One of the many attributes of the local on-demand economy (LODE), is it’s potential to flip local advertising models we’ve known for more than a century. It will do this in some cases by replacing marketing with a commerce engine; or as we’re calling it, the “logistical last-mile” to the consumer.

This all results from a more direct linking of buyer and seller — and the systems in place to achieve that marketplace transparency in a more compressed way. With Uber, for example, instead of searching, viewing listings, reviews, calling… you simply press a button and a car shows up.

So the key to many LODE apps we’re seeing is to match buyer and seller more quickly and reliably than local search. That involves lots of performance and location tracking. Beyond technology chops, it’s all about building balanced two-sided marketplaces, and network effect.

A related excerpt from our LODE white paper is below. Consider it a primer for the discussion we’ll have on stage at BIA/Kelsey NOW. Let me know if you’d like to participate (mbolandATbiakelsey.com) and stay tuned for lots more coverage.

Flipping the Model

LODE’s departure from local search has important ramifications for marketers. Stepping back, consumer behavior has evolved from print directory lookups to search engines and even social networks to find items or services that fulfill specific needs with varying degrees of urgency.

These models have progressed towards more of a user pull and less of an advertiser push. The trend has also moved towards more targeted advertiser placement, to establish positioning in front of consumers at strategic times and places of explicit commercial intent.

In a print directory context, this means physical positioning — through size, color and heading priority — to capture that coveted phone call at a time of consumer need. For search engines, it means formulating the right keywords and ad groups to likewise capture high-intent clicks.

With search came certain efficiencies in reaching high-intent consumers in a more cost-efficient way than traditional media. LODE continues down that evolutionary path by aggregating real time consumer demand in a given service category, allowing nearby providers to respond accordingly.

So instead of a consumer search for a business — requiring a previously devised marketing plan where a message is placed in front of that user — LODE flips the model. User demand is captured and revealed for service providers to react in real time to a marketplace now made transparent.

“There’s no advertising in these apps, it’s purely a grossed-up transactional value,” Comcast Ventures Partner Michael Yang told BIA/Kelsey. “Local isn’t reviews anymore, it’s on demand… The business model is consumer pay, and the merchant is being aggregated into a network.”

Put another way, the need for advance advertising to stay competitive is eliminated in some cases. Service providers thriving with LODE don’t need to market themselves proactively to generate demand. They’re now given an operational tool to capture demand reactively.

This is analogous to the Just in Time manufacturing principle. A Japanese innovation popularized in the U.S. by Harley Davidson, and more recently by Tesla, inventory is produced much closer to its sale. This improves cash flows and reduces capital requirements for cost of goods sold.

In LODE services, capital requirements for customer acquisition are likewise reduced. Demand generation at the app level creates marketplace transparency to deploy inventory — for example, a service provider’s finite set of appointment slots — exactly where it’s needed in real time.

“What we’re seeing is yield optimization,” MyNeighbor CEO Brendan Benzing told BIA/Kelsey. “Uber in early days had a brick business which was town cars, but it was all the time in between rides that was the mortar. That’s the value that technology is finally extracting due to mobility.”

The post Local On-Demand Economy: Flipping Local Search as We Know It appeared first on BIA/Kelsey - Local Media Watch.

Automotive will drive $15.13 billion in local advertising in 2015. That’s according to BIA/Kelsey’s 2015 Insights into Local Advertising report released today.

The Automotive industry, which has returned to strong growth on improved economic conditions, low fuel prices and the largely unanticipated transportation needs of Millennials, who have become the largest car-buying generational cadre in the past year. We project the segment will continue to grow at a three-percent compound annual rate through 2019.

The Automotive category includes: 1. Auto dealers & manufacturers 2. Other motor vehicle dealers 3. Auto parts & accessory stores 4. Tire dealers 5. Gas stations & auto repair. Collectively, these auto segments account for 11.1 percent of all local advertising in the United States.

