The next step in advertising: Local media as merchants?

If there’s one thing we’ve learned from the Internet it is that if middlemen don’t add enough value, their days are numbered.

Local media companies may not have thought of themselves as middlemen—but that’s what they have been for advertisers. When I used to buy advertising a decade or so ago, I felt it was my job to do what I could to get the media provider out of the middle between my brand and the customers we desired. For example, we did a lot to drive a direct relationship, including encouraging them to register with us so we could communicate with them directly later through e-mail. If we were doing it today, we’d add Facebook and Twitter into the mix.

Back then, there was more than enough ad revenue for the local media company to sustain their business—so much profit, in fact, that some companies got complacent. Just as railroad companies should have realized they were in the transportation business rather than the railroad business (and thus they missed the opportunity to get into the auto or air transportation business), media companies should recognize their business purpose is to connect their audience with products and services the audience desires. Without that business purpose, they can’t fulfill their editorial mission.

The traditional mission of a media business is to collect a loyal audience with high-quality information, and let the advertisers worry about how to sell stuff. The media companies sold the audience, not product or services.

Retailers historically aggregated consumers for product makers—for example, giving Proctor & Gamble a way to sell to people in Poughkeepsie. But many retailers didn’t add a lot of value beyond offering consumers product selection and price. Retailers such as Best Buy have realized that and have started to add other value to the experience (e.g., the Geek Squad). Meanwhile, one of the retailers’ biggest costs has been advertising—circulars, broadcast advertising or something else.

Today, media companies on the Web aggregate consumers around specific interests and product niches (technology, cooking, travel, music, movies, sports, finance) much more efficiently. I believe today’s media companies will need to get directly involved in commerce to ensure a sustainable business model. The Times (UK) and Burda (Germany) are both reported to be realizing a substantial portion of their profits from direct commerce enabled from their websites, selling third-party travel packages and other goods and services. Local media companies such as the Washington Post are either partnering with group-buying sites such as LivingSocial or rolling out their private label competition to Groupon and LivingSocial.

Some traditionalists may shudder at this blurring of church and state lines. However, the trusted relationships media companies and retailers historically aspired to have is more important than ever in this age of transparency. A company that shills for inferior products will be outed immediately. Conversely, a company that provides entertaining, inspiring and informative content and allows consumers to more easily find and complete a transaction for the best products and services is providing a great service to their readers. In a sense, Groupon is serving as a quasi-city guide and take great pride in finding unique offers and locales for their community and have an editorial staff of more than a dozen people.

The byproduct for traditional media businesses unwilling to make these moves is self-evident. It’s not hard to see this in action as you pick up your ever-shrinking newspaper that isn’t covering the topics it once did. In other words, their editorial mission is suffering due to sticking to their traditional ways.

Once again, traditional media run the risk of being slow to adapt. In some regards, smart media companies need to think more like retailers. That is, get directly involved in the transaction that they are only indirectly touching today. Rather than let the next eBay or craigslist form independently, they should get actively engaged in some of these new models:

  1. Private Sale business: Companies such as Gilt Groupe and Ruelala are experiencing phenomenal growth. These insider-ish member based businesses borrow from outlet-mall sample sales to create great value for the consumer. In a nutshell, they have a member list to which they send “flash sales.” Those sales are typically 72 hours in length, and the consumer gets access to curated merchandise at 50-75% off of retail. Yet another example is private sale pioneer, France-based Ventee-privee, which is approaching $1B in annual sales and like the others is highly profitable.
  2. Group Buys: Groupon and LivingSocial are seeing tremendous growth tapping people’s social networks to present consumers with great deals that still make sense for merchants. Group-buying sites have also gained investor interest because of their compelling economics as you can see for Groupon and LivingSocial.

While these trends can span both local and national media properties, I believe that the private sale business is a great fit for a national publication. National publications tend to be focused on a particular topic area whether they are gadget blogs, design site, or parenting magazine. Here are a few examples:

  • Wouldn’t Zulily (a private sale site geared toward young children’s clothing) bolted on to Parents Magazine grow far more quickly and still be a good fit with Parents Magazine’s audience mission?
  • Vogue has partnered with Gilt Groupe to “shop the issue” at
  • Daily Candy has launched their own Sample Sale.

