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—Monster.com, 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 Washingtonpost.com (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.