Car and light-truck advertising remains heavily dependent on television advertising, with 33.9 percent of local ad spend going to television. However, digital advertising is the sole growth category in automotive, increasing by 12 percent annually. BIA/Kelsey estimates that digital, which represented $2.78 billion in local spending in 2015, will account for 30 percent of automotive advertising by 2019. All of the anticipated $2.3 billion in market growth over the next five years will come in digital channels.

The report also examines the growing importance of Millennials to automotive industry growth, despite their long-reported indifference to driving. As they age into parenthood, Millennials are buying more cars than any other generation and can be expected to drive the industry’s transition to low- or no-carbon emissions and digital in-car entertainment and marketing.

“The auto industry and television came of age together as keystones of Twentieth-Century American culture,” said Dr. Mark Fratrik, report co-author, senior vice president and chief economist at BIA/Kelsey. “The two industries remain closely tied, with the auto industry being dependent on over-the-air television advertising, and all auto vertical subcategories relying heavily on traditional media to get their message to their audience. Looking forward though, digital is going to be very important by 2019, representing nearly one-third of automotive local ad spending.”

We also offer our guidance on preparing to use vehicle-generated data and in-dash displays, mobile and PC marketing, which will be responsible for much of the digital growth as the fleet turns over to a generation of digital-enabled cars and trucks. Location, personalization and programmatic advertising will be critical to connecting the in-car experience to marketing messages.

_________

The report is available for purchase in the BIA/Kelsey store. Advisory clients with portal access can login to download the report.

The post Digital Automotive Advertising Drives $15B in 2015 Local Revenues appeared first on BIA/Kelsey - Local Media Watch.

What are the macro factors driving our new favorite topic: the local on-demand economy (LODE)? Smartphone ubiquity is one, as are the algorithms to quickly match local supply and demand. There’s also an urbanization trend that creates healthy LODE marketplaces. And needy Millennials fuel the fire.

We examined these colliding trends in our recent white paper. They’re important for perspective of where LODE opportunities will emerge in the coming months. Beleive it or not, there’s still lots of unchartered territory, even as mainstream media cover LODE — usually a sign of any maturing sector.

A related excerpt from our LODE white paper is below. Consider it a primer for the discussion we’ll have tomorrow in our live analyst roundtable and of course on stage at BIA/Kelsey NOW. Let me know if you’d like to participate and stay tuned for lots more coverage.

LODE’s Driving Factors

Drilling down into LODE’s dynamics and drivers, it’s important to view the macro trends that are aligning to create fertile ground for its growth. These are a combination of technological, cultural, and economic. Here is summary, before we detail each factor in subsequent pages.

Mobility: The starting point for LODE, as with many other tech trends, lies in hardware innovation. Mobility and the smartphone revolution have created high-power computing to go. This has shaped user behavior and expectations for immediately fulfilled needs. This trend will accelerate with the impending age of wearable technologies like smart watches.

Cultural: Consumers have been conditioned by the computing capacity in their pockets to expect immediate needs to be fulfilled in an on-demand fashion. This general urge and expectation to have the world delivered on demand is further accelerated by parallel trends in media consumption such as, VOD platforms like Netflix, Hulu, etc.

Generational: The Millennial generation — emerging as a key component of the buying-empowered adult population — has a well-documented sense of entitlement and immediacy that provides a receptive environment for on-demand services. The generation’s characteristic aversion to ownership of physical goods is also conducive to several LODE services (i.e. relying on Uber versus auto ownership).

Economic: High unemployment has created a steady supply of service providers to fill the ranks of LODE’s workforce. Millennials — in addition to being avid consumers of LODE services — also possess work habits that are conducive to the flexibility that LODE service providers enjoy. These factors will further accelerate as LODE services move up market to higher-end professions, such as professional, creative and technical fields.

Geographic: Balance in any two-sided marketplace is always hard to achieve. The above factors are creating growth on both supply and demand sides of many LODE services. This is further accelerated by the overall societal trend of more individuals living in cities. This general orientation creates a network effect that assists marketplace growth.