Meanwhile, local media is a natural fit for group buys—the group-buying phenomenon is largely local. Already we have seen Groupon work with Metromix and LivingSocial partnering with the Washington Post. Group-buying programs can grow much faster by piggybacking the daily or regular habit most consumers already have with various local news properties.

National media will have to be more careful not to cross journalistic lines. It will be relatively easier for local media as most of the group-buying categories don’t directly relate to their editorial focus, with the exception of special sections such as travel. The value of the local media isn’t terribly different than the traditional model – i.e., aggregating a large, local audience. For that matter, “special reader offers” aren’t anything new. However, in this case, they are taking the additional step of closing the transaction.

Those of us who have sold media understand how successful private sale and group-buying programs can avoid the common scenario of trying to explain to an advertiser that the media property achieved the agreed upon objective (i.e., exposing consumers to the merchant’s offerings) but it may have been the merchant who didn’t do their end of the bargain very effectively. These social commerce programs can avoid a common problem with ads – the lack of measurability, and the inevitable disagreements between the merchant and the publisher over the effectiveness of the ads.

Some believe this model of commerce will die out as the economy recovers. I disagree. Product purveyors have always had extra inventory they need to unload. Further, the private sale approach allows them to do it in a way that they don’t perceive damages their brand even if they have premium positioning.

Likewise, in the local arena where popular group-buying categories such as restaurants and service providers (spas, dentists, etc.) are having great success, those organizations previously employed the “spray and pray” method of advertising with little idea whether it was working or not. With group-buying, they not only get a directly measurable transaction closed, they get what amounts to free advertising even for people who don’t purchase, since the group-buying sites amount to a quasi city guide. Groupon states in their marketing that 9 out of 10 businesses who have used them state that Groupon customers are among their “new regulars”. That puts this model in the no-brainer category for many local media.

Moving Beyond Traditional Display Advertising: It's All About ME

To date, nobody has found the holy grail of advertising models to support thriving hyperlocal sites. Traditional display ads, even with rich media, are only a start.

For the most part, these are still simply online facsimiles of offline ad types. Isn’t a banner ad nothing more than a print display ad brought online with a few bells and whistles? We need ad types that take advantage of the unique attributes of today’s digital media—whether it’s the social nature or immediacy of the web.

There are some emerging models that excite me, because they truly take advantage of the medium even if they are borrowing concepts from the past. I believe local sites should begin moving beyond traditional display ads by deploying three of these new formats: coupons, group buys and deals of the day.

All help overcome the issue online ad sellers frequently face. Sites may have done a terrific job of delivering traditional ads, but too many advertisers still say “Gee, I’m not sure if that ad worked or not.”

What these three examples provide are models that are easily understood by small business owners. In a world where the revenue per customer is relatively low, a local publisher can ill afford to spend a lot of time convincing an advertiser that he or she got a great deal. At the startup I’m involved in (GrowthSpur), we believe that “it’s all about ME” —the most effective revenue generators are going to be Measurable and Easy from the advertiser’s perspective. Coupons, group buys and deals of the day provide these sort of easy measurement of effectiveness, by driving identifiable customers directly to the advertiser’s front door.

We aren’t the only ones excited about these ad models. Companies such as Groupon and LivingSocial are some of the hottest start-ups around, with rapidly growing audiences and revenue. This is enabling them to raise significant expansion capital. Groupon just raised another huge round at an incredible valuation ($1.2B) for one reason – they are obviously having success as investors only make these kinds of investments in today’s environment if that is the case.

This latest advertising revolution should seem familiar to anyone interested in local media: The last major cycle of disruptive companies—, eBay, craigslist and others—decimated the classified-ad business, one of the traditional major revenue streams of local media. At GrowthSpur, we are working with local publishers to ensure that the next major cycle of disruptive ad models are a tremendous growth opportunity.

