YO BRO IT’S ME LITTY

One of the most interesting business opportunities on the L-Hoops radar is the ability for small businesses to leverage digital to locally market to their customers. Put more plainly, how can the pizza place, neighborhood bar, barber shop, arcade, bowling alley or Japanese massage parlor use the web as a marketing tool to drive new business?

Small business owners have long ago figured out the key to advertising and marketing while brilliant MBA’s, award-winning agencies, and self-proclaimed “marketing gurus” hopelessly manipulate the 4 P’s of marketing into buzzwords of mass destruction. The simple principle: only spend money if it leads to making money!

Local businesses are advertising the same way that they did a decade ago. This includes the obligatory phone book ad, penny saver coupons and local print publications. If they want to go Hollywood (think car dealers) they pony up with a super cheesy thirty second radio or television advertisement. Case in point…

Until recently, there have been few truly effective (effective = money making) digital platforms for local small businesses to advertise efficiently. The one true success, Google, happens to also be the greatest company of this generation. For those who think Google is just a nifty tool to help pickup French chicks, the true value is that it enables businesses to place small text ads on relevant search result pages AND allows the advertiser to easily track the result of their advertising expense. But there is a tremendous opportunity that goes way beyond Google. Just ask your local pizza place, neighborhood bar, barber shop, arcade or bowling alley. My guess is that many small business owners just aren’t nerdy enough to be advertising through Google. In fact, small businesses often look at their web presence as a cost center in which they have to pay to develop and maintain their own website rather than as a revenue generating marketing play.

New digital start-ups try to conquer the local space because of the vast untapped market but the well runs dry before they ever see substantial advertising revenue. Dating back to the dot com days with Microsoft Sidewalk, to hyperlocal news sites like Backfence.com and experiments from the Washington Post, the local space has been a digital albatross. The cost to create local content far outweighs the non-existent revenue from the zipped pockets of non-digital local business owners.

Thanks to the ever-evolving digital landscape, local businesses now have a plethora of digital resources they can use to help drive sales. Restaurants have an increasingly significant reputation to maintain on review websites like Yelp, Menupages and Citysearch. Businesses can use Facebook fan pages combined with highly targeted facebook ads. Twitter is a fluent platform to instantly connect with customers. There is also a renewed focus and investment in local email newsletters (Thrillist, Urban Daddy, Flavorpill and enhanced television and newspaper websites. To take the place of failing print media companies, local news (Everyblock, Patch) and relevant blogs and blog networks (Outside.In, Placeblogger) are taking their place. An even more promising development is the progress of the mobile web which is naturally location conscious. New apps like Four Square, Loopt and even BBM have tremendous potential to connect advertisers with potential customers. This NY Times article does a good job sizing it up.

Before we all have a neighborhood block party let’s realize it’s going to take at least another decade for Joe the Plumber or the average small business owner to be digitally-aware enough to do their own online marketing. This creates a neat little digital black hole.

Great local digital applications for users.
Meager local advertiser revenues.

In this situation I think the middle man wins. Who or what can help local businesses advertise digitally through the many new local platforms? How can that scale by city or neighborhood? I don’t think an individual publisher or platform can scale on its own because the unit economics don’t work. By that I mean that the cost of monetizing in an individual market is greater than the current revenues generated from a limited local audience. But if the local sales costs can be reduced, or the audience better monetized, then the unit economics can make sense for individual platform/publishers. I don’t think the “middle man” is a marketing agency. That is too manual for the digital world. More likely, the “middle man” is some kind of automated market place that allows local businesses to efficiently spend on local advertising and see a positive ROI. Yeah, that is kind of similar to a Google Adwords model. But it doesn’t overcome the friction of bringing the non-digital small business on to the web. For once I don’t have all the answers! I would love to understand Google’s local strategy.

I’ve become a true believer that Sportsvite’s success will lie in local. Participating in recreational sports is inherently local. No matter how well we can aggregate a recreational sports audience, the most value to marketer’s lies in how Sportsvite can influence their local activity. As Sportsvite captures the attention of players within their community, it is creating a highly effective marketing platform. Now we just need to understand how to reach the local advertisers and then scale to just about everywhere!