Drawing from revenue numbers reported by Google, Peter Krasilovsky estimates that local search revenue currently resides in the $1.3 billion range.
That got me thinking, how much is that per local market? I can’t find a stat on how many DMA’s there are in the U.S., so let’s assume that every DMA has at least one daily newspaper. Going off this chart, I’m going to guess that there are 900 markets with daily newspapers.
That makes each local market worth about $1.4 million.
You can’t run a daily newspaper, even in the smallest markets, on $1.4 million.
And of course, no newspaper is EVER going to capture all of the local search ad dollars.
We all assume local search revenue is going to grow, but will it? And if so, what is the potential for local news sites? It’s a very competitive, dynamic market comprised of many more pennies than dollars.
First, what is local search? I take it to mean search or directory browsing meant to find local goods and services.
Second, who advertises around local search right now? My answer is, not too many local businesses. Do a search on Google for something like “Stockton plumbers.” Currently, no local businesses turn up in that search. A similar search in the online versions of phone books turns up what look like more paid advertisers, but I suspect those are either forced buys or value adds.
This is important because you’ll eat up margins if local search advertising is anything but self-serve.
And I’m just not seeing a lot of small, local businesses rushing to use online self-serve advertising.
I’m not saying that won’t happen, but I’m skeptical that it will.
The only local advertisers using self-serve advertising with any frequency and consistency are Realtors. And “any town real estate” also happens to be one of the most popular search terms in just about every market.
The problem with most self-serve advertising is that it takes real work to do it right. It takes time and knowledge to craft the right campaign and match it to your web site (and most businesses either don’t have a Web site or have a very poor Web site). Then you must monitor your campaigns, tweak your bids and buys, and track your ROI.
When you own your own business and work 14-hour days just to keep the doors open, do you really want to learn how to manage your own self-serve advertising?
As newspapers cast about for new ways to grow revenue in these turbulent times, it is tempting to cast a longing eye at the $1.3 billion in local search revenue and think, “How do I get a piece of that?”
First, don’t fall into the trap to thinking CPC or self-serve retail is the easy road to riches. There’s money there for newspaper.coms, but it ain’t easy money. And your slice of the pie is going to be pretty small if you’re only getting two percent of the local unique users on any given day.
Second, remember that the $1.3 billion you see going to other companies was never your money. It’s money being generated by new markets that were never were your markets. And chances are, your slice isn’t going to come from existing markets. You need to create new markets in your local areas.
UPDATE: Jack Lail responds.