This article by Hollis was originally written for ClickZ on May 23, 2006.

Maybe it’s just us, but our agency is receiving RFPs seeking geotargeted ad campaigns more than ever. I take this as a great sign. The more advertisers think of the Web as a geotargeting tool, the more new ad dollars will be spent on online marketing.

With increased interest in geotargeting and new geotargeting options cropping up regularly (some presenting unique challenges to agencies), I thought it would be helpful to turn to a true authority on local online marketing.

Greg Sterling is formerly of The Kelsey Group and now principal of Sterling Marketing Intelligence and a contributor to ClickZ’s sister publication, Search Engine Watch,. He’s an analyst and consultant who specifically follows consumer behavior in local markets, advertisers trying to reach them, and the online the evolution of the interactive local media marketplace.

Hollis Thomases: Since “local” seems to be perceived differently by both agencies and advertisers, how would you define it for us?

Greg Sterling: Local is where 97 percent of the actual buying happens. It can be defined in several ways: in terms of consumer intent and/or advertiser orientation. I would define it to include national advertisers trying to reach local consumers as well as small business advertisers who do the majority of buying and selling in their local markets. From a consumer standpoint, it would include online behavior where there’s an express or implied local intent, which basically translates into an offline transaction with a retailer or a service business.

HT: Why is local intent so relevant?

GS: A person looking for a local retailer, entertainment outlet, or service business is often much closer in time to a buying decision, and their level of interest is greater. “Local clicks” very often represent better leads and convert better than general clicks. But a lot of local intent, such as users on AutoTrader.com or The Knot, is not tracked as such, so it’s still a lot of guesswork on the agency’s part.

HT: What’s the typical agency response/reaction to local and why?

GS: The agencies I’ve encountered think that local is a great opportunity but that the tools and the infrastructure are still developing.

HT: What’s the decision path for agencies with respect to local right now, and what’s the list of available options when it comes to local?

GS: There are many local targeting options:

• Major search engines’ geotargeted ad products
• Local newspaper, TV, and radio sites (some of which participate in networks) or news aggregators like Topix.net
• Internet yellow pages sites (IYP) and local networks such as Centro
• Vertical sites (e.g., travel, real estate, classifieds, moving, etc.)
• Local or region-specific sites
• Social networks or blogs
• Geotargeting options through contextual and general ad networks and larger publishers
• Pay per call in local directories

[And] I predict geotargeting on video pre-roll.

Buying local is fragmented and inefficient for national advertisers right now, and confusing and almost impossible for small business advertisers. There’s no clear consumer entry point and no singular local network. Agencies should not do broad-based local targeting [but] instead evaluate the most efficient buying strategies. This evaluation may yield overlapping or entirely distinct strategies or choices around where to place their local bets.

Local campaigns on search engines can cost more than general search because the advertiser is willing to pay more for their geotargeted ads. But whereas the agency can use its typical fee structure [for] national advertisers…, the agency has to figure out a way to automate most of the process [for small business advertisers] or there’s essentially no margin for the agency. Therein lies the rub.

HT: What are the tracking challenges, especially since so much of local advertising drives offline action?

GS: Tracking the offline transaction is especially difficult. Using unique phone numbers to track calls or using coded offers are two strategies. Doing customer surveys and extrapolating is another. But there’s a range of online-influenced offline buying behaviors that still aren’t going to be captured by any of these things, like the latent purchase, which happens weeks after the ad encounter online.

When you think about traditional media, there’s almost no way it can match the detailed reporting of the Internet, but the expectations for online are extremely high and probably unrealistic.

HT: Is there any way to improve an agency’s efficiency when it comes to local advertising?

GS: Figure out what can be automated and what cannot. Similarly, outsource what you can with confidence. Determine best practices and institute those. Once the networks become more rationalized and the infrastructure and ecosystem are built out, geotargeting will become easier to buy and easier to execute.

Related posts:

1. Why Pay-Per-Call Advertising Needs Ad Agencies | ClickZ Rewind
2. Local Search - The Future of Internet Yellow Pages
3. Switchboard and Superpages - Leaps in Local Search
4. Local Search 25% of Online Commerce Activity

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