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Startups Aim to Reinvent Local Advertising

Automatically tailored display ads could attract small businesses.
March 17, 2010

Advertising has been a killer Internet business model, making billions of dollars for Google and others. But a number of startup companies think there’s a huge untapped market in providing automatically tailored display advertising to thousands of local businesses.

Ad slot: PlaceLocal automatically generates ads for local businesses by crawling the Web.

Yelp, which aggregates customer reviews of local businesses, has tried to provide targeted local advertising with varied success. Now a new crop of startups are hatching plans to provide more effective advertising services to local businesses. The aim is to ease small businesses into online advertising through familiar channels such as newspaper sites, and to help these locally focused websites increase revenues by making it easier for them to service small accounts.

“There’s a lot of overhead to service small advertisers,” says Roger Lee, chief operating officer of PaperG, an advertising company whose customers include the Boston Globe, the Houston Chronicle, and Newsday. Most local businesses don’t have the budget to pay an advertising agency to design ads for them, he explains. And it isn’t cost-effective for newspapers to offer ad design services for accounts below a certain size. Lee, formerly the publisher of the Harvard Crimson, Harvard University’s student newspaper, says his company wanted to find a way to use technology to fill this missing link between local businesses and local newspapers.

PaperG is testing a software system called PlaceLocal that automatically generates ads for local businesses by crawling the Web. The system scrapes the Web for basic information about a business such as its address, phone number, and opening hours. Even if the business doesn’t have its own Web page, data can often be pulled from third-party services such as Yelp or Google Maps. The system then uses semantic analysis to find and extract photos and positive reviews, and it builds an ad automatically using Adobe’s Flash software. The business owner or newspaper ad sales representative can customize the ad, so if PlaceLocal didn’t choose the best photo or review, it’s easy to select another.

Lee adds that 50 percent of small businesses don’t have a website, and PlaceLocal can also be used to generate one. That way, if someone clicks on a business’s ad, there is somewhere to direct them. The company is also working on algorithms that would adjust the look and feel of an ad depending on the most common types of content that turned up when crawling the Web. For example, if the system found lots of photos, it might design a more image-heavy advert. Besides making it easy to create an ad once it’s sold, Lee expects PlaceLocal to help representatives sell ads in the first place. “The sales rep can have a beautiful ad designed for every lead sheet,” Lee says, “which makes a real difference in the conversation.”

PaperG isn’t the only company hoping to serve as an advertising go-between for local businesses. Lasso, an Austin-based startup, is focused on helping small businesses publicize discounts and special offers than on facilitating display advertising. Lasso’s platform is designed with a collection of features that can be turned on or off depending on the needs of a specific advertising platform. This includes the option to ad geocoding for ads so that they can be used by location-based software such as Foursquare, a service that allows users to report their location to friends through mobile devices. Lasso’s platform can also be linked to social media sites so that an offer can spread virally.

Services such as Groupon, which offers a daily deal in cities across the United States, have proved the popularity of special offers with customers. Lasso CEO Chris Treadaway hopes that his company can help newspapers in particular become hubs of such offers. Treadaway says local newspapers may be able to sell better ad packages to customers, and to provide statistics that make it easier to show the economic value of advertising over the Internet.

Online advertising for local businesses represents “the final frontier” for the ad industry, says Colby Atwood, president of Borrell Associates, a research and consulting firm based in Williamsburg, VA. But since so many technology companies are trying to leap into the fray, he says, many local business owners are confused by the spread of technologies on the market.

Atwood believes that while some small-business owners enjoy testing new technologies, many others feel uneasy because they don’t understand the advertising packages they buy. “There’s an underlying suspicion that maybe Web advertising isn’t for me and doesn’t work,” he says. Because of the desire to get measurable results, Atwood says, there’s been a huge growth in promotions such as coupons for local advertisers. Database management software has become much less difficult to use, and even businesses with limited resources can keep track of who’s redeeming coupons and follow up with more marketing aimed at these customers.

Services such as those offered by PaperG and Lasso could prove useful in helping local newspapers sell advertising, even if they don’t work perfectly, Atwood says. However, at some point he expects to see more consolidation in local advertising services.

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