All the excitement is about cracking “local”, or cracking the secret to the local advertising market.  There are millions of small business merchants out there that are really passionate about what their businesses, and they want to tell the world. Up until now they were doing things like handing out flyers, taking out ads in local publications, and paying to be in the yellow pages. Some of the more tech savvy buyers have even tried things like google adwords, or claiming their business on yelp, but this is only the tip of the ice berg. The vast majority of local business have not made the jump to online marketing, and here-in lies the opportunity. The world is racing towards providing an advertising or promotion solution to the mass market of small business merchants.  Group Buying is just the first channel to break through and scale.

Self Service (technology) vs Managed Service

Now that we have an idea of what the objective is, lets take a look at the first of two major races within the worl of local; moving towards self service. In one corner you have GroupOn, the local advertising titan. Via a resource intensive / sales heavy strategy they went out into the market and literally pulled local merchants into the online advertising world. GroupOn structured the campaigns, wrote the copy, designed the creative, and most importantly amassed a huge distribution list via a very simple channel, email.  They acted as an agency for their own ad platform.

In the other corner, you’ve got Foursquare, the tech world’s darling LBS service, and one of the best product teams on the planet. They’re going directly for the self service route by building easy to use tools for local merchants . This is a very web / new media approach to the problem, one where “sleezy” sales ( disclaimer, I’m a sales person, so no offense implied) people are avoided, and the simplicity of the product is all that is needed for success.

So how will this race play out? As you can see in the traditional advertising world, agencies (the service layer in the middle) have only gotten stronger, so we will never get to a 100% self service model. On the self service side, there are a variety of tools like ad sense, hubspot, and clickable that have arguably built higher margin businesses going straight to a willing consumer base.

The real key in how this translates into the local space is the merchant, yes the customer. They are the most important piece of the equation, and they are not ready to become internet marketing gurus. In the thousands of phone calls / hundreds of hours spent on the phone with local merchants while at Scoop St, I can tell you these business owners have other priorities.  They’ve got customers of their own, which are a huge hassle, and they have to manage a staff of employees on-site.  Merchants REALLY want to promote their businesses, its a natural instinct for a business owner, but they don’t have time for complicated technical solutions.  To make matters worse, its still unclear to them what the return is on these marketing schemes (will discuss in a follow on post).

Knowing more about the local merchant, its going to take years until they are comfortable enough to use a self service platform, my guess is at least 5 years before it reaches scale.  In the meantime, the companies who have the efficient account managers and sales people on hand to help atract merchants will continue to take the lead.  Groupon and Living Social will continue to grow, and if they’re smart they’ll try to educate merchants to use self-serve platforms.  This services layer will be key!  Value will be created by companies that can build and scale these teams, even if its 3rd party agency like teams that run campaigns for merchants across all platforms.

What better way to find real estate than to look next to your favorite bars, cafes, and restaurants?

Heck, I’d pay foursquare to see those ads for the month or two I was looking for an apartment!

( I know it’s in French, but here’s the “tip” on foursquare for an apartment)