The Challenges of a Rapidly Changing Local Marketplace

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Greg Sterling

The Challenges of a Rapidly

Changing Local Marketplace

Munich SIINDA 2014

• Local Search Association (“Strategy & Insights”)

• Impact of digital media on offline/local

consumer behavior

• Digital advertising and marketing

• Twitter: @gsterling

Who Am I?

• Apps dominate: More time being spent “in apps” than PC

• Multi-channel media: Now in a complex, “multi-channel”

environment

• Blurring of online, offline: offline sales dominate but online,

offline blurring

• Mobile payments: Offline transactions increasingly

happening via mobile payments (apps)

• New uses of location and offline data: New data being

unlocked by offline mobile patterns

• Privacy: a challenging issue/concern for all

• Sales, publishers, merchants challenged: marketers, media

companies challenged

Trends Overview

MOBILE DEVICE ADOPTION

Smartphones:

• 72% penetration in US

• 55% to 70% in EU5 markets

• 90% penetration by end of 2016 (US)

projected

Source: comScore, Nielsen 2014

Mobile Still the Story(location evolving)

Android: Dominant Global OS

Source: Gartner 2014

• Android on more than 3X devices vs. Microsoft

• Nearly as many Apple devices as Windows machines

Traffic Comparison (Europe)

21% + 9%70%

• UK: Mobile is 38% of traffic

• Spain: Mobile is 37% of traffic

Source: StatCounter, September 2014

KaufDA: 80% Mobile

Source: Company CEO Christian Gaiser

Mobile vs. PC Time (US)

60%*40%

• *Apps claim majority of digital media time: 52%

• Time with apps growing but not number of apps used

(roughly 27 apps used per month on average – but most time spend with far fewer)

Source: comScore, Nielsen August 2014

Top Apps by Audience Reach (US)

Source: comScore, June 2014; IAB, August 2014; eMarketer, July 2014, Xyo.net

• A few apps dominate usage

• In some developing markets

Facebook (and WhatsApp) “are the

internet”

• Global mobile ad revenues €14.6

Billion ($19.3 billion) in 2013 could

double in 2014

• 8 US companies control 80% of

worldwide mobile ad revenue

‘Unbundling’ (Fragmentation)

• Unbundling of 3,000+ headings (oppty to do it better)

• “Horizontal” usage consolidation among a few top sites/apps

• Lots of specialization and “point solutions” at the bottom

• Partly a competitive response to big players

FY 2013 revs:

• Total: $50.5B

• Mobile: $9B

(approx.)

• 18%

1H 2014 ad revs:

• Total: $4.9B

• Mobile: $3.02B

• 61%

1H 2014 ad revs:

• Total: $503M

• Mobile: $405M

• 80.5%

Mobile Ad Revenue

Source: company reports, Greg Sterling estimates

Source: IAB, IHS August 2014

Mobile Ad Formats

Europe’s ‘Mobile Search’ Market

Source: StatCounter, September 2014

Google controls 95% of

browser-based mobile

search in Europe,

slightly less in US

From ‘Search’ to ‘Discovery’

• Web search and search results less relevant to mobile users

• Context, location, time, history, social network data, offline behavior

enable “anticipatory search,” personalized recommendations (e.g.,

Google Now)

Foursquare Google Maps “Explore”

• From “search engine” to

“personal assistant”

• Driven by device/user

constraints, data available

• Google’s antitrust critics

accuse Google of “diverting”

traffic to Google vertical

results . . . But:

• Google trying to provide

“answers,” more value to

remain relevant in mobile-app

dominated environment

From ‘Search’ to ‘Assistant’

• Also trying to index “deep links” in

apps to encourage usage

Source: Google-IPSOS Q2 2013, n=1,600 US adults

• 90% of multi-device owners

use different screens

sequentially; 98% of activity

happens within a single day

• “Smartphones are the

backbone of daily media use . . . devices used most

throughout the day ....”

• Makes attribution, reaching

audiences more challenging

Cross-Device Movement

New Attribution Tactics

• Smartphones are always

somewhere in time and space

• Reveal patterns, preferences

and behaviors of their owners

• Make possible new types of

metrics and online-to-offline

tracking

• All major internet companies

seeking to provide offline/local

conversion data to advertisers

Segment groups of people based on their real-world

movement and shopping patterns:

“business travelers,” “auto intenders” “sports enthusiasts”

or “people who live in post code XYZ and watch Game of

Thrones”

Location Is the New Cookie

• Audience identification/targeting

• Retargeting

• Targeting + geofencing (e.g., serving

ad with coupon to QSR regulars within

2 km of a Subway)

Not Going to Discuss Privacy

Blurring the Lines

E-commerce and app-based payments for offline

experiences and services

Future Channels, Platforms?

How will these new “channels”

and “platforms” affect digital

and location based marketing?

Big Brands Scrambling to React

• Fewer than 10% of

marketers/brands are executing

cross-channel campaigns

• In 2013 80% of Fortune 500 didn’t

have a mobile-optimized site

• As of Q2 2013 Just 6% of top 100

Fortune 500 companies have sites that comply with Google's

mobile requirements

Source: e-consultancy-Oracle, 2014; iMomentus, 2013; Google 2013

Do you believe mobile marketing is a ‘must have’ or a ‘nice to have’?