Technological: Lowered barriers to entry in the app economy have created an explosion of startups that build LODE marketplaces and extend into new verticals and feature sets. Authentication technologies (such as Facebook Connect), facilitate reputation as a form of security and enforcement that keep LODE marketplaces safe and attractive. LODE will also be the environment where mobile payments finally take root.

(more…)

The post Local On-Demand Economy: It's All About Technology, Urbanization… and Millennials appeared first on BIA/Kelsey - Local Media Watch.

The success of companies in the local on-demand economy (LODE) hinges on creating network effect and balance in two sided marketplaces (supply and demand). These must grow together in unison, and in a step function that usually leads with adequate supply (i.e., enough Uber drivers).

Last week we examined demand, so now it’s time to zero in on these supply-side dynamics. There are many factors including economic (unemployment rates), geographic (urbanization) and generational (millennial work habits). These are all colliding to form the “1099 economy” at the heart of LODE.

A related excerpt from our LODE white paper is below. Consider it a primer for the discussion we’ll have on stage at BIA/Kelsey NOW. Let me know if you’d like to participate (mbolandATbiakelsey.com) and stay tuned for lots more coverage.

Next week’s excerpt: LODE’s Impact on Local Media.

Supply Side: The 1099 Economy

The two-sided marketplaces that define LODE mean that user and service provider growth must happen in approximate balance. There are unique market factors that create that balance and drive growth on each side of the supply/demand equation. The demand drivers were just covered.

For the supply side, LODE is keeping pace as its financial and lifestyle benefits are made known to service providers. This is important because the step function that defines LODE’s supply/demand balance usually starts with the supply side (i.e. enough Uber drivers).

This has been driven (excuse the pun) partly by high unemployment rates that create a larger eligible pool of service providers. For example, Uber had 160,000 drivers at the end of 2014. 40,000 signed up in December alone, and its cumulative total is doubling every six months.

Adequate supply is also driven by larger trends such as the percentage of the population that is concentrated in urban areas. This creates a larger eligible pool of suppliers. It also concentrates demand within a defined area, which provides ROI incentive for suppliers to operate.

Drilling down to more direct and tangible motives, there are often economic benefits for service providers. As mentioned above, reduction in marketing and operational costs enable individuals to sidestep traditional barriers to entrepreneurship. And some LODE services offer quick revenue.

A study by Princeton economist Alan B. Krueger reports that Uber drivers earn $19 per hour on average, and a majority are very satisfied. Drivers were also proven to work fewer hours and earn more than taxi drivers (though they must handle some expenses that taxi drivers don’t).

The Kreuger report also shows that driver growth isn’t receding even as some factors — such as high unemployment — abate. And as Uber lowers rates to the initial detriment of drivers, it argues that increased demand counteracts potential losses (per second order effect outlined earlier).

Punch Out

There is also the matter of flexibility. LODE is causing a cultural shift in the way people think about work. It’s chipping away at a centuries-long societal construct and mindset about working for companies. Ask any Uber driver how much he likes being able to create his own hours.

Though corporations absorb risk and create community — a benefit established as 20th century industrialization and urbanization created the welfare state we now know they also require sizable and sometimes inconvenient commitments from their employees.

And so a key constituency of the emerging 1099 economy has become individuals that require this flexibility out of necessity: students, contract employees, parents, people with multiple jobs. The ability to define one’s hours has been one of the biggest boons for LODE service providers.

For example, most Uber drivers work less than 15 hours per week, according to the Krueger study. According to a driver survey in the report, most are already employed full or part time. Earning additional income was stated as the primary benefit of being an Uber driver.

This flexibility is also perfect for a demographic group examined above in a different context: Millennials. The characteristic flexible hours that several LODE services offer could be form-fitted for a generation that doesn’t want to be told when to come to work.

The Dark Side of LODE

Despite many of the above advantages, there is a dark side to LODE that should be acknowledged. This involves some of the risks of distributed work forces that, for several LODE companies, exist in sometimes-vague status between full-time and contract work.