Now for the three measureable, easy models:

Coupons: The most straightforward and similar to offline models. Everyone likes a deal, whether it’s a two for one or 25% off of you next meal at the deli. A variety of white-label providers are offering their platform to publishers to streamline this process. The best of them don’t just replicate a print ad online – they offer easy sharing with friends and even “send this to my mobile phone” functionality.

Group Buys: Groupon and LivingSocial are the most active and well-funded. The basic idea is a business offers a great deal on some product/service—a $30 restaurant certificate for only $15, or three fitness classes for $29—but only if a minimum number of people sign up. Naturally this encourages consumers to share the deal with their friends, to ensure that all of them get the deal. The publisher/vendor collects the money. At the end of the sale period, the publisher cuts the business a check for an agreed-upon split, typically 50/50.

Deal of the Day: A variation on the theme above. Typically a publisher makes one offer per day that is a great deal for the consumer. The advertiser offers this deal exclusively through the publisher—so the business owner knows that any consumers asking for that deal came from that offer. In many cases, all the consumer has to do is mention the deal to get it.

We’re seeing sites ranging from (working with LivingSocial) to uber-deals site Your Long Island charting a path in this realm. We expect to see a lot more as these and similar models prove themselves. Just remember that for it to work for the local advertiser, it’s needs to be all about ME.

How the Vancouver Winter Olympics (and other big stories) can help a hyperlocal news website grow

Hyperlocal sites, by definition, are focused on their local community. However, periodically something happens in your community that has national significance that can draw some broader attention. More important is how it can accelerate your reach within your community by exposing your site to a new set of local people. This latter form of traffic is the most sustainable.

The reality for most communities is that their neighborhoods either never received coverage from local media or that coverage has pulled back as budgets have tightened. This has left a big opportunity for hyperlocal sites to get a marketing boost like no other. I will share how that has worked tremendously well for my local site — — so that you can take these experiences and apply it into your own site. I will also share how we are being proactive with the upcoming Olympics to draw more audience. Our site has a local connection with the most prominent snowboarders on the U.S. Olympic team — Lindsey Jacobellis, Seth Wescott, Shaun White, Nate Holland and Graham Watanabe — that we are going to utilize to provide our community with a perspective they won’t get from NBC.

Curtis Bacca is a local the top snowboard/ski technician in the world with a small shop in town called The Waxroom that tunes skis and snowboards. No one has done the tech work for more gold medalists at the Olympics or X Games in the last decade. He had three athletes (Jacobellis, Holland & Wescott) competing in two events at the recently completed X Games and they came in first, first and second. He shared some pics after the event and was profiled by ESPN. He also provided his updates on the Waxroom page. Afterwards, he told me he was blown away with all people from our community and around the country who saw what he was doing and was psyched to do more at the Olympics.

At the time I’m writing this, he’s in Vancouver, well before the Olympics start, to do his reconnaissance and testing the boards to ensure the boards are riding at their maximum velocity, as every 1/1000th of a second can matter. In fact, he’s been at an “undisclosed location” that he calls the “Secret Squirrel Test Facility” and has had some mystery shots of a Boeing test facility honing the boards for the unique conditions of the misty, foggy, wet snow of the Cascades that his athletes will encounter. We’re setting him up with a helmet cam as they recon the course. After the events, he’s going heli-skiing/riding with Wescott and will share that, as well as being able to liveblog from his Blackberry while shooting pics (we have a feature that allows you to email pics/stories directly to the site), giving us the inside scoop, etc. If you know anyone who has interest in snowboarding, in particular, send them to the Waxroom page. They’ll get a perspective like none other.

Listed below are items on how we hope to turn a first-time visitor into a repeat visitor (something that would Jeff Jarvis would probably recommend to Rupert Murdoch surrounding the whole paywall kerfuffle). I should give a shout-out to Neighborlogs for providing us with a Content Management System (CMS) that enables what I outline below. In an earlier piece on OJR, I highlighted why I selected their platform over WordPress, despite having worked extensively with WordPress. The items below were brain-dead simple, which wouldn’t be the case with most CMSs I have worked with.

