Local Rules for Ad Operations

Originally Published 10/21/06

In the late 1980s, the fledging online service Prodigy created local content covering the Atlanta metro market. In part, the hope was that “Access Atlanta” would entice an audience to sign up and log on. But in this chicken and egg scenario, the egg was yet to be hatched. The online audience wasn’t there because the penetration of homes with PCs was not significant. And so — although an avid local following was born — it was too small to create a meaningful audience.

Nearly 20 years later, the battle lines are finally being drawn at the local and community level. There is significant reach at the DMA and metro levels, and everyone wants to play locally with an internet presence. Newspapers, TV, radio and yellow page providers, along with pure-play internet sites– all are vying for their share of the local market and are shifting time, resources and money in that direction.

And this time, it’s not just a toe-in-the water approach. Even the traditional broadcast companies are now realizing that local internet advertising is not to be considered “value add,” but can actually become a multi-million dollar component of their revenue stream. I can tell you from first-hand experience that the last couple of years have been marked with a tremendous sense of urgency by all parties to gain a foothold in local.

From the perspective of the media operations side of the house, the emergence of local online advertising presents some fascinating challenges and opportunities.

The customers

The surge of local content is about to bring thousands of new advertisers online, many for the first time. For ad operations, it will begin to seem like 1995 all over again. “What’s a gif? How do I calculate cost using CPMs? Why can’t I see my ad online? Is .017 percent a good click rate?”

The result will be a more time-intensive customer service experience. Even local advertisers with traditional media experience in TV, for example, will feel they are in a parallel universe and need guidance. When they are used to buying five local TV spots a month and getting them, there is frequently less tolerance and understanding when the 250,000 impressions they bought turns out to be 240,000.

The inventory

Yes, we are reaching the critical mass necessary to make local an attractive proposition. But still, it’s all relative, and in terms of inventory management there will be scant room for error.

That means that seasonality and spikes in local news will affect the five auto dealers crammed into the local online metro section more than if they were advertising on say, Yahoo!. Highly competitive local advertisers will want assurances they receive the share of voice they expected and will hold sales and therefore media operations responsible.

Increased vigilance of inventory will be crucial, and will frequently call for the kind of hands-on, micro-management that current solutions (ad servers, contract management) can’t supply

The pricing

The pricing picture is unsettled at this point. For the most part, savvy internet advertisers are now used to paying on a CPM basis for graphic ads and video as rotated on major publishers. Bringing new local advertisers into the fold also brings preconceived notions of pricing from other media. The yellow page advertisers pay a flat fee to advertise in their books. Traditional broadcast looks for audience and reach guarantees.

Now add in the Google factor, which has institutionalized the cost-per-click model. This convergence of pricing models will complicate media operations’ life by creating a more complex world of product and packaging options. There’s now more to keep track of and more accuracy needed in creating IOs in contract management systems that reflect the more complicated matrix of advertising options.

The products

Local content will demand the use of multiple products to satisfy both consumer and advertiser needs. And these go beyond simple banner placement.

Looking for that plumber in Toledo? You’d better have a robust search solution with a database that covers not only downtown, but all the surrounding communities. There are several off-the-shelf directory products that provide canned listings.

But how will those canned products coexist with the need for prominent placement by individual local advertisers? There is increasing demand for a product that allows the local advertiser to book and pay for placement of their own graphic ads online (aside from current CPC solutions), which could be a hefty piece of development effort. All this means that, on the media operations side, folks will be keeping their eye on search inventory and pricing, as well as CPMs and sponsorships.

Video and/or streaming audio will soon be a must have and not a nice to have. Traditional broadcasters have a head start on content and technology. For the other local providers — print and internet-only publishers — the road is tougher. Where does the local video content come from, if not from the network mainstays? Stay tuned for the growth of independent networks of video content producers, prepared to syndicate local in the same way stringers have done for traditional print and broadcast.

The people

We already know there is a shortage of ad operations and media operations professionals. What happens when there are hundreds of emerging sites attempting to make local content work across the country?

In many cases, they won’t get the respect they deserve from ad serving companies and will find rates, terms and service unacceptable. They will ultimately put themselves as risk when they try to run the operations group with one person– just pray that person doesn’t get sick, or worse.

I think this will lead to more business for some of the outsourced ad operations groups. Sure, that’s a solution. But it also just transfers the problem of finding bright, intelligent, competent ad traffickers from individual publishers to outsourcing groups.

So, just when you thought things were getting settled, the world will become more complicated.

It’s astounding to think that the groundwork for a lot of this was laid almost two decades ago– time flies. It’s encouraging, in a way. We can all look forward to another 20 years of innovation and change.

Not a bad place to be for a career– local, or otherwise.

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