Local Media May Have Blown Another Online Ads Opportunity

For the first time in the internet’s history, the hottest thing online today is local. Through daily coupon deals, place reviews and location sharing, local services is where it’s at.

That should finally mean boom-time for local newspapers, long out in the wilderness during an online age whose abundance had undermined their historical lock-down on local ad sales.

Newspapers have been undergoing a steady disintermediation for several years now, with Craigslist and Gumtree often held up as shorthand for the demise of classifieds. But publishers have had plenty of time to start from scratch and turn their remaining local ad sales clout toward reinventing the sector on their own terms, with customers in mind.

Yet look at the booming crop of next-generation local ad services and you’ll see none was devised by the operators who once had the market all to themselves. Daily deals vendor LivingSocial is making $1 million a day and is taking $175 million from Amazon (NSDQ: AMZN), sector leader Groupon could go on to bring daily deals to a much bigger audience if acquired by Google.

Had they injected this stuff in to themselves, local media could have a similarly brighter future. But, once again, it’s Silicon Valley developers and independents with no “media” track record who seem set for fortune.

Established proprietors are now throwing everything and the kitchen sink at advertisers, but some are still coming up short. paidContent:UK recently heard of one recruitment agency which was offered, by a regional news publisher, full-page ads in three of its biggest newspapers plus web banners for just £400. It yielded just eight queries. Unsatisfied even at that low rate card, the advertiser has now pulled its spend from print and radio and now advertises exclusively online.

Contrast that with another case we’d heard about, a small rural spa which opted to market through Groupon. The arrangement compelled it to discount its price and give a cut to Groupon, of course, but resulted in 73 new actual customers coming through its door. In these austere times, that’s not to be sniffed at.

The classifieds market, if it were not already decimated by Craigslist and Gumtree, has lately been battered further by the economy’s impact on small-business spending – no wonder advertisers are flocking to higher-return investments. The upshot: local media operators are losing their historic connection with local businesses.

How are they fighting back? In the States, publishers like McClatchy and Media General have partnered with Groupon to launch daily deal initiatives, powered by and sold by Groupon itself, while others like Cox and Star-Tribune Company are running such programmes in-house using white-labeled technology.

But British newspapers have not yet jumped aboard the local deals bandwagon – for them, deeper refinements and extensions of their existing sales strategy are the order of the day…

Northcliffe, which has 113 newspapers and 155 websites, will in 2011 expand its LocalPeople hyperlocal network to sell ads to a long tail of small business operators, like plumbers, it considers untapped. But, without scale, returns here, by default, could be small pickings.

Johnston Press, which publishes 253 weekly newspapers and 297 websites, wants to offer advertisers better targeting. “We are now implementing the type of technology that will enable us to tag all our content online with 1,300 different keywords,” digital director Henry Faure Walker told a Westminster Media Forum.

Once we tag our content, we can take it to an advertiser – would you like to advertise around Peterborough ice hockey? The yields on that are higher. The advertising model online has struggled – that’s why publishers ae where they are.”

Any new-wave ad model would seem to require satisfying users as much as advertisers. That’s why tools like property search do so well online. In news, advertising has usually been regarded as a necessary evil, separated from users’ main goal of reading content. It may now be a tools, or services, mentality that media operators must adopt, actively helping their users save money.

Johnston has also done a deal to integrate user-powered reviews repository Qype in to its local websites, replacing its existing, in-house directories and events databases.

But partnering with the likes of Groupon and Qype, whilst seemingly smarter than doing nothing, is just indicative that local media proprietors have lost the innovation initiative nowadays. They are needing to work with the pure-play online services that have stolen a march on papers’ own turf.