What Are the Most Interesting, Important, Challenging Issues in Local?

MapI’m giving an opening presentation in a couple of weeks at the SIINDA conference in Munich. SIINDA, the search and information industry association, is the merger of the former EADP (yellow pages) and EIDQ (directory assistance) trade associations.

I’ve got a number of things I could talk about but they’re all too familiar. I feel that I’ve lost perspective.

Here are some of the things I’ve been thinking about:

  • Ongoing chaos and confusion for SMBs in trying to figure out all the channels
  • New segmentation approaches to SMB market
  • Continuing impact of mobile on local lookups and search
  • The rise of the multi-screen user and the cross platform internet
  • Evolving role of location in mobile advertising
  • Location is the new cookie
  • The marriage of online and offline commerce and the rise of local “marketplaces”
  • Verticalization of local (consumer and advertiser)
  • Structural and sales challenges of traditional local media trying to generate more digital revenue
  • Google’s algorithm changes and their impact on local listings
  • Social media (i.e., Facebook) and its emerging role in local search and SMB marketing

Which of these are most interesting and relevant to you? Which ones would you be most interested in as a member of a conference audience?

Are there other questions or issues that are more pressing or provocative? I’d be interested in your input.

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Under the Radar, Thumbtack Grabs Surprising $100M Series D Round

Thumbtack

Local services marketplace Thumbtack has been around for about six years. It raised its first VC round ($4.5 million) in January 2012. Last week it raised $100 million bringing its total funding to almost $150 million over five rounds.

Most people in the local space don’t talk (or think much) about Thumbtack. But clearly it’s doing something right — at least the VCs think so. They wouldn’t have invested at this level without solid evidence of momentum and a belief in a huge-dollar acquisition or a potential IPO.

A rumor I recently heard is that the site is doing something on the order of $2 billion in annual gross sales (meaning the total value of transactions booked). However I haven’t spoken to anyone there for at least a couple years.

The site has evolved from a directory/local search model to a lead-gen model. It is essentially the second coming of Service Magic (now HomeAdvisor).

Users fill out vertically specific wizards about their projects. Then they typically receive three qualified names of merchants who have “purchased” the right to submit quotes.

Thumbtack wizard

Local businesses must submit Thumbtack Credits in order to convey their quotes to consumers. Each credit costs $1.67; different categories require different numbers of credits to submit a quote. For example, it costs 2 credits (or $3.34) to submit a quote in the Central Air Conditioning Repair or Maintenance category. Concrete Installation requires 5 credits (or $8.35). 

This billing model is somewhat novel, which may be part of its VC appeal. It’s a quasi-CPA model and so far less speculative than “advertising.” But it’s also less concrete than a transaction or percentage fee when an actual job is booked (see, e.g., RedBeacon).

According to Compete the site has just under 2 million monthly uniques. My guess is that is almost entirely SEO traffic. The site was second only to Yelp in several cases that I checked. I would speculate, however, that only a small fraction of Thumbtack’s visitors are from branded or navigational searches.

Thumbtack SEO

Thumbtack may get acquired. However if investors are hoping for an IPO the site will have to develop much more visibility and not be so dependent on SEO for traffic. It now must build a brand.

I’m impressed and frankly surprised that Thumbtack appears to be doing as well as it is — largely under the radar.

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Attack of the Round-Faced Wearables

Moto 360

The square smartwatches (Samsung Gear, LG G Watch) have already largely failed. Motorola’s forthcoming round-faced Moto 360 is the new “reference design” that Samsung and LG are racing to match, hoping that round faces appeal more than the clunky rectangles we’ve seen to date.

We don’t yet know what the anticipated Apple iWatch will look like or what capabilities and functions it will feature. I have a Samsung Gear Live watch and have no desire to actually wear or use it.

I’ve been spending lots of time thinking about smartwatches, wearable device advertising and various user scenarios. Here are a few observations and predictions.

A successful smartwatch will be characterized by at least two and maybe all three of the following:

  1. Beautiful design that will create a desire to own the item purely from an aesthetic standpoint
  2. An affordable price (below $250) for the mass-market version (iWatch probably comes in at $299)
  3. It can work on its own without a mobile phone connection

The latter issue presents problems for device makers and consumers.

Samsung’s “Gear Solo” watch (for India) and perhaps its forthcoming Gear 3 have or will have built-in connectivity and won’t require a smartphone pairing. This is a way Samsung could potentially break out with a smartwatch. Indeed, the more I think about this issue, the more I tend to believe that over time stand-alone functionality will need to be present for success.

