Daily Deal Trend Leads More Local Merchants to Online Marketing

The local advertising market has long been populated by mom and pop operators who have used cable TV, spot TV, radio, newspaper and Yellow Pages to get out the word about their products and services. In recent years, this market has grown to a value of $130 billion. While these merchants have dabbled in online advertising, no single digital format has won over the local ad market. All that could be about to change.

Rare is the local business operator who hasn’t been approached by a daily deal vendor lately. Whether it’s Groupon, LivingSocial or kbg-​deals, local firms are being contacted and asked to participate in a daily deal promotion. And many businesses are trying these promotions, some more than once. Writing for the Wall Street Journal, Stu Wood and Geoffrey Fowler point out that, at first,  digital advertising for many local operators made little sense. Banner ads did nothing to drive traffic to their shops and neither did the once-​popular city-​specific guides. But the daily deal concept is a different business model. The online partner puts together the promotion, secures the customers and collects the money. All of these tasks are appealing to a business operator who’s worrying about buying food for the day or setting new products on shelves.  In addition, says Greg Sterling of Sterling Market Intelligence, “There is essentially no risk. The thing that is powerful is the idea of buying the customer up-front.”

While the daily deal model is not perfect, it is proving popular with local businesses. And it is expected to drive a significant shift in online advertising. BIA/​Kelsey data indicates the digital part of local advertising (pureplay) reached $11.7 billion last year. That figure will increase to $21.2 billion in 2015.  As a result, digital will rival spending in both local broadcast TV (at $20.4 billion in 2015) and radio (at $18 billion in 2015). And the local daily deals segment is expected to reach a value of $3.9 billion by 2015.

While some marketers have expressed concern that the daily deals aren’t profitable, many more expect to participate regularly. What isn’t so clear is which media operator will come to own this market space. I'll address that topic in my next blog post.

[Sources: Woo, Stu and Fowler, Geoffrey. Daily Deals Rescue Local Ad Market. Wall Street Journal. 14 Jun. 2011. Web. 15 Jun. 2011; ILM East Conference — Boston. BIA/​Kelsey. March. 2011] 
Kathy Crosett
Kathy is the Vice President of Research for SalesFuel. She holds a Masters in Business Administration from the University of Vermont and oversees a staff of researchers, writers and content providers for SalesFuel. Previously, she was co-​owner of several small businesses in the health care services sector.