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.

On Media Transparent last October, I explored the idea of real time deals, which requires consumption of a daily deal within a limited time frame. Merchants with perishable products – seats at a restaurant, theaters, hotel rooms, airlines – want a deals system that quickly and efficiently fills excess inventory, especially at a moment’s notice. Both Groupon and Living Social introduced their versions of real time deals this week with Groupon Now and Instant Deals. It’s the next bold iteration of how online deals will transform the way consumers shop.

Restaurants can obviously use these deals to fill their slower Monday through Wednesday dinner slots. I list other types of businesses that would benefit most from real time deals:

High margin real time deals that can be sold nationally or regionally

• Last minute airline tickets for specific destinations flying from a preferred airport(s)
• Last minute hotel rooms – redeemable within 24-48 hours. Hopefully every city in a network will have at least one deal.
• Ski lift tickets. Resorts projecting poor skiing conditions over the weekend can run campaigns to fill their chairs with real time deals throughout the week.
• Cruises, vacation packages, hotel packages preceding long weekends and vacation periods.

Services and products based on seasonal demand

• Golf course fees. Nobody golfs in February, even in California. But if the weather is projected to be fair over the next week, half price greens fees will get the duffers out.
• End of season sports equipment based on season.
• End of season amusement and water park admission

What are the implications of real time deals?

1) Real time deals encourage last minute buying.

Now, consumers will “game” the real time deal system to extract savings. Wednesdays may replace Friday nights as restaurant night. People will wait to buy tickets to concerts, sports events or theater if they know the program doesn’t have popular appeal, and set up alerts so they’re notified of the opportunities. Groupon (and inevitably other deals systems) uses a simple method to deliver deals by having the user click on the “I’m hungry” or “I’m bored” button to check on real time deals geolocated near where they are. Spontaneous purchasing is exciting; everybody loves the feeling of instant gratification of a bargain and doing something fun at a moment’s notice.

Just as Groupon has instilled the “never pay retail” consumer culture that merchants hate, real time deals will instill a “never buy early” mindset that merchants will hate more. Yet, our society is adapting to real time and I expect the new consumer behavior will embrace late buying because advanced planning is such a hassle with cancellation and substitution (discovering there’s something better to do at the scheduled time) risks. It’s simply much more efficient to, say, confirm your travel plan a day or two before a planned event than to confirm the plan a month ahead only, particularly if pricing is essentially the same.

2) Paradoxically, real time deals can also encourage advance buying for seasonal services.

Tax accountants are far less busy in January than April. Consumers purchasing cars and other large ticket items will often spend weeks or months to make a decision. Christmas trees can be enjoyed longer if offered as a deal during Thanksgiving weekend. Time limited deals can force consumers to stop procrastinating and get things done while pricing is cheap during merchant off times.

Yesterday’s news of Groupon’s massive $950 million financing round wasn’t unexpected, and just confirms their intent to build a sales army to dominate SMB business in the same way Yellow Pages held sway over local advertisers in the 20th Century. Morgan Brown explains the new Groupon strategy well:

Groupon knows that in order to grow at scale in the SMB market you need a big sales organization with feet-on-the-street in the markets you’re hoping to reach. If you look at the successful small business advertising providers—the one’s that own large chunks of the market—they all have large sales forces. And it’s the large sales force that has stood between many a great, local-business-focused business plans and actual success.

Google, only a few weeks after their failed Groupon bid, immediately jumped into the fray with the launch of their local outbound telesales initiative, and will likely reinforce the sales force with an acquisition of a Groupon competitor.

The sea change in how local advertising is moving from Adwords to Groupon – it’s just simpler

Before Groupon’s emergence in 2010, Google arguably held the most widely used and efficient online advertising platform with Adwords. The problem with Adwords (and most online applications that require extensive training or experience) is it requires the B2B channel – search engine marketers, YPs and ad media companies – to make sense of the product for a largely tech-challenged local business market. How do you expect a local merchant to deduce the keywords and the pricing structures required for an Adwords campaign?