(I suspect the iWatch will presuppose and require an iPhone, which I imagine is part of the point for Apple)

There’s the basic problem of paying for the always-on data connection for your watch. Consumers fundamentally don’t want to be shelling out additional money to carriers. Family and multi-device plans might address this issue over time.

Moving on to monetization: traditional mobile display advertising is very unlikely to be viable on wearables. The same largely goes for mobile search ads. However I can imagine, for example, a news app that inserts some interstitial ads as one swipes through headlines. We might also see video pre-roll — if video can be made to work reasonably well on these devices.

On the whole, however, marketing on wearables is going to be notification based. These will be notifications that consumers have opted-in to receive in advance (presumably on the PC or a smartphone or tablet) that can be pushed based on location/context, time of day or other considerations.

Fundamentally I don’t believe people want to make calls on their watches (a la Dick Tracy). I also don’t think they want access to dozens of apps. They’ll want a few core features and capabilities such as health tracking, weather, news/sports, local discovery and perhaps one or two other things (e.g., social media updates). Ironically I think Foursquare might really shine on a smartwatch given its new focus on personalization.

Notwithstanding the success of smartphones a “wearables market” is not a foregone conclusion or in any way inevitable. Much depends on the variables above. In addition, if Google, Apple, Microsoft, Samsung and others don’t get it right during the first few “at bats” consumers will start to lose interest.

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Samsung’s Clever #IceBucketChallenge Ad

Here’s a clever if not-fully-realized way that Samsung got in on the ALS Ice Bucket Challenge and demonstrated one of the benefits of its handset (water resistance) vs. others:

Yet most brand efforts to exploit social-media phenomena like this are doomed to fail or worse (trigger a backlash). There are perhaps some lessons to be drawn from carefully studying how the whole thing got going and why it exploded but ultimately it was fun/daring and for a good cause. Both ideas played equally in the popularity and spread of the thing.

Marketers will be hard-pressed to generate any sort of “Ice Bucket formula” that can be cynically applied to general social media marketing campaigns.

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Help Me Make the LSA Work for You

Uncle SamToday is my first official day as “VP of Strategy and Insights” at the Local Search Association. A couple of years ago the LSA was the Yellow Pages Association. However the industry has radically changed and thus the YPA became the LSA and broadened its focus and mission.

Today it has more than 300 members in 30 countries.

I’m going to try and help broaden it further and form relationships with different groups and events as part of what I’m doing. Of course I’ll be speaking and producing content but President Neg Norton and his team want to make the LSA a hub for valuable information for members and non-members alike (somewhat more valuable for members of course).

LSA medium

The LSA already has a pretty well developed roadmap but I’m helping to influence it. Let me know what kinds of content, services, events, data you’d like to see. We’ve already conducted member and non-member surveys and have a reasonably good sense of what people want but your input and comments will be valuable in fleshing that out further.

Many people still don’t fully understand the importance of local/location/offline and we want to reach out to a larger constituency to not only support but educate marketers, agencies, brands, SEOs, retailers, startups, SMBs and others how the internet plays in local buying and “last mile” advertising and consumer decision making.

Feel free to let me know your thoughts no matter how wild, outlandish or outside the scope of what you think the LSA does. We want to make the LSA responsive to the needs of “the industry” and place it at the center of the location revolution that’s happening now in large part because of mobile.

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Survey Finds 60% of Consumers Visit Facebook Pages Before Buying in Stores

Facebook PlacesLast week Gannett’s G/O Digital released a new consumer study based on a survey of 1,000 US adults who were “interested in buying products and services from local/small businesses.” The purpose of the survey was to see how these consumers engaged with local businesses (and ads) on Facebook and how they used Facebook in their shopping research.

Several previous studies have established Facebook is widely used by consumers to help make purchase decisions. Consumers look at reviews on Facebook as part of that process. Yet Facebook is not an efficient or, in my view, very user-friendly site for shopping or local search. I keep waiting for the stand-alone Facebook “Places” app (or similar) to appear.

It’s a little like Waiting for Godot. But back to the G/O Digital study, which confirms what others have previously found but also goes beyond earlier studies with some specific findings that are important to point out.

Among the social media sites used for local shopping Facebook was the clear winner, although I’m surprised that Pinterest didn’t do better. Facebook is not very “useful” in my view when it comes to finding local business information.

Social media Facebook used for local shopping

Despite my views, these survey respondents were highly engaged with Facebook and Facebook advertising as sources of local business information. Almost 60% said they visited business pages before buying offline at a local business. This is perhaps the most important finding of the survey — and a major reason to have an active Facebook presence.

Restaurants were the most commonly followed local business category. Education and then beauty/spa came in second.