First, Uber’s rapid growth has compromised screening and led to allegations of driver misconduct, including sexual assault. This should be acknowledged, but we will not detail it any further in this report.

Regarding the official status of many LODE service providers, such as house cleaners, drivers, pet care providers, etc., its flexibility comes at the cost of assuming a certain degree of legal risk. This is part of the LODE dynamics, which transfers risk from companies to their labor pools.

This is shifting though, as well-publicized deviant acts of LODE providers (and consumers) motivate companies to provide greater insurance and legal protection for participants. Airbnb famously upped its insurance coverage after drug addicts destroyed a rented Oakland home.

Beyond legal risk for service providers, thereâ??s an inherent risk they assume in marketplace volatility. When comparing LODE to less-flexible traditional jobs, as above, it should be noted in fairness that the latter comes with a steady paycheck and risk absorption by a company.

The post Local On-Demand Economy: What's Driving Supply? appeared first on BIA/Kelsey - Local Media Watch.

The success of companies in the local on-demand economy (LODE) hinges on creating network effect and balance in two sided marketplaces (supply and demand). These must grow together in unison, and in a step function that usually leads with adequate supply (i.e., enough Uber drivers).

Last week we examined demand, so now it’s time to zero in on these supply-side dynamics. There are many factors including economic (unemployment rates), geographic (urbanization) and generational (millennial work habits). These are all colliding to form the “1099 economy” at the heart of LODE.

A related excerpt from our LODE white paper is below. Consider it a primer for the discussion we’ll have on stage at BIA/Kelsey NOW. Let me know if you’d like to participate (mbolandATbiakelsey.com) and stay tuned for lots more coverage.

Next week’s excerpt: LODE’s Impact on Local Media.

Supply Side: The 1099 Economy

The two-sided marketplaces that define LODE mean that user and service provider growth must happen in approximate balance. There are unique market factors that create that balance and drive growth on each side of the supply/demand equation. The demand drivers were just covered.

For the supply side, LODE is keeping pace as its financial and lifestyle benefits are made known to service providers. This is important because the step function that defines LODE’s supply/demand balance usually starts with the supply side (i.e. enough Uber drivers).

This has been driven (excuse the pun) partly by high unemployment rates that create a larger eligible pool of service providers. For example, Uber had 160,000 drivers at the end of 2014. 40,000 signed up in December alone, and its cumulative total is doubling every six months.

Adequate supply is also driven by larger trends such as the percentage of the population that is concentrated in urban areas. This creates a larger eligible pool of suppliers. It also concentrates demand within a defined area, which provides ROI incentive for suppliers to operate.

Drilling down to more direct and tangible motives, there are often economic benefits for service providers. As mentioned above, reduction in marketing and operational costs enable individuals to sidestep traditional barriers to entrepreneurship. And some LODE services offer quick revenue.

A study by Princeton economist Alan B. Krueger reports that Uber drivers earn $19 per hour on average, and a majority are very satisfied. Drivers were also proven to work fewer hours and earn more than taxi drivers (though they must handle some expenses that taxi drivers don’t).

The Kreuger report also shows that driver growth isn’t receding even as some factors — such as high unemployment — abate. And as Uber lowers rates to the initial detriment of drivers, it argues that increased demand counteracts potential losses (per second order effect outlined earlier).

Punch Out

There is also the matter of flexibility. LODE is causing a cultural shift in the way people think about work. It’s chipping away at a centuries-long societal construct and mindset about working for companies. Ask any Uber driver how much he likes being able to create his own hours.

Though corporations absorb risk and create community — a benefit established as 20th century industrialization and urbanization created the welfare state we now know they also require sizable and sometimes inconvenient commitments from their employees.

And so a key constituency of the emerging 1099 economy has become individuals that require this flexibility out of necessity: students, contract employees, parents, people with multiple jobs. The ability to define one’s hours has been one of the biggest boons for LODE service providers.