Groupon simplifies the concept of local marketing by defining deal structures that local merchants can understand from their experience with coupons. Even though the ad structure has simplified from bidding $1.00 per click on “Berkeley pizza”, to $10 for $20 worth of pizza, the problem with creating and distributing the online coupon still exists. Self service deal platforms like Groupon Stores and Facebook Deals will only be accessible to a small segment of savvier local merchants. Full service, either from a Groupon or Google sales rep, or another B2B player, will be the way to connect with local business in order to create coherent campaigns. Full service is the missing link, and the channel where new opportunities lie for a wide swath of industries – media both mainstream and social, Groupon and its cohorts, Google and search, and ad agencies both national and local.

Creating a new system of deal distribution

No player can source 100% of the deals, so the challenge facing Groupon or any other local ad media player is to avoid becoming a silo of deals:

…A new generation of  deal aggregation channels is also rapidly in formation.Products such as DealExchange and OfferEx present first generation examples. You also see a growing array of deal feeds finding their way into distribution on local search sites, providing exposure to consumers while they are initiating local business queries. Last time we counted there were over a dozen “deal aggregators” independently collecting up deal content and creating portals and distribution-centered business models.

from: Crumbling Silos: Daily deal distribution in transition | Closely.com blog

While building market share, Groupon is challenged with creating the deal distribution systems that shares profit with players who don’t or won’t have competitive sales forces. Otherwise, consumers will resort to the deal aggregation channels beyond Groupon to find and redeem deals.  Affiliate and deal sharing systems will evolve that enhance deal distribution efficiency across websites, Facebook and search, and in turn will subtract the aggregate number of more inefficient local sales people working for each independent deals provider.

Although Groupon and Google are intent on building local sales armies, I discuss the contraction of the sales force in 8 Major Social Commerce Trends for 2011:

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.

Simply put, both Groupon and Google are focused on creating a local ad sales infrastructure in which they manage and control ad buying decisions, but in an open source framework that attracts downstream partners and affiliates, who share profit by nothing more than redistributing their deals.

Get ready for the commercial social media...

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The latest Facebook metrics are powerful: 400 million active users (7% of the world), 50% of them logging on each day and spending more than 55 minutes daily on Facebook.

The sudden concentration of traffic on the social media led by Facebook has caught business by surprise. In particular, small and local businesses don’t quite realize their consumer is now spending a majority of their time on the social media, but they continue to rely on the old online standard: their website. Websites and blogs are critical as marketing collateral, but local businesses need to develop an online marketing presence that spans across the social media ubiquitously.

With all the buzz around Foursquare and Gowalla, why is hyperlocal media suddenly hot? Geolocation is changing the social media by providing nothing more than the tagging mechanism to define social networks by localities. Geolocation facilitates the development of a new, more practical, more intimate Twitter/Foursquare network of friends who just happen to be living down the street. It’s far more compelling to build a social network of folks you can have coffee with than the national networks than generally evolve in Twitter and Linkedin. I myself see this… I am starting to socialize with San Franciscans…

The Hyperlocal Marketing Opportunity

So we’re seeing social apps like Twitter and Yelp quickly adopting location “check-in” functionality, with Facebook in the wings. And this presents a huge opportunity. It’s a no-brainer for local retailers and businesses to see that they need to provide the most effective online venue for their local customers to “check-in” to. The new local “websites” are the Facebook business page, the new local advertising vehicle is the Twitter coupon, and the new reviews column is Yelp.

You haven’t seen them yet, but Facebook is primed to evolve into a massive Sunday advertising circular for local businesses:

And why not? It’s free. Enterprising local media publishers (for example, Breaking News sites) will curate and compile these merchants into local online directories.

Twitter will develop hyperlocal couponing systems that will be online equivalents of PennySaver coupons and Valpak:

And why not? It’s free. Couponing is effective because it is perceived by consumers as “found money” while straight advertising may now be considered “spammy”. You’ll see the advent of new local social media based advertising agencies that will create turnkey Twitter / Facebook / Foursquare couponing campaigns for merchants. And these campaigns will be accepted because online data is more efficient for tracking and analysis than traditional advertising channels like radio / TV or inefficient direct mail offerings like PennySaver. There is a defined ROI.

