Over the past few years, we’ve watched as a host of payment processing, point-of-sale and scheduling services have popped up, helping local businesses manage day-to-day operations in more efficient ways. Using the cloud, these ‘commerce’ software plays have begun to undercut a number of large legacy companies, shaking up industries which have remained static for decades.
The upheaval is ushering in a new dynamic not only in operations, but in local marketing as well, opening the door for a software-centric approach to local marketing. By bringing together these emerging operations technologies and existing consumer software (e.g. local search and discovery), marketers will be able to automate the way in which businesses and consumers interact, driving down costs and expanding capabilities. A reordered local marketing landscape has emerged in which winners will offer integrated marketing and operations solutions, leveraging consumer data and closing the loop for marketers. A new report from Street Fight traces this evolution and lays out the new local marketing landscape.
So how did we get here? For the better part of a decade, the bulk of the innovation in the local marketing industry has centered on the local consumer. Rapid consumer adoption of digital, and in particular, mobile devices has created a massive market for consumer-facing tools, allowing vendors to aggregate consumer demand at scale. Companies like Google, AutoTrader and Expedia — and more recently, Yelp, Angie’s List, and Groupon — grew quickly, creating products for consumers, and then selling that local demand to marketers.
However, these demand-side systems, which enable marketers to find, segment, and target local consumers on the web, have vastly outstripped the supply-side systems that aggregate information about businesses selling products locally. Vendors can target and message local consumers in any number of ways, but the technology helping marketers plan, buy, and measure the results of these local marketing campaigns is limited at best.
The firms that will see the most growth over the next four to five years will bring together supply and demand.
Street Fight believes the demand-side product — e.g., services like search and discovery that help consumers navigate the marketplace — has matured, as innovation in the market has started to shift toward supply-side products and services. Startups and existing technology firms will continue to use a combination of mobile and cloud computing technologies to bring the operational infrastructure of local businesses — point-of-sale, payment, scheduling and more — online. In the same way that consumer web products introduced new ways for marketers to access demand, these SaaS workflow systems are revolutionizing the way marketers, and technology firms, understand, analyze, and access local supply.
What’s more, with consumer demand and local business (supply) online, technology companies will be able to automate critical aspects of the local marketing workflow, writing algorithms to bring together back-office systems (e.g. payment processing, point-of-sale, and scheduling) and marketing in a dramatically more efficient, scalable manner. Demand-side companies like Yelp have already begun the shift, establishing partnerships with supply-side players, and we believe that the firms that will see the most growth over the next four to five years will work to bring together supply and demand through internal product development or industry partnerships.
In the new report, Street Fight takes a look at the impact of supply-side technologies on the local marketing industry, detailing the opportunities and risks that these emergent services present to existing companies. An accompanying industry chart shows where a handful of hyperlocal companies lie on the continuum of supply- and demand-side offerings.
Here are three key impacts:
Closing the Loop
The emergence of cloud-based operations software may finally offer a solution to developing online-to-offline metrics. These systems provide vendors with a scalable back door into a local business’s day-to-day operations, allowing vendors to push users who see an ad directly into a businesses booking or payment engine, for instance, without complex and costly integrations. Newer in-store systems – from point-of-sale to wi-fi analytics tech – can also better measure conversions in-store, by substantially reducing the friction in implementing a trackable ID (e.g. a coupon) or mobile payment integration.
Maybe the most disruptive impact that automation will have is on the way local marketing campaigns are planned, bought, and executed. There’s a massive opportunity in automating planning and creative decisions based on real-time business data, creating new ways for businesses to leverage the existing technology at a fraction of the cost.Vendors can simply plug into an existing data stream generated by the operations software and use algorithms to programmatically produce creative and execute campaigns. In the same way Google Now can surface relevant content based on our past actions, vendors can automate marketing decisions in real-time without any adding meaningful costs for the marketer.
A Platform Economy in Local Marketing
What’s emerging is a “platform economy” in the local technology sector similar to third-party developer ecosystems built by Salesforce and Apple in their respective enterprise and consumer software markets. The back-of-the-house products will effectively manage the master data of the business, and provide key services for the target business, and then function as a development platform and software marketplace for enterprise applications. This will dramatically reduce the sales and support costs associated with scaling a local marketing services business, providing the infrastructure needed to do scale without sacrificing shrinking margins.
Read the report, “How Back-Office Innovation is Transforming Local Marketing.”
Steven Jacobs is
Deputy Editor of