Facebook SMB study Gannett

The major reasons that consumers said they went to SMB Pages were to look at reviews/ratings and product or service information. Eighty percent of survey respondents said that positive reviews/ratings on Facebook Pages made them more inclined to buy from the SMB under consideration.

Equally interesting (and impressive) was the number of people who engaged with advertising from SMBs on Facebook. This was not a Facebook sponsored study so I tend to take the numbers at face value (so to speak).

Screen Shot 2014-08-19 at 11.17.10 AM

In terms of the particular types of ads that “worked” to attract and motivate consumers, Offer Ads beat other categories (e.g., promoted posts) by a significant margin. I spoke briefly to Facebook about this finding and they said their internal data don’t show this gap between Offers and other types of ads.

In terms of ad influence, behaviorally targeted ads or retargeting were most likely to affect this group (no privacy concerns I suppose). After that ads that were locally relevant followed by demographically targeted ads were most likely to have an impact on these respondents.

Gannett Facebook SMB study

It’s important to point out that there was no measurement or reporting on actual store visits or sales. These are opinions and attitudes. Still the results are significant and worth understanding clearly.

From my point of view here are the big takeaways:

  • Large numbers of consumers are regularly using Facebook to help make local/offline buying decisions
  • Reviews and ratings are the most critical aspect of this; however they’re also looking for product and service information
  • Offers that are targeted by location, interests and demographics are going to be potentially very effective in influencing consumer buying (not if there are bad reviews however).

Accordingly SMBs should:

  • Set up a Facebook Page with lots of rich information about the businesses, products, services, hours, etc. Treat it like a website alternative. Even if it’s not regularly updated it should have complete information (including lots of photos). Facebook Pages are much more visible than SMB websites in general — and they’re cross-platform.
  • Collect/solicit reviews from customers (I don’t believe there are Yelp-like strictures around review solicitation here)
  • Experiment with ads and especially Offers to drive in-store or offline visits

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Square Adds Scheduling to Growing Portfolio of SMB Services, Tools

Square appointments

Last week I described some of Square’s functions and services as CRM-like. I asked how far would Square go to build out its small business marketing portfolio? Today the company announced Square Appointments.

Though not “marketing” per se, it continues the build-out of Square’s commerce platform and more comprehensive suite of SMB-centric services.

If the business doesn’t have a website Square will provide a booking page/site. Pricing is based on headcount: free for 30 days, $30 per month for sole proprietors, $50 for two to five employees and $90 for anything above that.

While low-cost credit card acceptance has quickly become something of a “commodity,” Square’s more compete set of services makes it a more attractive option for SMBs than say PayPal, which is only about payments.

Online scheduling will also create or reinforce customer loyalty.

I’ve spoken numerous times in the past about how “operational” companies such as Square can disrupt more traditional SMB marketing services providers. A company buying digital media ads could easily and quickly be displaced if “back office” support providers decide to expand their services into marketing — provided they’re competent. (Demandforce [now part of Intuit] is the poster child for this.)

That’s not to say that Square will inevitably get into SMB marketing services. But it argues those companies more deeply integrated at the “operational” layer are probably going to develop stronger, more lasting relationships with SMBs than pure marketing services providers.

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Coupons Generate Brand Loyalty, Fast Action and More Spending

RetailMeNot logoLast week Groupon announced disappointing earnings. In the wake of such news I’m always asked about whether consumers are losing interest in “deals” or coupons.

Many people have lost interest in Groupon-style daily deals. However Americans remain coupon crazy.

Brands and many retailers are ambivalent about coupons but use them because they continue to “work.” Evidence of the continued effectiveness of coupons comes most recently in the form of a survey (n=500 US consumers) conducted by Forrester, paid for by RetailMeNot.

Notwithstanding Groupon’s stumbles, email remains the top way people obtain digital coupons, followed by search.

Coupon distribution

Despite the fact that only a tiny fraction of all coupons in the US are distributed digitally, they can have a powerful affect on shopping behavior. Below are some of the top-level findings from the survey:

  • Coupons most effective type of retail promotion
  • 68% believe that digital coupons have a positive impact on a retailer’s brand; an equal number say coupons generate loyalty
  • 47% open to trying new brands if they receive offers via smartphone
  • Coupons received on PCs but especially mobile devices lead to quick action: “More than 90% of smartphone and tablet users redeem their digital coupons within several days”
  • 55% of smartphone coupon users will spend more money during their online or in-store visit — the majority at least $25 more

Coupons RetailMeNot

Here are the things that struck me:

  • Coupons positively impacted retailer brand perception and loyalty (mild surprise)
  • Coupons generated nearly immediate redemption (no surprise)
  • Coupons motivated additional, unplanned spending (modest surprise)

Finally the survey asked about how consumers discover coupons on their mobile devices in particular. There were roughly 12 answer choices with fairly even distribution across the top categories: email, search, apps, push notifications, from retailers and others.

