Greg SterlingOpus Research/Sterling Market Intelligence

November 9, 2011

The Local Paradigm Shift 2011:

‘Big Trends’ Edition

The SoLoMo ‘Mandala’

LocalSocial

Mobile

Sacred image of the Social-Local-Mobile universe and a symbol of our collective search for beauty and wholeness in a world of chaos and disorder.

• Hype-Local: Demand, Awareness Growing

• Mobile Momentum Continues

• Social Media, SMBs& the ‘Now What?’ Problem

• Local Data Tsunami

• Payments and Real-World Analytics

• From Clicks to Transactions

The ‘Big Themes’

Hype-Local: Demand, Awareness Growing

• Before 2000: Local was hot as part of internet-everything bubble

• Before 2000 – 2007: Local misunderstood, underappreciated

• After 2009: Mobile helps make local transparent and sexy

• Premium product: Local impressions/calls/clicks pay/command a premium (e.g., Nexage, xAD, AT&Ti, etc.)

• Not just for SMBs anymore:

“86 percent of national marketers surveyed intend to look for ways to better modify, adapt, and localize their marketing content, messaging, and prospect engagement practices. Clearly, localized marketing is becoming a critical area of strategic focus and competitive advantage for brands.”

(Source: CMO Council study of brands/agencies October, 2011)

A Rough Timeline

Brands: “What localized marketing channels currently using?”

Source: CMO Council October, 2011 (n=300 brands, agencies)

Social media 48%

Mobile, SMS, email 44%

Newspapers 41%

Portals, search engines 33%

Local mags 31%

YP/IYP 7%, daily deals 6%

In-person events 57%

• In US, annual retail sales are roughly 4T USD (2.48T GBP)

• 80%+ of online consumers use the internet to do product research

• E-commerce is 4.6% (95% purchases happen offline)

The Value of Local

Source: US Census Bureau Q2 2011

Mobile Momentum Continues

• By 2015 more mobile/wireless internet users than fixed-line users – multiple predictions

• Between 30% and 40% (or so) of “EU5” have smartphones

• UK smartphone penetration 40% (50% by Q1 2012)

• US smartphone penetration: 43%

• In US and UK roughly 7% of Internet traffic coming from non-PC devices 

• US mobile internet audience now 100M users

Source: Morgan Stanley, 2010, IDC, 2011, Ofcom, comScore, Nielsen (2011)

Smartphone, Mobile Internet Growth

Smartphones: 50%+ for Under 45

Others:

• Pew: 42%

• comScore: 37%

Source: Nielsen, Q3 2011

Overall Smartphone (18- 44 yrs) Smartphone (25-34 yrs)

57%47%

38%

43%53%

62%

Feature phone Smartphone

Smartphone Ownership: by Income

Source: Pew Internet Project, July 2011

At least 53% penetration for those making over $75K USD (54.2K EUR)

0102030405060708090

Global mobile apps vs. web consumption, minutes per day

MINUTES

70MINUTES

66MINUTES

74MINUTES

81MINUTES

64MINUTES

43

June 2010 Dec 2010 June 2011

Desktop Web iPhone/iPod Touch

Sources: comScore, Alexa, Flurry Analytics

Mobile vs. PC Time Spent

Source: Nielsen 8/11

Android Users: Apps Trump Mobile Web

33%

67%

Mobie Web

Mobile apps

Average Android user (US) spends 56 minutes per day actively interacting with the mobile web and apps

Source: Nielsen 6/11

Usage Concentrated in Top 10 Apps

This is Android data but the pattern also holds for iPhone users

43%

8%4%3%

3%

39%

Allocation of time spent among apps

Top 10

11 to 20

21 to 30

31 to 40

41 to 50

All others

Mobile Impressions Already Massive

Source: Flurry Analytics September, 2011

If there were advertisers sufficient to fill all the mobile app "inventory" the value of that inventory would exceed of online display advertising.

