In The News

The Times (London): The scramble for advertising

Local businesses are still too hard to find on the web, but the big web companies are queueing up to help

by Jonathan Weber

Whether or not Google's stock is really worth more than $600 a share, the forces behind the incredible run-up are not hard to discern: internet advertising is growing by 25 per cent a year, all indications are that it will continue to grow fast, and Google's market share is increasing even as the overall market grows.

Indeed, one of the most notable aspects of the rise in online advertising is that the spending is increasingly concentrated on a handful of very large sites – the top ten are taking in some 70 per cent of online ad dollars, according to the Interactive Advertising Bureau.

That concentration goes a long way in explaining the explosion of acquisitions in online advertising, with the big – like AOL and Yahoo! and Microsoft – looking to get even bigger by buying ad networks like Tacoda, Right Media, and eQuantive. And it also explains why a lot of investors think scale will be important in going after the biggest untapped market in the online ad world: small, local businesses.

For the most part, small businesses have been slower than big businesses in shifting marketing dollars to the internet, and it's not hard to see why: many small business owners don't have the time or expertise to learn about the new medium, and ad purveyors don't have the time or expertise to create the products and services that will work in small local markets.

Both of those things will undoubtedly change over the next decade or so. That's why a start-up company like ReachLocal can raise an incredible $68 million (£33.5 million) to position itself as the ad sales force for local online advertising. According to a fine blog I read called Local Onliner, the company now has 11 local sales offices and sells for "most of the local portal and sales engine leaders."

The sleeping giants in the local ad business are the Yellow Pages companies, and they are rushing to build out their online offerings. But it's not obvious that they'll be able to translate their one-time stranglehold over sectors like plumbers and injury lawyers into similar dominance on the internet. In fact, Google and Yahoo!, with their local initiatives, are a big challenge, and lots of new players are rushing to get involved.

A new survey sponsored by a company called Webvisible shows a great deal of variety in how people do "local search." They use search engines, they use local directories, they use local newspapers, they use consumer review sites. There's a whole sector of companies - Yelp is probably the leader – whose premise is that getting a community to post reviews of businesses is the key to effective local search.

I have more than a passing interest in all this, of course, since my company, NewWest.Net, is very much about new approaches to local online ad business. Personally, I think we are still very, very early in this game, and it will take quite a bit of time to sort out. But I also think that brands and quality content will matter a lot in developing trust and credibility at the local level, and that in turn will be important to becoming the go-to source for local information and advertising.

Certainly, the current experience when searching for small businesses online is often quite disappointing, with strange aggregations of generic directory listings leading to an unhelpful maze of links. A lot of money is being spent trying to do this better, but the smaller and more local the geography, the more difficult it will be for big national directory platforms to provide a good experience.

This online market, more than most, is still very much up for grabs.