This “diversified” distribution indicates to me that the digital and especially mobile coupon world is still somewhat chaotic and there remains a meaningful opportunity for either retailers themselves or a third party to provide better or more comprehensive access.

Of course, RetailMeNot and a few others are jockeying for that position.

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Dex Media Sees 12% Q2 Digital Rev Growth but 21% Print Decline

Dex Media logoEarlier today Dex Media announced Q2 revenues. The company reported revenue of $474 million against a loss of $85 million. Digital revenues grew 12.4% but print revenue declined 21%.

Operating revenue for the first six months was $930 million, a nearly 50% improvement over last year.

Dex Q2 revenues

Across the industry print continues to see a steady erosion. So far the gap hasn’t quite been closed by digital. This is true for newspapers as well.

Beyond the revenue implications there are some significant sales implications. Managing costs probably means migrating more sales from premise-based reps to telephone sales.

One question is whether telephone sales can be as effective in closing new business (or retaining customers). There are those who argue it can while others think the industry’s migration to telephone sales is self-destructive in the long term.

What are you thoughts about the future of local media sales in the face of these cost and revenue pressures?

Update: A few highlights from the earnings call transcript:

  • Client retention is approximately 80% and better at higher spending end
  • In Q2 igital sales accounted 29% of amortized revenue
  • Currently 36% of clients buy some digital product (lots of room for growth)
  • Average annual spend per digital client is $2,700 to $2,800 (per year)

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Consumers and Marketers Going Opposite Ways on ‘Native Ads’

Sponsored content

It may sound naive but it’s not entirely clear to me why online advertising has become such a “cat and mouse” game — putting consumers and marketers in such antagonistic positions. Ads can in the best of circumstances be useful and even entertaining (see the Super Bowl).

Most of the time, however, they’re neither.

Paid search has managed to generate massive revenues by matching user intent and being relatively unintrusive. In traditional media, newspaper circulars are still “read” with enthusiasm and interest by selected audiences. Coupons are very effective and extremely popular. Print yellow pages, an earlier version of the search model, was full of “content” that was almost entirely advertising.

Online display advertising, in contrast, has a history of struggling for attention. Display has compensated through increasingly aggressive use of data and targeting. Many online consumers, perhaps wary of such data-collection practices, are increasingly seeking to block or avoid marketers online.

Survey Do Not Track

Source: Communispace

Native advertising or sponsored content, a euphemism for what used to be called “advertorial,” is increasingly seen as one viable response to consumer ad indifference or avoidance. BuzzFeed just raised $50 million against an $850 million valuation partly on its sponsored content model.

A majority of marketers have embraced at least the concept of native ads. A recent survey of 400 digital marketers by 614 group found that 69% believe native advertising is “valuable.” Yet nearly the opposite is true for consumers. As previously reported, a 2014 survey by Contently found a majority of consumers disapproved of sponsored content.

Part of the reason that native ads may be “working” is because consumers don’t immediately recognize them as ads and confuse them with actual editorial content. That’s part of the point. Marketers protest this accusation by arguing that they’re not trying to confuse or deceive anyone.

Yet fundamentally consumers don’t trust most forms of digital advertising. Once they understand something is an ad they’re much more skeptical and critical. This is why native ads seek to blend in and do the legal minimum to call attention to themselves as ads.

By my informal observation, nearly one in four “stories” appearing in Yahoo’s news stream is sponsored. One has to pay close attention to avoid clicking on them.

There’s no reason to believe that consumers will warm to sponsored content unless it becomes better and more prominently labeled as advertising. My view is:

  • Disclosures must become more obvious and clear to avoid confusion
  • The ad placements must become more directly and contextually relevant (travel ads in a travel context), which may sound like a contradiction of the above statement
  • They need to be less like conventional ads and more genuinely informational and interesting

Much of the sponsored content I’ve come across is perfunctory or bland or just bad. Yet good “content” is expensive and most marketers aren’t that interested in being thoughtful about their advertising. They’re relying on targeting and data more than improving the creative.

There are certainly exceptions that we can point to but in my experience most marketers simply want to put their existing ads in front of consumers in new ways that aren’t so easy to avoid. But that’s not going to work over time.

Most people by now have seen comedian John Oliver’s epic takedown of native ads. In the event you haven’t here it is:

Image via BuzzFeed.

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