Tablets a 4th Screen, Mobile-PC Hybrid

• Total tablets “in the market” as of end of Q3: 46 million (not counting eReaders)

• 40 million iPads (sold); 6 million Android tablets (shipped) – 95% of tablet traffic coming from iPad

• T-commerce: 48% of US tablet owners made a purchase in past month (October, 2011)

85%

15%

iPadsAndroid

Source:Company statements, comScore Q3 2011

Source: Google-AdMob, March 2011

Tablets Cannibalizing PC Usage

28% of respondents said that the tablet is their primary computer

Yes No

77%

23%

Since you started using a tablet, has your desktop/laptop usage decreased?

Mobile/Tablet Access ‘Primary’ for Many

• Pew Internet Project (July 2011):

- 87% use internet on their phones

- 68% of smartphone owners go online daily

- 25%“mostly” use their phones to access internet

• Google-AdMob: 40% of iPhone/iPod Touch owners (n=7,300) go online more often on their mobile devices than via PC (2009)

• Mobile will be a primary access method for a substantial segment of the population within 3-5 years

Siri Mainstreams the ‘Voice Interface’

Siri is to voice commands and “voice search” what the iPhone was to smartphones in 2007: a breakthrough experience that forces competitors to respond

“Voice is the new touch”

--Dylan or Simon

Source: InsightExpress Q2 2011, Luth Research (Q2 2011), Opus Research 2010

Deals/coupons preferred form of mobile advertising

In store coupon searching common use case on smartphones (smartphones)

50% of survey respondents have made a special trip to a store after receiving a mobile coupon

Text message (push)

Email

Text to receive (pull)

App

QR code

Check-in

25%

18%

17%

13%

10%

8%

How would you prefer to receive coupons on your mobile?

Deals/Offers Preferred Mobile Ads

Social Media, SMBs&the ‘Now What?’ Problem

What Is ‘Social Media’?

• Consumers talking to each other online

• Consumers talking about companies, products and brands

• User-generated content

• Online word of mouth

• Coming up: Search vs. Social, Can Social Media Be Outsourced?

• Facebook has 350 millionactive mobile users globally

• Twitter has100 million active mobile users and “46% of active users make mobile a regular part of their Twitter experience”

• Overall comScore says US mobile-social networking audience just over 70 million

• 40 million US mobile users access social networks (including blogs) daily

Mobile Inherently Social

Source: Company statements, comScore Q3 2011

25

Source: GSMA UK, 12/10

Faceb

ook

Google

Yahoo

AccuW

eath

er

Mic

roso

ftBBC

Vodafone

Samsu

ng

Orange

eBay

2523

702

373240

127 109 79 64 57 48

Top UK Mobile Sites by Time Spent (millions of minutes)

Facebook Dominates Mobile Time Spent

Source: AMEX 2/11 (n=400 US small businesses who did some form of online marketing)

Current SMB Marketing Methods

Other surveys have shown social media usage by SMBs at 70% (varies by category)

Source:Palore July 2011

Study: 58% on Either FB or Twitter

• 66% of SMBs said they updated Facebook at least weekly

• 63% of SMBs feel it has helped make customers more loyal

• 56% feel it has taken up more time than they expected

• 25% of SMBs estimate their investment in social media has made a profit while 15% estimate they have lost money; the remainder (46%) feel they broke even.

• Often social media has fallen short of expectations (36%) vs. exceeded expectations (9%)

Source: Network Solutions, 2011 (n=500 US small businesses)

Mixed Experience with Social for SMBs

• Business owners or surrogates set up accounts

• They often don’t know what to do after that

• How to measure ROI, how to think about social

• They lack education, best practices advice

• Range of third parties now trying to help

• But how much of social media can be outsourced?

Confronting the ‘Now What?’ Problem

Google+ Complicates Life – and Like

• In North America, 45% of respondents said they Liked a brand to get a deal.

