Is Geo-Local the Answer to the Local Advertising Quandary?

A few weeks back, I spent time with Ian White, CEO and founder of Urban Mapping, a San Francisco-based start-up that’s been in the geo-local trenches for nearly seven years. Not surprisingly, our conversation centered around the consumer geo-local services. A key takeaway from our conversation was something White said (and I paraphrase): The long tail is the enemy of local advertising.

That statement pretty much sums up why almost all local advertising efforts have been non-starters. It’s the web’s ultimate chimera. You see, anyone can start a local website, but in the end, because local content is relevant only to a very small section of society, national advertisers can’t take those local markets very seriously. Both the end customers and the best-suited advertisers are very local, and hence are limited in numbers. To sell to them, one needs a local presence.

This is one of the reasons why many local publishing efforts have failed to grow. The ones that are succeeding are essentially small businesses with limited ambitions.It’s an interesting quandary: Local advertising is an untapped market, yet the odds of a national player making a go of it are virtually impossible. In the past, phone companies used to rule the local advertising business by publishing Yellow Pages, but that business isn’t going too well these days. Just check out the declining the latest quarterly report from Dex One (s DEXO), the company formerly known as RH Donnelley. It reads like a page out of a vampire novel.

So what is the answer? GPS-based local offers which push you into taking action based on where you are. In other words, a needs-based location-aware mobile-based advertising platform that’s a part AdSense and part Groupon. Many companies are ready to go after this market, like Multiplied Media, the Calgary, Alberta-based company behind the Poynt Local Search app, which today launched the Poynt Offer Engine, a location-aware advertising and offer platform.

Poynt isn’t the only one with that idea. TeleNav, a Sunnyvale, Calif.-based company that makes location-based search and navigation applications has launched a new advertising platform for on-the-go users. The platform will allow advertisers to target their messages based on a person’s location and get more context from their search query.

TeleNav has also developed action-based metrics such as “Drive-to Rate,” a metric that captures the number of users who viewed an ad and chose to drive to the advertiser’s business location. Sort of like how Google (s goog) provides the click-through rates for its AdSense customers. I like this advertiser-centric, data-driven approach, as it makes the advertising platform more accountable.

TeleNav says its navigation services log about 700 million minutes of usage each month. Users of TeleNav’s search and mobile GPS navigation services view more than 40 million mobile search pages each month. The ad platform is going to target those users. TeleNav’s platform combines need (search) + location + local + offers, giving it a fighting chance in the market that is very crowded.

Everyone from Geodelic to Whrrl to Foursquare is targeting the local advertising market. Each has their own twist. Of course, giants Yelp, Apple (s AAPL) and Google are lurking in the background, each hoping to get a piece of $3.8 billion mobile advertising market. So far, I give Foursquare the edge over others, mostly because it had the brand recognition and tractions with brands and advertisers. That doesn’t mean others aren’t going to try. (Read: The Great Open Database of Place Pages in The Sky)

As Jeff Holden, founder of Pelago, the company behind Whrrl app, recently said local advertising is really about “foot streams” and not “click streams.” Companies that can turn foot streams into dollars are going to be the likely winners.

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