For example, most Uber drivers work less than 15 hours per week, according to the Krueger study. According to a driver survey in the report, most are already employed full or part time. Earning additional income was stated as the primary benefit of being an Uber driver.

This flexibility is also perfect for a demographic group examined above in a different context: Millennials. The characteristic flexible hours that several LODE services offer could be form-fitted for a generation that doesn’t want to be told when to come to work.

The Dark Side of LODE

Despite many of the above advantages, there is a dark side to LODE that should be acknowledged. This involves some of the risks of distributed work forces that, for several LODE companies, exist in sometimes-vague status between full-time and contract work.

First, Uber’s rapid growth has compromised screening and led to allegations of driver misconduct, including sexual assault. This should be acknowledged, but we will not detail it any further in this report.

Regarding the official status of many LODE service providers, such as house cleaners, drivers, pet care providers, etc., its flexibility comes at the cost of assuming a certain degree of legal risk. This is part of the LODE dynamics, which transfers risk from companies to their labor pools.

This is shifting though, as well-publicized deviant acts of LODE providers (and consumers) motivate companies to provide greater insurance and legal protection for participants. Airbnb famously upped its insurance coverage after drug addicts destroyed a rented Oakland home.

Beyond legal risk for service providers, there’s an inherent risk they assume in marketplace volatility. When comparing LODE to less-flexible traditional jobs, as above, it should be noted in fairness that the latter comes with a steady paycheck and risk absorption by a company.

The post Local On-Demand Economy: What’s Driving Supply? appeared first on BIA/Kelsey - Local Media Watch.

All of the excitement and investment in the local on-demand economy (LODE) starts with its consumer demand. The consumer culture that’s been conditioned to expect everything on-demand has created a receptive marketplace to the “uberfication of everything.”

That conditioning has come partly from smartphones and the immediate intent that they help fulfill. It has also come from parallel trends in other media — such as on-demand entertainment through things like Neflix.

And this all resonates especially with millennials — a generation for which “on-demand” is practically a tagline. The result: the mobile device has become the remote control for the physical world, and nowhere has this played out more than in LODE.

A related excerpt from our LODE white paper is below. Consider it a primer for the discussion we’ll have on stage at BIA/Kelsey NOW. Let me know if you’d like to participate (mbolandATbiakelsey.com) and stay tuned for lots more coverage.

Next week’s excerpt: LODE’s Supply-Side Dynamics.

Demand Side: A Remote Control for the Physical World

To start, LODE is fueled by a growing consumer need for on-demand access to anything. This is simply a cultural trend conditioned by mobility. Our smartphones — and soon to be wearables — have portability plus location awareness: A formula for immediate access to anything.

That basic capability has been furthered by app innovation. Lowered barriers to entry in the app economy have resulted in a flood of new services to connect buyer and seller in local markets. Authentication technology meanwhile creates a reputation-enforced system of safety and security.

These factors have come together to condition consumers to expect services to be brought to them wherever they are. It’s worth noting that this conditioning has been galvanized by usage trends elsewhere in technology — such as VOD consumption a la Netflix, Hulu, etc.

Indeed, LODE services literally and figuratively turn the smartphone into a sort of TV remote for the physical world. The metaphor caries though the device’s shape, as well as the physical action of pushing (tapping) buttons to summon physical world activity: A digital means to an analog end.

It’s a Millennial Thing

All of the above is then accelerated by a generation for which “on demand” is practically a tagline. Millennials — continuing to take over the ranks of the buying-empowered adult population — have a well-documented sense of entitlement and immediacy that’s fertile ground for LODE.

“An old economy business model that Millennials can’t relate to [is] an annual subscription for something you might not need,” said Urgent.ly’s Spanos. “Millennials expect everything now, and they turn to their phones for that.”

That goes for the basic principles of LODE in its access to immediate needs. But it also applies to an important aspect of LODE services in that they sometimes replace the need to own physical goods — a characteristic aversion of Millennials (with exceptions of course).