Conclusion

2009 was the year when the masses found Twitter and Facebook. 2010 will be the year when local business begins to recognize the power of leveraging Facebook, Twitter, Yelp and Foursquare et al to achieve a level of community engagement that standard “one-way message” advertising can’t achieve. It’s about being ubiquitous across the social media so your community of customers can find your services via their preferred channels – Twitter, Facebook, etc.

Related slideshow: Ubiquity marketing (Jan. 2010)

Related webinar: I’ll be discussing “The Impact of Geolocational Media” on the Virtual Bar Camp April 6 at 2:15pm, Room #4. Register and join our discussion.

We’ve often discussed how Twitter is positioned to become a hyperlocal advertising platform. 140-character sound bite based ad messages, particularly consumer friendly coupon and discount deals, can be targeted to a community and it’s free.

Here are three new examples of Twitter based local advertising models:

1) Mashable introduced Postabon yesterday. Simplicity is the key to finding local deals. Postabon, currently operative only in New York City, displays deals on a map and allows the community of users to rate them. Very straightforward.

Users need to log in to Postabon to submit their deals with time frame parameters:

2) Edhat is an independent Santa Barbara news service that has created Twitter-like ad banners for sale to local merchants:

Edhat offers advertisers to “put your Twitter tweets on Edhat” which points to eventually developing a self-service ad banner platform where the message can change based on the tweets the advertiser broadcasts.

Local Twitter ads can be automated AND free

Postabon requires that advertisers login and “post” their deals on site. The deal posting process would be much simpler if advertisers could simply tweet their deals automatically through Postabon, and not bother with the login process and manual input. Edhat has an advertising based business model, so it’s not free.

3) Breaking Seattle News, A2BreakingNews and other Breaking News sites have added Daily Deals and a Daily Blue Plate Specials page that allows local advertisers to tweet their deals automatically and free.

All they need to do is to get added onto the Twitter List for Daily Deals on each Breaking News Network city site simply by tweet request. If the Breaking News site doesn’t have a Daily Deals page, ask for it at #dailydeals.

Twitter Lists simplifies the aggregation of local deals and discount coupons so that any individual or organization can provide helpful information to their community.

This slideshow is a presentation we’ll be making for the California Association of Realtors next month. Marketing local business services like real estate to a community is changing. Pushing to a community via drip email marketing and shopping cart advertisements is time consuming and frankly more intrusive to the recipient than broadcasting the same information out as a media channel. What’s the difference in positioning? Media channels are in a much better position to provide favors and opportunities by virtue of their being a hub in their community. This in return attracts business. It’s the subtle difference between pushing your name out there and pulling in people who share business interests with you.

Fast Company’s Michael Gluckstadt’s article “Can Anyone Tap the $100 Billion Potential of Hyperlocal News?” points out the problems when a national advertiser like the New York Times, or local news aggregators like CitySearch, Topix or Outside.In developing “community” try to build a sticky hyperlocal website. Answer: there is little incentive for anybody in the local community to take the lead in building some corporate hyperlocal site. They would rather build their own.

Hyperlocal seems like a can’t-miss proposition. “There is real demand for good information about our neighborhoods, our children’s schools, our streets, our blocks,” says Jay Rosen, an NYU journalism professor and media blogger. Except for one thing: Success remains perpetually around the corner, constantly predicted yet never fulfilled. While different people have named hyperlocal as a trend to watch every year since 2004, “everybody’s groping for a business model,” says Gordon Joseloff, who fits the all-too-typical norm for this space with his popular, distinguished, and unprofitable site in Westport, Connecticut.

The business model problem is twofold:

1) National advertisers ignore the hyperlocal markets because they are too sales labor intensive in their focus on mom & pop SMEs

“Advertisers have no interest in community Web sites,” says Gordon Borrell, CEO of the analyst firm whose statistics are routinely cited as evidence of hyperlocal’s bright future. “They don’t have the type of material advertisers want to be around,” referring to archetypal hyperlocal stories about high school basketball and drug arrests. “Sites are connecting the dots inappropriately.”

2) Hyperlocal networks are much more intimate and require buy-in participation from on-the-ground players within the community. Although national hyperlocal community sites try to attract community conversation, there is no real incentive for somebody in the community to create a stake in the site without any kind of ownership or compensation.

