Local is viewed as the final frontier.  Many have blogged on the challenges of online local ad sales, and after just concluding two years of working in the sector, I though I’d add some thoughts.

I. The commonly held and correct beliefs stated in many reports, articles, and blog posts are as follows:

• It’s often been said that advertising is “sold to” and not “bought by” small medium local businesses (SMBs).  While some of these businesses do “self serve,” this is a self-selecting group, whereas the majority lack the time and inclination to manage their own advertising.  Further, most online advertising platforms do require a significant learning investment and ongoing maintenance that sole proprietors can not afford.
• Servicing small businesses is therefore expensive and requires a feet-on-the-street approach or outbound call centers.
• Traditional media companies with large local salesforces have an asset that they can potentially reposition to capture this opportunity. However, I think this asset is typically overvalued given the significant training and commission restructuring required to re-gear a traditional media salesforce.  In addition, most of these companies do not have the technology infrastructure to deploy online, which requires a different set of tools and metrics than their traditional offline businesses.  This can largely explain the success of new entrants into the space, which have built feet on the street and tele-sales forces, as well as technology, from the ground up to tackle this opportunity.
• Local businesses want calls and leads not clicks.
• According to the Kelsey Group local advertising is $155 billion market with $32 billion of it to go online by 2013.  It’s big and untapped.

I think that does it for summary.

II. Now some additional thoughts, which are really more clarifications than novel ideas.  I’ll divide my potential solutions into two categories:  suggestions for the here and now (cutting carbon emissions) and more novel, long-term solutions that would allow for a significantly more cost efficient channel (geoengineering).

Let me begin with my favorite chestnut: It is not 1,000 times more challenging or costly to service a $1,000,000 a month search engine marketing budget than a $1,000 a month budget.  This makes servicing SMBs margin difficult.

The selling and servicing process therefore has to be efficient.  The local salesforces are an asset, and when they are in the field, they need to be able to quickly sell to SMBs who want more leads, customers,  and sales – not clicks.  This means that all the novel inventory (search, display, FourSquare, group coupons, local offers, etc.) that they are selling need to be bundled and simplified to “leads” or sales.  Otherwise the sales process gets too complex and time consuming. With a common denominator, or several, that are meaningful to the end customer, then pricing can be uniform across platforms.

Some local online advertising products being sold now are highly detailed in their reporting, others are not.  I think the demand for accountability is only going to increase, pushing even more need for sales and service efficiency.  We’ve seen the fortune 500 move from wanting clicks to conversions.  We’ll shortly see SMBs go from demanding clicks/calls to qualified calls or sales.

Given these issues, a self-service, SMB advertising tool is the holy grail, but it may for the foreseeable future remain a mirage.  I think the best we can hope for at the moment is efficiency enhancing tools which streamline the hands-on processes involved in cracking this nut.

III.  So I would say that the preceding deals with the carbon emissions cutting solutions to global warming, now on to geoengineering solutions.

WhenI first got interested in FourSquare, it was because it was approaching the local problem perpendicularly from conventional solutions.  And, I’ve personally seen others get significantly more engaged with local businesses as a result of the service and others like it.  I think the idea of engaged users who want to produce and update online content for local businesses makes a lot of sense; especially when many local businesses do not want to tap out offers and updates from iPhones.  Go with the river not against.  Google even tried having independent representatives sign up local businesses at one point but cancelled it.

The idea may seem complex and overly distributed, but if I told you five years ago that independent bloggers would pose a challenge to traditional newspaper journalism, you would probably have been in disbelief.  So crowd-sourced, independent, social advertising salesforces may be a solution to a margin challenged alternative.

Also of interest is the fact that many of us, even in cities, have repetitive ongoing interactions with certain types of local SMBs for which social media works quite well.   For example, my friend and Socialgreat collaborator Bill Piel, surfaced that Foursquare has collected thousands of local business twitter accounts.

I also get offers and interact with several local businesses on their Facebook pages; such as one of my favorite restaurants,  Parlor Steakhouse, on the upper east side.   Social media seems simpler and lighter for SMBs than a full blown web presence, and fits more with the kind of “relationship” that restaurants, pet care, and child activity centers have with their local community members.  Given that these social communication products tend to work, why not a more social sales model?

If I was launching a business today that needed local sales, I would work with the existing sales channel to standardize my inventory units (cut carbon emissions), but I would also start hustling to see what I could make of the more “out there” social sales models (geo-engineering).  Local ad sales could have the messy and distributed model of an ebay.  Why not?

With that said local is big but really tough.  It’s almost as hard a online music, but I’m a huge optimist and continue to dig in on this sector.