A 2014 report by The Intelligence Group called young people “the first generations of ‘NOwners,’ or those who prize access over ownership.” Ride sharing service Zipcar likewise reports that 61 percent of 18 to 34 year olds chose “experiences” over “possessions” in a December 2013 poll.

“They’re apprehensive about ownership, and they see access as a more experiential way of consumption,” said My Neighbor’s Benzing. “But there are also similarities to baby boomers, towards the end of life and no longer gathering things. They’re trying to unload and de-clutter.”

You Need Holes, Not a Drill

Beyond generational factors, there’s a cultural shift among several age groups, away from the blatant consumerism that defined the ’80s and ’90s. Survivors of subsequent recessions, including the housing crisis, have been conditioned to own less stuff.

This is a notable cultural shift when it comes to the mindset of making daily purchase decisions. A small home improvement project for example, is historically governed by a mindset to buy all of the necessary power tools, which are then used once and stored for years in a closet or garage.

However, a more economically attractive (and faster) outcome could come from renting the equipment or hiring an on-demand service provider to finish the job. This is supported by the always-surprising statistic that the average power drill is only used 13 total minutes in its lifetime.

Rachel Botsman cited this figure during a 2010 Ted Talk on the emerging area of collaborative consumption. “What you need is the hole, not the drill,” she continued. “So why don’t you rent the drill, or, even better, rent out your own drill to other people and make some money from it?”

The post The Local On-Demand Economy: What's Driving its Demand? appeared first on BIA/Kelsey - Local Media Watch.

All of the excitement and investment in the local on-demand economy (LODE) starts with its consumer demand. The consumer culture that’s been conditioned to expect everything on-demand has created a receptive marketplace to the “uberfication of everything.”

That conditioning has come partly from smartphones and the immediate intent that they help fulfill. It has also come from parallel trends in other media — such as on-demand entertainment through things like Neflix.

And this all resonates especially with millennials — a generation for which “on-demand” is practically a tagline. The result: the mobile device has become the remote control for the physical world, and nowhere has this played out more than in LODE.

A related excerpt from our LODE white paper is below. Consider it a primer for the discussion we’ll have on stage at BIA/Kelsey NOW. Let me know if you’d like to participate (mbolandATbiakelsey.com) and stay tuned for lots more coverage.

Next week’s excerpt: LODE’s Supply-Side Dynamics.

Demand Side: A Remote Control for the Physical World

To start, LODE is fueled by a growing consumer need for on-demand access to anything. This is simply a cultural trend conditioned by mobility. Our smartphones — and soon to be wearables — have portability plus location awareness: A formula for immediate access to anything.

That basic capability has been furthered by app innovation. Lowered barriers to entry in the app economy have resulted in a flood of new services to connect buyer and seller in local markets. Authentication technology meanwhile creates a reputation-enforced system of safety and security.

These factors have come together to condition consumers to expect services to be brought to them wherever they are. It’s worth noting that this conditioning has been galvanized by usage trends elsewhere in technology — such as VOD consumption a la Netflix, Hulu, etc.

Indeed, LODE services literally and figuratively turn the smartphone into a sort of TV remote for the physical world. The metaphor caries though the device’s shape, as well as the physical action of pushing (tapping) buttons to summon physical world activity: A digital means to an analog end.

It’s a Millennial Thing

All of the above is then accelerated by a generation for which “on demand” is practically a tagline. Millennials — continuing to take over the ranks of the buying-empowered adult population — have a well-documented sense of entitlement and immediacy that’s fertile ground for LODE.

“An old economy business model that Millennials can’t relate to [is] an annual subscription for something you might not need,” said Urgent.ly’s Spanos. “Millennials expect everything now, and they turn to their phones for that.”

That goes for the basic principles of LODE in its access to immediate needs. But it also applies to an important aspect of LODE services in that they sometimes replace the need to own physical goods — a characteristic aversion of Millennials (with exceptions of course).

A 2014 report by The Intelligence Group called young people “the first generations of ‘NOwners,’ or those who prize access over ownership.” Ride sharing service Zipcar likewise reports that 61 percent of 18 to 34 year olds chose “experiences” over “possessions” in a December 2013 poll.

