Promotional commerce between small businesses and local consumers is undergoing a massive reconstruction. In the process, media channels are being forced to proactively adapt or wither into irrelevance.

In the old world, a business relied on a small number of trusted local media channels to package and deliver their promotions to local consumers, and spent what they could justify to convert these offers into visits and appointments.

Media channels no longer enjoy the spoils of having critical mass in consumer reach and limited competition.

Flipping the Model Upside Down
Technology is emerging to support the total collapse of the historical media channel model of how promotions reach consumers.  Businesses can publish their marketing messages directly to the always-on consumer and their connected friends. Live connections between mobile users and nearby merchants threaten to obsolete the concept of “running a campaign through a media publisher.”

I’d propose that promotion distribution forms as a “Distribution Cloud Service” integrated into social/customer marketing tools – laying the foundation for the business to capture the enormous potential behind yield management.  When businesses need more demand, they can dynamically extend their reach into premium distribution channels.

Cloud Formations
The number of pathways for promotions to reach today’s local consumers is staggering. While the daily deal industry has distracted the minds and pocketbooks of entrepreneurs, there is a much broader marketplace model in formation.

Promotions should be viewed as the core content and commerce to ignite and expand ad channels like AdWords, Facebook Display, Twitter ads and mobile display ad networks. And, as consumers live their local navigation through mobile apps, a new layer of “promotion SEO” is in formation.

The early days of deals distributed through email lists should be viewed as “so 2010.” Networks such as Local Offer Network, 8coupons, Google Offer Marketplace are rapidly in formation, and mobile networks such as Verve and Where/PayPal are stepping up to bring new distribution options to the local business.

Will the Tools Become Media Channels?
One of the most important subtle shifts implied in this trend is the emergence of a new dynamic between tools and distribution.  Media businesses that have grown up on selling ad products and lead gen to small businesses will have to find their way to align with and distribute through the merchant tools that manage the customer and social layers.

In vertically integrated business models such as Groupon, the tools and channels are aligning into a turnkey arrangement.  However, businesses see and hear every day about the exciting plethora of ways they can reach their local customer and consumer targets.  You can see similar silo stacks in formation — Foursquare and Yelp are beginning to provide premium promotion distribution services that take advantage of their sliver of the local audience, for example.

A more powerful concept is one of a simple integrated set of marketing tools, connecting to an expansive open distribution cloud — layered together with the merchant’s “owned and operated” social and customer distribution. As we redefine how promotions are created, managed, distributed and redeemed, the transition to a new dynamic between distribution and merchant tools is underway.

Re-linking the Food Chain
This is not a simple “build the product and they will come” model. It never is when small businesses are the buyer and local consumers are the targets.  However, the pattern is unmistakable and the shift has fundamental value that is transformative to how local demand and supply interacts.

One of the most interesting dynamics to watch in the coming couple of years is the alignment and tension between small business services and the channel pathways.

Perry Evans is the founder & CEO of Closely, Inc. a Colorado-based start-up focused on reinventing small business promotion marketing for today’s live, mobile social world. Perry has led the formation and development of several local media and technology businesses over the past 15 years, including MapQuest, Jabber and Local Matters. He is an active advisor to mobile start-ups LocalMind and Forkly, is a mentor in Montreal’s FounderFuel, and is a Board Member of the University of Colorado’s Deming Center for Entrepreneurship.