What is the hardest stage of growth for SMBs? After examining census and business data for the past decade, BIA/Kelsey has identified the “troubled teens” transition from blossoming small companies (one to nine employees) to medium-sized firms (20 to 49 employees) as the critical stage where tool complexity and pricing, as well as local business models, are misaligned with the needs of growing companies.

Take a moment now to get the free download of our new Sponsored White Paper, Optimizing Local Marketing: SMB Marketing Needs “Do-It-With-Me” Models.” Produced courtesy of Vendasta, which asked BIA/Kelsey to explore the opportunities for aggregated marketing services in local SMB markets, the paper examines the pressing need for consultative marketing services that blend easy-to-use digital presence management tools with hands-on marketing expertise for companies that are too large to continue to market on an ad hoc basis and too small to hire and retain full-time marketers while paying for expensive enterprise tools that are often overkill, and over-priced, relative to the SMB’s needs.”

Specifically, it’s the “troubled teens,” when a company is between 10 and 19 employees, that represent the greatest opportunity for local marketing services players to step into a startling gap in success. Even as smaller and larger firms continue to grow, albeit with very high failure rates among the smallest businesses, it is the teen companies that fail at a rate more than an order of magnitude greater than other businesses of any size.

The U.S. Census has been tracking business birth and death rates on a five-year cycle. During the last cycle, between 2010 and 2011, SMBs of between 10 and 19 employees failed 14 times more often than the next largest group (20 t0 49 employees) and accounted for the only net loss of jobs among all businesses of any size in the United States.

Vendasta talked about its DIWM approach at BIA/Kelsey Interactive Local Media Conference in December and also dug into the idea with Michael Boland during a video interview last fall. We’ve been increasingly struck by the emerging complexity of small business, which we believe is evolving into a “Local On-Demand Economy” (LODE). This takes the aggregation of demand further than Uber, blending new forms of local services with novel employment or contractor arrangements with service providers.

Tools to participate in the LODE economy will need to bridge the gap between limited human, technical and financial resources within growing SMBs and the requirements for digital presence management at a price that supports increasing growth. Too often, teen firms take on high upfront costs to integrate enterprise tools into their workflows, failing to get results because ongoing coaching is needed to build a robust marketing experience. The DIWM model provides expertise and explanations along with technology, helping business to grow organically, building their presence instead of exhausting their budgets upfront and leaving entrepreneurs on their own to use enterprise software designed for teams of marketers when the SMB has only begun to embrace marketing as a practice.

This misalignment in tool complexity, price and service model is a market opportunity for companies such as Vendasta, which provides a digital presence dashboard through resellers, including the Miami Herald, that deliver marketing advice along with the Vedasta’s 10X platform.

Yet we also see Google, Facebook and LODE exemplar Uber, to be expanding into these markets, across many locally delivered services. There is a race on to crack the local logistical and marketing challenges of on-demand goods and service.

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We’ll be discussing DIWM in depth at BIA/Kelsey’s National Conference, March 24-27 in Dallas.

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The Local On-Demand Economy seems to be taking over tech headlines, not to mention VC dollars. We’ve been covering this “Uberfication of Local” for the past couple years and more formally in the past few months.

We’ve been calling it On Demand Local Services (ODLS), but with a new white paper to further plant our stake in the ground, we’re extending its boundaries with the term “Local On Demand Economy” (LODE).

Regardless of what it’s called, it will be a key area to watch in the coming months. This goes for anyone working in local media or selling services to SMBs. Like many disruptive areas, LODE is both opportunity and threat.

The area is rich for analysis, including it’s current state, background and where it’s going next. These will be key discussion points in forming strategies around LODE and extending local media’s addressable opportunity.

The report’s executive summary is below and the full version will be published in the next few weeks. We’ll be covering this closely here, in our newsletter, and in other forums.

More to come on all of the above and in the meantime, here’s the summary:

Executive Summary

You’ve probably seen it throughout tech news coverage: “Uber for XYZ has launched.” It’s a business model first popularized through hailing a ride somewhere, but is now taking over a wide range of local service verticals — everything from house cleaning to car repair to dog walking.

We’re talking about the local on demand economy (LODE). It is defined as services that are summoned on-demand through mobile apps, then promptly fulfilled offline. For users, it brings immediate needs to their fingertips (literally). For providers, it aggregates demand.

This creates marketplace transparency that brings together buyer and seller more efficiently. Individual service providers are afforded customer acquisition capabilities previously reserved for larger companies. Many LODE apps also handle operations like payments and scheduling.

In micro terms, these lowered overhead costs create favorable unit economics that are passed on to consumers — further fueling demand. In macro terms, the rise of LODE could transform the traditional local service models we’ve known for centuries. It’s the new “1099 economy.”