“They’re apprehensive about ownership, and they see access as a more experiential way of consumption,” said My Neighbor’s Benzing. “But there are also similarities to baby boomers, towards the end of life and no longer gathering things. They’re trying to unload and de-clutter.”

You Need Holes, Not a Drill

Beyond generational factors, there’s a cultural shift among several age groups, away from the blatant consumerism that defined the ’80s and ’90s. Survivors of subsequent recessions, including the housing crisis, have been conditioned to own less stuff.

This is a notable cultural shift when it comes to the mindset of making daily purchase decisions. A small home improvement project for example, is historically governed by a mindset to buy all of the necessary power tools, which are then used once and stored for years in a closet or garage.

However, a more economically attractive (and faster) outcome could come from renting the equipment or hiring an on-demand service provider to finish the job. This is supported by the always-surprising statistic that the average power drill is only used 13 total minutes in its lifetime.

Rachel Botsman cited this figure during a 2010 Ted Talk on the emerging area of collaborative consumption. “What you need is the hole, not the drill,” she continued. “So why don’t you rent the drill, or, even better, rent out your own drill to other people and make some money from it?”

The post The Local On-Demand Economy: What’s Driving its Demand? appeared first on BIA/Kelsey - Local Media Watch.

In all of the excitement and investment in the local on-demand economy (LODE), an important question is what will be its economic impact? This follows our discussion last week of “flipping the model” of local search and advertising. With that backdrop, we sketched out a model to quantify LODE’s opportunity.

The relevant section from our LODE white paper is below as a primer for the discussion we’ll have on stage at BIA/Kelsey NOW. Let me know if you’d like to participate (mbolandATbiakelsey.com) and stay tuned for lots more coverage. Next week’s excerpt: LODE’s Demand Side Dynamics.

Economic Impact?

Despite some of the takeaways of the previous section, LODE will never fully replace marketing. Many local service providers will still operate outside of the LODE customer acquisition framework, and will need to establish branding to generate demand through traditional marketing.

The question then becomes, what local service verticals are most prone to disruption by LODE, and therefore where and what quantity of revenue will it displace? Verticals whose consumer need is dynamic and urgent are most subject to disruption, such as transportation, as demonstrated by Uber.

As for aggregate revenue, it is difficult to forecast LODE’s impact. But we can apply models to begin to structure potential marketplace outcomes. For example, the local advertising market was $137 billion in 2014, according to BIA/Kelsey, growing to $159 billion by 2019.

To start in basic terms for the sake of illustrating a model for LODE’s impact, let’s pretend it displaces 20 percent of local media advertising by 2019. That would work out to $31.8 billion. This is only a construct, but a useful exercise in beginning to quantify the opportunity (or threat).

Of course this will not play out with such a simple substitution effect: there will be incremental revenues that LODE creates. That’s a key point for any local media companies that are viewing LODE as an opportunity to grow revenue — both through revenue per advertiser (ARPA), and reaching new business.

Similarly, it should also be noted that LODE’s efficiencies in customer acquisition make it tenable for local service providers with minimal marketing budget. Therefore, LODE’s addressable market could exceed local advertising’s current boundaries, and thus a potential growth opportunity.

Quantifying that one step further, BIA/Kelsey projects that 19 percent of small businesses in the U.S. spend money on any form of advertising*. The other 81 percent could represent LODE’s addressable market; and where opportunity for pure plays and local media companies resides.

_______

* Roughly 5.4 Million SMBs in the U.S. advertise. This is usually framed within the 6 million businesses that BIA/Kelsey classifies as SMBs (including having more than one employee). In the calculation above, SMBs that advertise are framed within the larger population of overall small businesses (LODE’s broader addressable market), reported by the Small Business Administration to be 28 million in the U.S.

The post The Local On-Demand Economy: What's it Worth? appeared first on BIA/Kelsey - Local Media Watch.