• 33% of respondents said they wanted to “show support” for the brand or celebrity.

• 9% wanted to be among the first to receive news from the brand or celebrity.

• Nearly 60% of social media users visit social networks to receive coupons or promotions; 23% do so weekly

Source: Nielsen October 2011, Nielsen/NM Incite global consumer survey

Consumers ‘Like’ Deals

The (Local) Data Tsunami

• Crowd sourced

• Merchant created

• Social media

• Reviews/tips/ratings

• Delivered everywhere via APIs

Mobile Payments & ‘Real-World Analytics’

Mobile Payments Era Begins

It’s real and becoming intensely competitive:

Google, PayPal, Intuit, mobile carriers, Amex, Visa, MasterCard, Square, among others

In many instances payments and offers/incentives/loyalty cards are tied together

Eventually online ads and offline purchases will be connected for a “closed loop”

Real World Analytics

Many companies trying to connect online and offline data/purchase behavior

Check-ins and other methods being used by Euclid to track in-store presence

Lots of mobile promotional efforts (e.g., offers) to get people into stores

Eventually much closer visibility on which ads delivered in-store visits, even purchases

From Clicks to Transactions

Deals Introduce Transactions to Local

• Traditional “lead-gen” has always existed at the local level in certain verticals (cars, jobs, real estate)

• Pay per call has existed in pockets (now increasingly)

• Deals introduces a “transactional” model to SMBs with potentially profound results for local advertising market

• Deals more tangible for SMBs vs. “advertising”

• Movement from a speculative advertising model to a more concrete “pay per customer” model

Source: Opus Research 2/11 n=7,510 US small businesses

Pay per store visit

A percentage of a sale, generated by an online marketing program

Paid-search clicks (e.g. Google sponsored listings)

Telephone calls to your business

Other

16.5%

27.3%

15.3%

16.6%

24.4%

SMBs Like Idea of Buying Customers

How would you prefer to be billed for new customers?

Source: Borrell Associates, September 2011

Source question for this chart: If you've participated in a Deals program, will you do so again? Respondents = 159

Not sure

No

Yes

0% 10% 20% 30% 40% 50% 60%

37%

14%

48%

On average just over 50% of deals turn out to be profitable, while 25% to 30% lose money.

-- Rice University, June 2011 n=324 daily deal merchants

But Would They Do It Again?

Source: Borrell Associates, September 2011

Have you diverted marketing dollars away from other types of advertising in order to offer coupons/deals?

No Yes I haven't offered coupons for my

business

0%

10%

20%

30%

40%

50%

60%

70%

80%68%

19%14%

Diversion of Ad Spending to Deals

Percentage spending decrease among surveyed businesses using deals to promote themselves:

Yellow Pages: - 27.5%

Print advertising: - 21.6%

Direct mail: -17.6%

TV: -14.7%

Local radio: -13.7%

Source: Rice University, June 2011 n=324 businesses that conducted a daily deal promotion between August 2009 and March 2011

Impact on Traditional Media

RedBeacon Exemplifies Transactional Model

• 35% of merchant responses coming from mobile (in 2 mos).

• App is feature rich and allows for video and audio to be uploaded

• In app scheduling

• Calls, chat, multiple communication tools

• RedBeacon: mobile could become primary way that consumers and service businesses interact

• Biz model is commission

From Publisher to ‘eMarketplace’ Platform

“Emarketplace platform:” Yell says it will “establish the first local eMarketplace platform for consumers and SMEs to connect and transact locally (local ecommerce, coalition loyalty programs, concierge services).”

In summer 2011 Yell announced a change of strategy:

From publisher to platform: Yell says it will move from being a publisher/provider of advertising services a publisher of “digital services” (marketing services, co-branded affinity cards, payment services, business operations, government access services).

Greg Sterling greg.sterling@gmail.com

Twitter.com/gsterling

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