This happens by flipping the traditional local advertising model that requires marketing in advance. Instead, demand is captured and revealed for service providers to react in real time to a marketplace made transparent. Put another way: marketing is replaced with a commerce engine.

This is a fundamental shift in that local service providers don’t have to make their availability known through various forms of marketing in order to generate demand. Demand comes first as consumers make their need known. Supply (local service providers) then adjusts accordingly.

This creates more efficient customer acquisition — a critical factor for local service providers with small or non-existent budget for upfront marketing. Therefore, the addressable market for LODE services could exceed the boundaries of local advertising, and therefore a growth opportunity.

These and other attributes have caused LODE to be the largest area of VC funding of the past year. According to CB Insights, LODE companies raised $2.6 billion in 2014. This happened at a rate of roughly 20 deals per quarter and a series A average of $7.83 million.

Uber — LODE’s most emblematic startup — is one of the most successful companies of the last decade in terms of revenue growth and valuation. It has alone received $2.7 billion in total funding, is now valued at approximately $40 billion and operates in several countries.

That success has compelled several startups that extend this framework to new verticals and feature sets. Other examples are Lyft for ride sharing; Airbnb for hospitality; Homejoy for house cleaning; TaskRabbit for “odd jobs,” and Urgent.ly for roadside assistance.

Meanwhile, the sector’s growth continues to be fueled by several macro factors. These include technology (smartphone penetration and app innovation); culture (acclimation to app based local discovery); the economy (unemployment rates and provider availability); and generational shifts.

This Insight Paper defines LODE, examines its drivers, spotlights best practices and maps its trajectory. It will characterize the next phase of local commerce.

The post Rise of the Local On-Demand Economy: An Insight Paper Preview appeared first on BIA/Kelsey - Local Media Watch.

On Demand Local Services — a.k.a the uberfication of everything — continue to expand into new local service verticals. We’re seeing everything from lawyers to weed delivery (you might need those two together). This is the topic of a report I’m writing, and a discussion point in this week’s analyst roundtable.

In addition to ODLS, there’s a report in the works on closed loop marketing by Abid Chaudhry. He discusses in the roundtable how mobile engagement creates a more cross-screen world, making offline attribution increasingly important. We hit on this theme in our last roundtable.

And Charles Laughlin discusses his report in progress on the state of the art of local ad sales. This is a fast moving topic, and a contentious one. Charles examines all schools of thought in the report, co-written by Stacey Sedbrook, including the division of traditional and digital sales forces. Another key topic.

All of these will be published in the coming weeks among other white papers, such as Peter Krasilovsky’s report on card-linked loyalty offers. Though he wasn’t able to join the roundtable, his paper joins the mix with a unique angle that aggregates data and input from the biggest players in the card-linked offers field.

The roundtable video is below and stay tuned for more video (and white papers).

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Yelp is acquiring Eat24, the online delivery and pickup service that competes with GrubHub, Delivery.com and other national and regional players for order-taking, food search and discovery. The service is being acquired for the equivalent of $134 million ($75 million in cash and 1.4 million Class A shares).

Eat24 currently provides menus, order-taking and tracking services for more than 20,000 restaurants in 1,500 cities — 10,000 fewer than GrubHub. Like GrubHub, its revenue model is based on commissions (industry standards are typically 10-12 percent per order.) The service is free to the consumer, although restaurants can charge their own delivery fees.

The service is largely dependent on customer pick up at restaurant locations, but delivery is becoming a larger factor. In several California cities, for instance, Eat24 will soon be providing delivery via SideCar, the shared-car service.

Founded in 2008, Eat24 has been integrated with Yelp’s mobile app since 2013. By bringing Eat24 in-house, Yelp can strengthen its platform of services, which have grown beyond advertising and now includes scheduling, reservations/booking and offers. Yelp reports that it has over 93,000 active local accounts.

While Eat24 currently lags behind GrubHub, online delivery is still a nascent category. Moreover, it is ripe for cross-over activity with other food-related segments, including rating/reviews (i.e Yelp and Zomato, which just acquired IAC’s UrbanSpoon); online reservations (i.e. Priceline’s OpenTable); and eventually even grocery delivery (i.e. Amazon, WalMart and Google.)

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Mobile payments won’t take over the universe in 2015, as the tech media would have you believe. But it will have a noticeable impact on our favorite new topic: On demand local services (ODLS), a la Uber.

That’s where mobile payments’ physical barriers (i.e. point of sale compatibility) don’t exist. Think of it like in-app payments but for local services fulfilled offline — everything from walking your dog to getting a ride somewhere.

Apple Pay could unleash this already quickly developing area by creating a single point of entry for payment authentication. That makes it easier than dealing with separate payment systems for several ODLS apps.

We tackled this topic in the opening analyst roundtable of our Interactive Local Media conference last month in San Francisco. The video is below for the mobile payments segment. The rest of the roundtable is coming soon.

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