Single-coded question

Base: SMB survey by Greg Sterling/Opus Research (2013), n=1,255 small business owners/decision makers

21%

57%

22%

Must have A nice to have Don’t know

SMBs Uncertain

77% doubtful re value of mobile marketing

Which of the following statements best describes your company’s appetite to

grow the business over the next few years?


8%

19%

38%

34%

1%We are not looking to grow,we're having trouble keepingup with the demand as it is

We are content with ourcurrent size

We would like to grow thebusiness a little

We would like to grow thebusiness significantly

Other

Not All SMBs Want to Grow


Please select which statement most closely matches your ‘state of mind’ when it

comes to marketing your business?

Base: Firms with an appetite to grow (732), Firms with no appetite to grow (278)

13%

33%

12%

21%

15%

37%

When done correctly, marketing can bring alot of success to my business - but it's hard for

me to always "get it right"

The majority of my cusomer base is via wordof mouth so I cant see how marketing will

support me further

I value the benefits that marketing can bringand believe its an important investment to

make

Appetite togrow

No appeiteto grow

Growth vs. Status Quo SMBs


28%

9%

7%

4%3%3%

46%

$1 to $1,000

$1001 to $2,500

$2,501 to $5,000

$5,001 to $10,000

$10,001 to $20,000

SMB Budgets Under $5K (3,8K EUR)


Marketing Challenges: Not Enough…

Source: Thrive Analytics-LSA, 2014

1. Time

2. Budget

3. Expertise

4. Internal

resources/personnel

What are some of the common frustrations you experience with marketing your business?

Multi-coded question

5%

6%

18%

18%

26%

28%

38%

0% 10% 20% 30% 40%

Other

I have to work with too many vendors for differentmarketing services

None of these

There are too many choices of marketing channels

Because its not my expertise, its hard to judge what's goodquality marketing

I don’t have a clear measure of what return on investment I get from marketing

Its expensive for what you get

Others include: lack of time and lack of

money

Marketing Frustrations


Which of the following do you use to measure the return on investment (ROI) of your marketing?

Multi-coded question

4%

4%

10%

18%

21%

21%

23%

25%

35%

39%

46%

50%

0% 10% 20% 30% 40% 50% 60%

Number of mobile application downloads

PR/Newspaper coverage

Data from analytics dashboard

Number of qualified sales leads

Number of clicks through to your website from interney…

Average size of sales

Foot traffic to your store

Likes on Facebook/Twitter followers

Number of incoming customer calls

Ask our customers how they found us

Sales

Repeat business

ROI Understanding a Problem


If you had a significant increase in budget tomorrow, what ONE activity would you choose to spend that money on?


20%

11%

8%

7%7%

6%

5%

5%

4%

4%

4%

3%

3%

3%3%

2% 2%

2% Company webiste

Full time marketing resource

Direct marketing

Paid search advertising

TV advertising

Social Media

Search Engine Optimisation (SEO)

Online display advertising

Print Newspapers

Leaflets/Flyers

Coupons/promotional

Mobile site or app

Yellow Pages

Outdoor/Billboards

Radio

Blogs

Magazines

Online reviews

Better Websites + Help


Thinking about the number of marketing vendors that you prefer to work with, please select from the list below which statement best describes your preference.

Single-coded questionWhat Do They (Really) Want?


• Would prefer to do all

marketing in house

• Would prefer to work

with single

source/vendor

• Use multiple, specialist

vendors

40%

48%

6%

What the SMB Needs

• A trusted advisor who can build an

affordable, customized customer

acquisition/retention program that

delivers results

• Problem: publisher/channel wants to

deliver templated, scalable solution;

may be biased toward favored

products and not be good at

fulfillment

• One model is financial services: SMB

hands over budget, “sales advisor”

distributes that budget across various

channels and delivers periodic reports

Same Pitch, Same Products

Many similar claims and pitches

creates skepticism/confusion:

• “Your one-stop shop”

• “Your digital agency”

• Lengthy menu of “products”

• Some: unethical or false claims

No transparency; digital churn

still very high

Up to five calls per week

Preferred Contact Methods, Info

Source: Thrive Analytics, LSA, 2014

• Educate sales to “speak the

language of the customer”

• Enables specialized services,

more efficiency

• Development of targeted

consumer products and

“marketplaces”

• “Templated,” perfunctory

approaches won’t work

Going Vertical One Response

Operational Services+

• Deliver key services: payments, order processing, CRM, scheduling,

invoicing, field services management

• Combine services and marketing for more (obvious) ROI/value,

diversified revenue and better retention

• Examples: Square, Swipely, HomeAdvisor, DemandForce, Groupon,

OpenTable, others

• Square: started as a simple way to accept credit cards. Now offers:

- Card processing

- E-commerce marketplace

- Complete POS system

- Analytics

- Loans

- Scheduling

- Invoicing

- Customer feedback mechanisms

It’s All about Execution

Discussion is

easy.

Execution is

an uphill

battle.

Greg Sterling

[email protected]

Twitter: @gsterling

Questions