Digital giants closing in on local media
Google already has feet on the street from Portland to New York City to sell search advertising and directory listings to small and medium business (SMBs). It is only a matter of time until the company targets ever-smaller markets like Cincinnati. Oops, it looks like it already has. Sales to local SMBs are absolutely the last stronghold for newspapers and Yellow Pages. If Google (and others) move in effectively with low-cost, high-touch services, then local publishers – who long have enjoyed the mastery of their domains and the pricing power it afforded – will be in a world of hurt.
Amazon is well on the way to doing to local merchants and big-box stores what it already has done to bookshops. Not satisfied with introducing the Kindle Fire as a hand-held reading and shopping machine, the company has launched a new mobile app called Price Check that lets you scan a barcode at Best Buy (or any other place) to get a better buy from Amazon before you leave the store, thus skipping the checkout line and avoiding sales taxes in many jurisdictions. Main Street and Big Mall merchants are the primary buyers of local newspaper, radio and television advertising. If Amazon and other digital disruptors (like the nifty Decide.Com price-comparison service) seriously disenfranchise bricks-and-mortar retailers, then local media will suffer right with them. (See also such former major retail advertisers as: Circuit City, CompUSA, Mervyns, et. al.)
Microsoft this month grabbed a lead in the eventual disaggregation of local broadcast and cable TV audiences by adding a host of popular programming services, including Netflix and ESPN, to the Xbox network that reaches some 35 million households. Impressive as the new voice- and gesture-controlled Microsoft console is, the big kahuna – Apple – has yet to roar. Steve Jobs is reported to have said in his dying breath that he had cracked the code of delivering a great experience to the big screen in the living room. Given his iTrackRecord, it’s hard to bet against him, but Google, Sony, Amazon, Netflix and a host of others will. When someone gets Internet-powered TV right – and someone most assuredly will – then local broadcast and cable TV audiences will shatter – and their business models will follow. For an example of how this might play out, consider this: The terrestrial AM-FM radio audience is barely a third as large today as it was in 2000, according to Bridge Ratings, an independent analytics service.
With revenues expected to reach “only” $2 billion this year, Facebook hasn’t siphoned away many local advertising dollars. Yet. But the intoxicating "ME"-ness of its content is carving heavily into the audiences of all traditional media, with Alexa.Com reporting that the average visit to Facebook lasts 21 minutes while the average session at, say, a newspaper website runs 3.5 minutes. It is axiomatic that advertisers will follow audiences, especially since Facebook allows marketers to specify such things as the Zip Code, age, education, marital status, sexual orientation and other specific interests of the target consumer. As is the case with Google’s outrageously profitable AdWords system (which delivers a significant share of the $36 billion in ad revenues the company is likely to book this year), marketers can opt to pay only when someone clicks on a Facebook ad, creating not only superior efficiency but sophisticated analytics that trump “Mad Men”-style marketing with free, actionable and real-time metrics. Not a local media company in the land can compete with the breadth and granularity of the Facebook platform. But, it gets worse: It's only a matter of time until daughters and sons inherit the body shop or mattress business from their dads. Once they do, these next-gen business leaders will turn to Facebook – and not the local media – to find customers among their friends and the friends of their friends. By comparison, the high-priced advertising alternatives offered by most local media companies will be, well, mighty unfriendly.
This is the known territory that local media companies will face in 2012 and beyond. But, as the noted deep-thinker Donald Rumsfeld once said, there are unknowns to contend with, too.
The unknowns are game-changing innovations we can’t conceive. Depending on your generation, try to remember what the world was like before radio, VCRs, mobile phones, the Internet or iPads. These compelling breakthroughs blasted out of nowhere and into the mainstream, roiling everything in their path.
Now, imagine all those things happening at the same time. That’s what the world will look like until further notice. And most local media companies aren't ready.