For example, Outside.In showcases BackBay in Boston on their home page:

Outside.In, Topix, etc. are great for aggregating news from local publishers, but they lack community participation, as evidenced by the Back Bay Discussion Board (three entries for 2009):

What Outside.In needs is an About.com-like local monitor to engage the community, but this can become a financial albatross by introducing training and possible compensation of these monitors.

The Hyperlocal Business Model – an Illusion?

A hyperlocal business model requires community participation. The one-way broadcast “newspaper” model of Topix local news + advertising is just a variation on the old Web 1.0 model. ONE THING IS NOT EVEN BEING MENTIONED IN THIS CONVERSATION ABOUT HYPERLOCAL ADVERTISING -  Local advertising revenue models may not even be viable once local merchants discover that they can reach and market to their community through Twitter. Free. Of course, this is based on the assumption that Twitter continues its rapid adoption by the masses, which in one form or the other (see Facebook/Friendfeed) should happen.

The Breaking News Network has the ingredients to address the needs of the hyperlocal community – simple WordPress based sites constructed in a matter of hours and customized to the city or community, and anchored by hubs of the community to market and promote the Breaking News City site.

Related articles:

What’s Missing from Today’s Hyperlocal Sites – Community Leadership May 7, 2009

The Local Merchant’s Guide to Twitter June 16, 2009

Twitter is Destined to Become a Local Advertising Media Platform May 12, 2009

We’re leveraging participation in each city within the Breaking News Network by helping local businesses understand the power of Twitter as local advertising media:

We’ve published a simple, but explicit eBook introduction to Twitter for local businesses called “The Local Business Owner’s Guide to Twitter” for free download. The final chapters provide high level tactics for using Twitter as a local advertising media.

Let us know what you think about the eBook and retweet it! For a real estate perspective on Twitter, download the Twitter for Real Estate Twits book at MyTechOpinion.

We see Twitter positioning itself as a local advertising platform: it’s simple to use, requires little time commitment to Tweet, and free. Here’s a guide for local merchants on how to use Twitter to reach their local audience:

1) How different local merchants should use Twitter

2) How to build a local Twitter consumer community around you

3) How to survey for business opportunities

4) How to make your Twitter campaign more efficient

1) Services

Walk in / appointment based services: Barbers, beauticians, spas, nail salons, auto maintenance / lube,

Tweet schedule openings for the day. Offer daily special and coupons.

Examples: @truemassage, @polishednails

Articles: Putting Twitter’s world to use

Medical / health services: Optometrists, dentists, chiropractors, doctors

Create a professional profile befitting your standing in the community. Discuss the tools and trends of your practice. Demystify.

Examples: @scottgreenhalgh (Cosmetic dentistry), @evansclinic

Professional services: Accountants, attorneys, financial planners

The problem with arcane professions like the law and accounting is the “boring” factor. Twitter should be used to connect with the community for branding purposes. Become a “business calendar”; accountants can broadcast changes in tax codes and alert important filing dates.

Examples: @cordellparvin, @kanoisandeep (Tax guru)

Articles: Attorney marketing on Twitter. Valuable or waste of time?

Transaction based services: Real estate, mortgages, travel agencies, recruiters

Transaction based service providers suffer from a spammy reputation because it’s easy to incessantly tweet out home listings, job posts or travel deals. The focus should be on providing information and data relevant and interesting to, say a prospective home buyer, by talking about communities or market conditions. Interacting like a “real” person is paramount to establishing a welcome identity as a hub, not a spammer, in the community.

Examples: @mortgagereports, @scottkato

Arts and entertainment services: Night clubs, events organizers, symphonies

Tweet schedule of events and shows, offer quizzes, advertise discounted tickets, create contests – give away two free tickets to a local follower

Examples: @yoshisjazz @sanfransymphony

(note: arts groups should design great backgrounds!)

Articles: Cultural groups tap social networking

Hospitality: Restaurants, hotels, taco trucks, street food vendors

Tweet the day’s lunch menu @ 11am, and dinner menu @ 1 pm, 4pm. Link to recipes. Offer coupon code.