  • Nearby Stories module. Most of our stories are geo-tagged. Chances are if someone is reading a story about a topic, they’ll be interested in stories that are about that same location.
  • Featured Stories module. These are our editorial picks of the most interesting stuff on the site that we hope draw them in.
  • Featured Photos module. Some people are more visual so we highlight some of the best pics that come in to the site. Hopefully some will grab their attention. Those pics, in turn, have links to the articles they are associated with.
  • Events module. We highlight the upcoming events happening in the area and encourage them to post their own events.
  • At the bottom of the article, we give them ways to sign-up for our email newsletter or follow us on Twitter (as well as some recent tweets).
  • Finally, if none of that grabbed their attention, at the bottom of the page we have teasers for our Most Viewed Articles.

The following are some other examples of the sorts of stories that give a hyperlocal site a boost to ts visibility that we have seen work very well (some obvious, others less so):

  • Natural disasters of local significance: We have had a flood and mudslides. At the time we had the flood, our community paper only updated its website once a week. Conditions were changing by the hour, so our updates, including pulling data from federal data sources, were invaluable for our community.
  • Natural disasters of local and national significance: We had a major wildfire that became the number-one priority fire in the country. With people being evacuated and many local people either traveling or being second homeowners, the local newspaper and radio didn’t do them any good as those sources don’t reach beyond our community. We turned our classified system into a resource for people needing housing, places to board animals and more. Even though the local newspaper has 30 times more resources than us, we had the most comprehensive coverage because we tapped our community.

    They were shooting pictures, sharing stories, taking video and more. In part they were inspired by my limited videography skills (my only real skill is I don’t mind running up 3000-foot peaks to get a good view, as you can see here and here), knowing they could do better. Some of the video ended up getting picked up by CNN and by CBS’ 60 Minutes (see footage here). The video is from a member of SunValleyOnline’s community that happens to be a professional videographer but contributed his video to us for free though later was paid by CNN & CBS for his footage. You can see more of the footage that we posted on YouTube to see the range of video from low to high production value. By the time the fire was done, we’d had site visitors from all 50 states and 42 different countries. To this day, many of those people still visit the site as they have some connection to our area (friends, family, second homes, etc.). On an even more gratifying note, to this day people will stop me on the street and thank me for how connected they felt even though they were hundreds or thousands of miles away, as they’d been evacuated or were second homeowners.

  • Locals hitting the big time in their sphere: Whether it is a Little League team going to the World Series, a local athlete going to the Olympics or someone in the arts hitting the big time, locals are deeply interested in their experience and proud of their connection with those individuals. Some subset of those people are willing to blog and share their behind-the-scenes perspective that you don’t get in a traditional media outlet. Even if it is raw, people love it.

Around the time of‘s 10-year anniversary, I visited its newsroom and noticed what looked like an EKG reading (i.e., a line graph with spikes up and a plateau followed by more of the same). The only difference was each plateau on the graph was a little higher than the next as you moved left to right. As I got closer, I realized that this graph was actually MSNBC’s traffic growth over 10 years. Each of the spikes was labeled with the associated news event — OJ verdict, Princess Di’s death, elections, tsunami, 9/11 and so on. Little did I know that there would be a correlation between that graph and growing a hyperlocal site’s traffic.

Not unlike MSNBC, we have experienced the same dynamic. That is, when there’s a big story we will see a spike in traffic followed by a higher plateau of traffic. That plateau is what has the greatest value. If we did a good job when people visited for the first time by giving them a good experience, they will come back. Better yet, we get some to subscribe to our newsletter or RSS feed and are in a coveted spot to remind them of our site. Our site has gotten progressively better at increasing the length of time people spend on our site as we have added modules on the page to expose them to what else we have. Let me give a recent example. We had an unfortunate avalanche tragedy at the local ski area that defines our area. [As fate would have it, it happened at the same time we were doing a complete platform shift that I wrote about on OJR, but that’s a different story.]

SunValleyOnline has not spent a penny on marketing, in the traditional sense, to build its audience. Instead it has used tactics such as what I outlined above to build itself into a top site in its area. This kind of resourcefulness is what has enabled SunValleyOnline to be one of the early profitable hyperlocal sites supporting a small team.