In all of the excitement and investment in the local on-demand economy (LODE), an important question is what will be its economic impact? This follows our discussion last week of “flipping the model” of local search and advertising. With that backdrop, we sketched out a model to quantify LODE’s opportunity.

The relevant section from our LODE white paper is below as a primer for the discussion we’ll have on stage at BIA/Kelsey NOW. Let me know if you’d like to participate (mbolandATbiakelsey.com) and stay tuned for lots more coverage. Next week’s excerpt: LODE’s Demand Side Dynamics.

Economic Impact?

Despite some of the takeaways of the previous section, LODE will never fully replace marketing. Many local service providers will still operate outside of the LODE customer acquisition framework, and will need to establish branding to generate demand through traditional marketing.

The question then becomes, what local service verticals are most prone to disruption by LODE, and therefore where and what quantity of revenue will it displace? Verticals whose consumer need is dynamic and urgent are most subject to disruption, such as transportation, as demonstrated by Uber.

As for aggregate revenue, it is difficult to forecast LODE’s impact. But we can apply models to begin to structure potential marketplace outcomes. For example, the local advertising market was $137 billion in 2014, according to BIA/Kelsey, growing to $159 billion by 2019.

To start in basic terms for the sake of illustrating a model for LODE’s impact, let’s pretend it displaces 20 percent of local media advertising by 2019. That would work out to $31.8 billion. This is only a construct, but a useful exercise in beginning to quantify the opportunity (or threat).

Of course this will not play out with such a simple substitution effect: there will be incremental revenues that LODE creates. That’s a key point for any local media companies that are viewing LODE as an opportunity to grow revenue — both through revenue per advertiser (ARPA), and reaching new business.

Similarly, it should also be noted that LODE’s efficiencies in customer acquisition make it tenable for local service providers with minimal marketing budget. Therefore, LODE’s addressable market could exceed local advertising’s current boundaries, and thus a potential growth opportunity.

Quantifying that one step further, BIA/Kelsey projects that 19 percent of small businesses in the U.S. spend money on any form of advertising*. The other 81 percent could represent LODE’s addressable market; and where opportunity for pure plays and local media companies resides.

_______

* Roughly 5.4 Million SMBs in the U.S. advertise. This is usually framed within the 6 million businesses that BIA/Kelsey classifies as SMBs (including having more than one employee). In the calculation above, SMBs that advertise are framed within the larger population of overall small businesses (LODE’s broader addressable market), reported by the Small Business Administration to be 28 million in the U.S.

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The BIA/Kelsey “Status and Review of Card-Linked Offers, 2015” report, which is based on in-depth interviews with industry leaders, has generated a lot of interest among the various shareholders of card-linked offers and non-advertising marketing solutions (including financial institutions, tech vendors and publishers).

We’re especially interested in the feedback from Thanx CEO Zach Goldstein, who tells us he’d like to see the Card Linked Offer space rebranded as “Card-Linked Services.” The main reason? “There is a lot of value that can be delivered to a consumer by linking their card without receiving and fulfilling an offer,” he says. “In our case, for instance, easier reward accrual for loyalty programs.”

In Goldstein’s view, the report — which is bullish on momentum in the card-linked offer space — could be even more bullish. He’s seeing conversion rates for Thanx campaigns ranging from 22 percent into the low-30 percent range. This is well above the 3 percent to 12 percent conversion rates that we cited as the norm.

Goldstein also takes issue with the report’s conclusion that cashback is the preferred reward type — something that is widely assumed by the financial institutions and related ecosystem, but sometimes disputed by players that focus more on loyalty.

“Many of our merchants would rather sacrifice margin than top-line revenue,” he says. “We actually see far more businesses who like to use card-linked for the ‘accrual’ portion of the experience (tracking spending to qualify) but redeem rewards through a more traditional channel or through mobile.” For more of Goldstein’s views on card linking, click here.

The CardLinx Association, which partnered with us on the report, is going deep on card-linked offers with a great lineup of speakers in New York April 28. We hope to see you there.

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