Examples: @divinopiazza, @kogibbq, @nakedpizza

Articles: Naked Pizza erects Twitter billboard, List of street food vendors using Twitter

Retail

Advertise your deals of the day, weekend sales, etc. Your Twitter feed’s timeline chronicles what your store offers so consumers will use this as a consumer and comparison shopping resource. Consumers may use Twitter to ask questions in lieu of a phone call because it’s more efficient. Be sure to intersperse deals tweets with interesting links. @ABC_Carpet twitpics its rugs!

Examples: @brooksrunning, @ABC_Carpet, @wfm_oakland (most Whole Foods Market branches have their own Twitter feed)

Twitter marketing no-no: Abandoning a Twitter feed at @bestbuybayarea

Articles: List of US retailers on Twitter,  Retailer Twitter aggregation

2) How to Build a Local Follower Base:

• Follow the followers of other local Twitter feeds in your city.
• Contests: Offer two free tickets to concert or lunch in a weekly drawing to a local follower. The locals will follow you.
• Quizzes: Post picture of city landmark, or quiz about interesting local facts.
• Give to the community: Support other local Twitterers by retweeting their local interest stories and events.
• Provide links to interesting articles related to your business, market conditions or city. For example, link to reviews of cameras if you’re a camera shop.
• Position your Twitter account as your online point of contact by adding your feed info to business cards and storefront signs. Twitter names are much easier to remember than phone #s. Article: Twitter to replace 800 #s as point of corporate contact.
• Tweet using hashtags at a Breaking News site for your city, and request placement of your feed into the City site.
• Personalize: Of course, make sure you’re not tweeting about business all the time or it may come across as spammy. It’s best to create two accounts – a business account like @yoshisjazz that sticks to the subject, and a personal account to have conversations that reveal your personality.

3) Surveying for Business Opportunities

• Monitor Twitter search terms for your business. Many Twitterers ask for help to their follower base. If you’re a tax accountant in Chicago, monitor the search terms “Chicago tax accountant” by creating an RSS feed at Search.Twitter.com and tracking it in your RSS reader.

• Use the hashtag conventions #ihave and #yourcity occasionally (add them to a tweet once per week or so) to alert others who monitor this hashtag convention for services or goods you provide.
• Register your Twitter feed at Jobaba, the social marketplace for local services. More of these localized service sites will appear.

4) Twitter Efficiency Tools

• Use a Twitter scheduling application like Hootsuite or Tweetlater to schedule your tweets for the week. Especially useful for restaurants that know their menu offering for the week.
• For larger companies or stores, use a collaborative Twitter application like CoTweet so your Twitter account can be monitored and updated by multiple employees. Example: @ocreggie has five monitors.

Craigslist has become the standard for community classifieds; it’s more efficient reaching a local audience than any other local advertising media, and it’s free. But it does have problems:

1. Craigslist advertisers / posters are generally anonymous, and thus less credible.
2. Craigslist advertisers don’t have track records or eBay feedback ratings.
3. It can take a long time to produce a Craigslist ad, and you need to re-create the ad to get it up to the top of the list a few hours/days later.

Using Twitter to distribute classifieds can address these problems:

1. Twitterers, if they are not purposefully anonymous, have identities that generally tie into other social networks like Facebook or blogs/websites.
2. Twitterers have a track record on the basis of their existing tweet history. Querying the Twitter name and identity on search engines may also uncover reputation problems.
3. It can take as little as 30 seconds to produce a “Tweet” classified, including uploading a picture or video via Twitpic or Twitvid.

The Hurdle to Twitter Adoption:

Twitterers posting classifieds need a relevant local audience to sell to. We’re building the Breaking News Network of hyperlocal Twitter-based community sites to facilitate that local exposure. Later this year, each city in our Breaking New Network will be introducing a localized Tweetslist.com application that will provide local classifieds exposure just like Craigslist.

ilist.micro and #ihave and #iwant

ilist.micro is a Twitter classified service that developed a Twitter hashtag convention used for selling and requesting goods by Tweeting #ihave and #iwant. We’ve incorporated this hashtag convention for the Classifieds section of our San Francisco, Los Angeles, New York City, London and Toronto Breaking News sites.

Related articles:

Building a National Breaking News Network just like a Craigslist