Borrell Associates has just released “Economics of Search Marketing” to specifically address the challenges of a scalable local online advertising model.
The first important takeaway from this study is that local advertising is changing dramatically as small businesses in the next five years will move dollars from the old media (down 19%) to the new including to Local Search (up 39%).
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While these are good statistics for those of us building platforms that make buying local search easier and more cost effective there was plenty more to think about in this report.
The scariest part was how SMBs stop buying local search after a relatively brief period of time, like six months. The study suggests that over zealous resellers over promise the effectiveness of local search and thereby leave the small business owners disappointed in the results. And they say most resellers take 45% of the spend to cover their costs thereby making the ROI less attractive.
I would add to that that a reseller whose income is based on just the clicks will buy every AdWord imaginable even the very ineffective ones hurting the ROI even more.
So, what’s the solution? First, realize that local search is important, cost-effective and worth the effort.
From a brand perspective because you are trying to create a good program in a single vertical you have a certain economy of scale in your favor. The keywords that work in Memphis will also work in Denver. So you should be able to lower your overhead from 45% to about 25% including the hosting and monitoring of the landing pages or microsites.
You should run a good pilot program before you do anything to prove that local search works in your vertical and to build a reasonable proof statement that you can deliver to your retailers that isn’t overblown.
Make your local search program 100% co-op, that will keep everyone’s interest and move advertising dollars from the less effective newspaper and Yellow Pages to the more effective Internet.
And, finally don’t buy every keyword, monitor the click-through rates and what happens on the landing page and in the store as closely as possible. Buying fewer, better keywords is the best path to more sales.
It’s not easy re-inventing local advertising but those who get it right will be big winners.