Greg SterlingSterling Market Intelligence/Opus Research

November 18, 2010

Me, Here, Now: Me, Here, Now:

The Local Paradigm ShiftThe Local Paradigm Shift

‘Paradigm Shift’

We’re in the midst of a shift—driven by mobile and social media—dramatically changing the way we communicate, navigate relationships as well as the world around us.

Market Noisy, Chaotic, Accelerating

• Market has become increasingly “noisy” for advertisers (SMBs, even brands)

• Consumers too: information overload, paradox of choice, too many new gadgets

• Pace of change is picking up, time accelerating (toward real-time)

Convergence of Trends

You Are Here

Catalyzed by “internet in your pocket”

LocalSocial

Mobile

Bridge between Online and Offline

53% of mobile search has local intent

70% of mobile search tasks completed in 1 hour (vs. 1 wk for PC)Source: Microsoft (2010)

People finally recognizing connection between internet and offline behavior

Power of the “check in” (drive foot traffic to stores)

Mobile Will Dominate—Soon

• 5B mobile subscribers

• Smartphone penetration 28% US, 37% Spain

Old Simplicity Gone—Forever It Seems

• Old days: local media monopolies (YP, newspapers, radio) made life simple for consumers, advertisers

• Internet and now mobile have disrupted usage, margins and business models to varying degrees

• Disruption accelerating further

• Two examples: daily deals, local database

Deals Gone Wild

• Groupon: $400M topline this year

• LivingSocial: “well over $500M in 2011”

• “Come out of nowhere”

• More than 120 companies operating in the US in June; dozens in Europe

• “Customers not clicks”

• Models that push risk out of system for advertiser threaten traditional local ad models

SMBs Prefer Groupon Model (Conceptually)

Local Data Become ‘Commodity’

• Had been a primary source of value

• “Free” database of places can now be had from:

- CityGrid

- Google

- Facebook

- YPG

- Factual

- Placecast

• Not in Europe—yet

Local Data Become ‘Commodity’

“Two guys in a garage” via APIs can now build competitive local sites/apps (not possible before)

Independent developers don’t face same inertia, cost structures or corporate inhibitions

Better position to compete for verticals or specialized consumer apps

Online Brands Highly Perishable

• Examples: Friendster, MySpace, Digg

• Citysearch and now . . . Yelp?

• Yelp:

- Founded in 2004

- Became leading local brand in US through content and dedicated community

- Almost bought by Google for $500M; now facing more direct threat by Google

- Movement toward “lists” and “Likes” threatens longer form reviews content

Google: Local-Mobile Juggernaut

• Local search• Reviews• Maps• Navigation• Shopping/products• Voice search,

visual search

• All PC mobile

Google “owns” Android devices

Google “Boost”

Automated SEM for SMBs

Facebook Also Has Designs on Local

• Facebook has replaced Google as the “it” company

• Haven’t totally figured out local strategy

- Places

- Check-ins (+ Deals)

• Perhaps 2+ million SMBs with Pages?

- Active vs. presence only

- Penetration in some categories high

• Compare: Google Places (4M+)

Facebook Largest Mobile Network?

• FB: 200 million active (daily) mobile users

• Top mobile site/apps

• “About 70% of Facebook users are outside US"

Source: Nielsen (October, 2010)

Twitter Too

• More than 200 million users globally

• More than 65 million “tweets” per day

• Wants to figure out local

- Playing with deals

- Wants to offer ad product for SMBs

“We’re thinking of a more self-serve process to advertise on Twitter, where a local coffee shop can advertise on the service looking for Twitter users in the area . . .”

-- Biz Stone, Twitter co-founder

Rise of the Local Ad Network

• About 8 or 9 bona fide local ad networks (many in mobile) that help monetize local impressions/searches

• High eCPMs

• Some YPs now involved (APIs, etc), but should have been the network themselves

Explosion of User-Generated Content

• User-generated content has exploded

• Whole businesses built around reliance on freelancers

• Demand Media: IPO

• Associated content bought by Yahoo for $100M

Traditional Publishers Squeezed

• Traditional local media publishers need to use G, FB, TW for distribution/exposure

• But G, FB, TW also trying to be marketplaces that make traditional less necessary

• Sales channel/customer service (“hand holding”) never goes out of style

• Local advertisers have more options, more confused than ever

• Outlook for consumer usage less certain

Traditional Publishers: TAC

69% of IYP traffic in US not owned and operated

Traditional Publishers: Identity Crisis

• A sales channel/agency for our advertisers and onramp to network?

- SuperMedia: “the full service digital ad agency for America's local small-to medium-sized businesses”

• A trusted consumer brand for local information across platforms?

• Answer this: Why should consumers use IYPs or comparable local directories?

Some Quick Summary Thoughts

• Google will “own” NAP lookups – the bottom of the funnel

• Big brands dominate (but room for “flavor of the month”). Perpetual instability

• Facebook becomes a local powerhouse (risk of poor execution)

• Traditional local media struggle to compete against either/both

• X-platform strategy required; mobile continues to gain

You Are Here—or Will Be

You Are Here

LocalSocial

Mobile

Greg Sterling greg.sterling@gmail.com

Twitter.com/gsterling

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