals advertisers with their readership. The most innovative media companies will set up their own deals platforms that replicate what Groupon Stores is offering at premium pricing, or just work with Groupon Stores and share revenues.

8. Retailers are setting up their own deals platforms

National chains have the advantage of leveraging their scale to provide services local merchants can’t compete with. My local Safeway knows what I purchase through my shopping card, and can promote deals for items I normally purchase. Simply by clicking the “Add” button, Safeway automatically gives me the discounted “personalized” price without printing coupons.

9. Expect new mobile apps that provide instant discounts at point of purchase

Shopkick and Checkpoints are two mobile apps that provide instant rewards for walk-ins. Compelling the consumer to enter a store is simply an advertiser’s dream.

10. What about local businesses that don’t sell deep discount products?

Will Facebook allow accountants to provide discounted tax services? Probably. Retailers are only a small portion of the local merchant landscape. The new frontier for deals advertising lies in finding innovative and effective marketing methods for professionals, business to business services, and businesses that rely on lead generation, like real estate and auto sales.

We see a new trend in lead generation that connects buyer and seller one on one exclusively and transparently using variations of the Deals format. Most lead generation systems are based on subscription models or pay per lead that serve up leads amassed from capture sites. Consumers provide their contact information with no idea who will call them.

The new lead generation systems will provide an enticing “deal” from a specific company or business professional. More important, these deals are promoted or syndicated through appropriate channels that connect advertiser and customer. The key to the new lead gen system is functionality that allows the advertiser to transparently see who the lead is (it could be a Facebook friend already) and assess whether that lead is worth pursuing. If the lead is worthy, a fee is paid to the syndication channel where the lead was sourced. The new systems are performance based, and will contribute efficiency and far more certainty in the lead generation process in the same way the Daily Deal ensures every purchaser will be a customer for the advertiser.

Groupon‘s nationwide rollout of $25 for $50 worth of Gap merchandise got a lot of mainstream media airplay and sold 441,000 Groupons, netting $11 million. The net effect is the mainstream buzz that introduces Groupon to America. The “daily deal” is becoming institutionalized as the advertising medium most compatible with the Great Recession.

Here is what the Groupon + Gap deal will spark:

• More national deals. Think Office Depot, Best Buy, Home Depot, or Apple Stores where the sale of higher ticket items over $100 can justify a $25 for $50 deal. Groupon and other coupon players can layer on national deals on a limited basis so they don’t alienate their local business client base.
• National and regional retail chains now have a medium for brand revival. Can a loss leader Groupon strategy create enough traffic to generate supplementary sales, or even stave off seasonal financial problems from the one time coupon receipts?
• Shopping malls and local business associations can now systematically round robin “daily deals” among their stores in order to deliver foot traffic.
• The spawning of national deals that don’t require redemption at the physical retail level. Think infomercial products, Dell PCs and other electronics, and odd lot inventory.

Groupon has shown they are more than just a local restaurant play, and it’s frankly more market efficient to produce one national Gap campaign to complement the hundreds/thousands of local campaigns they do daily as their bread and butter.

One fallout about the Gap campaign is the prospect that everybody will be wearing the same Gap clothes this fall!

Google is talking about interactive video ads at this weekend’s Allen & Co. conference. Today, Twitvid is launching its video advertising platform over Twitter (press release). What’s important to know about video is that there is already an institutional history of the video format in the form of the :30 television spot.

Like television, the social media will act as broadcast media that will distribute the “video spot” over the channels – Facebook, Twitter – that are replacing television eyeballs. Even more promising are the upcoming geolocational marketing opportunities for local merchants who will be able to upload video, coupon deals and other content like menus on mobile applications like Yelp and Foursquare. Those first mover merchants who develop compelling media content will be rewarded with Facebook “likes”, the new currency for customer attraction and search results.

We’re now reaching the stage where the instant video upload for business starts to make sense. Remember the old Seesmic video conversation platform that Loic LeMeur took down last summer 2009 because he concluded video conversation adoption by the public was limited? I agree carrying on a video conversations may still attract a limited audience, but the ease of uploading video from iPhones etc. now makes it much more easier to develop video messages on the fly. For example, it would be easy for a chef to iPhone video the day’s dinner offerings and broadcast/post it via a social media distribution system like Posterous across the restaurant’s Twitter and Facebook feeds each afternoon:

It takes time for consumers to understand and adopt new media. The concept of Twitter was alien to most, until Oprah made Twitter accessible in April, 2009. The use of adhoc video for business messaging is still alien to those who believe video production quality standards are high hurdles, but pioneering businesses will soon figure out that audiences are more interested in the real time message being delivered in “living color”.

The landscape of online local advertising has been changing dramatically since Groupon announced its powerhouse VC investment less than three months ago in April. Groupon and its gaggle of imitator couponing systems have forced traditional media to re-examine their CPM-based banner ad models, and they’re now adding the same kind of Daily Deals to their ad mix. Right down to the local print:

(iPhone pic from: @bergenctynews)

The quick adoption of couponing systems by traditional media is an immediate reaction to ad competition, and signals a strategy to retain their traditional advertising channel to the consumer:

In three months, a wall has been erected by traditional media; there’s no reason to develop partnerships with the Groupons and their ilk when they own the distribution channel to the local consumer:

The biggest barrier now facing the infant couponing systems is gaining access to local media channels in order to promote their Daily Deals. They are essentially brand new companies, and they all leverage email lists and the social media as alternative channels to reach into the community.

The second barrier is building local sales infrastructure to service community businesses. Funded Groupon and LivingSocial can invest in local sales infrastructure, but the hundred other couponing ventures don’t have the luxury of capital and usually just build out in their home city.

What’s next for couponing systems

In order to scale their business regionally or nationally, couponing companies will create new or parallel business models:

1. White label couponing systems for license use by local media companies – TV, radio, newspaper – to offer Daily Deals. The white label licensing concept can extend to national advertisers like Home Depot to broadcast their local weekly deals and granularly to the local chambers and civic associations wanting to promote their merchants.
2. National ad agency and media buying services that acquire and harvest clients at the local level for national distribution across networks of local couponing and other advertising systems. For example, half price ski lift tickets at Vail or Mother’s Day gift wine packages from Napa can be sold through couponing systems regionally, even nationally.
3. Coupon aggregation systems like TheDealMap, Yipit and DealRadar make it easier for consumers to find local deals in one list or map. Affiliate marketing models will contribute to the expansion of these types of coupon distribution systems down to the neighborhood level.

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Local coupon aggregation and what’s next