In this regular Street Fight feature, local marketing gurus David Mihm and Mike Blumenthal kick around some of the biggest ideas affecting the local search ecosystem and the broader industry. Send an email or leave a comment if you have specific topics that you’d like them to touch on in future columns!
David: Fun seeing you in Austin for our last conversation, Mike! How was your trip back across the country?
Mike: It’s a BIG country! We drove from Austin to New Mexico and then across the Texas panhandle through Missouri and on to Western NY. Lots of small, failing towns and a few large cities like Oklahoma City and Indianapolis that are doing incredibly well. And I am not sure any amount of marketing will help these small towns I passed through.
Along the route I did a bit of reading and I saw three stories last week that struck me as related. Facebook and Google’s increasing share of ad spend, Angie’s List being on the block and Yelp laying off 175 including sales folks in Europe. These seem inextricably related. What is your take?
David: Three sides of the same coin, for sure. I didn’t even know Yelp had 175 European salespeople. I guess the Qype acquisition hasn’t panned out as expected.
It certainly brings up the question: if Yelp can’t succeed in big anti-Google consumer markets like Germany and France, how optimistic can you be about their prospects on this side of the pond?
David: It’s been a persistent problem from the minute they tried to monetize. Yelp just doesn’t have an ad product that delivers value for the majority of their customers, so their salespeople have to bend over backwards to try to sell it.
Mike: The WSJ article noted that non-Facebook, non-Google spending actually declined by 5%. This doesn’t bode well for the rest of the ad-supported ecosystem.
David: The flow of dollars from businesses of all sizes, but especially small ones, has clearly been away from lower-performance niche platforms into Facebook, where spending a few dollars on a Boosted post leads to instant, incredibly measurable activity for the SMB.
We can debate the value of that activity, but relative to the questionable/delayed/opaque performance of so many digital ad products, Facebook seems to have found a sweet spot — and one that hasn’t required (many) salespeople. They have the same size audience that Google’s had for the last decade, with none of the complexity required to reach it.
Mike: Obviously with Facebook and Google taking so much of the ad spend it seems to speak to their incredible scale AND value they provide for their ad spend. And, at least Facebook, has more and varied new ways of easily upselling these small businesses.
As the ad market constricts and the value is increasingly extracted by Facebook and Google, these two behemoths will themselves be confronted with slowing growth. (In fact Facebook’s stock took a dive on just that fear.)
David: We’ve actually seen this movie before…with Google.
Early on, with relatively few advertisers, long-tail Adwords and even programs like Adwords Express were a total bargain.
But in the auction model, as you attract more advertisers to limited inventory, high-performing terms eventually become cost-prohibitive, even for advertisers that convert visitors at a better-than-average percentage. (Not to mention the fact that Voice and mobile are accelerating the constriction of inventory.)
There’s an equilibrium that Google has already hit in many markets that will eventually hit Facebook. I see it taking longer than Adwords did because long-tail demographic targeting performs (at least in my experience) so much better than long-tail keyword targeting. But I won’t even try to predict when!
Mike: Google is dealing with this equilibrium by trying to expand inventory with Maps and Products but even in those areas, there is an approaching limit of price and complexity that will keep many small businesses out of the market. Maybe that’s why they prefer marketing spend to advertising spend?
David: Certainly the complexity of Adwords overwhelms all but the savviest of SMBs and likely reinforces their overwhelming preference for organic marketing in the form of SEO, websites, and email.
Traditional media companies, and platforms like Yelp and Angie’s List, that have sustained their businesses on selling in-house ad placements or reselling Adwords, don’t have much longer to react to this reality, as the news this past week demonstrated.
Which gives me an idea for our next conversation: what are the best ROI opportunities in digital marketing? How can these companies actually add value for small business customers?
Mike: Sounds good, looking forward to it already!