I found this post by Jim Moran, one of the founders of YipIt, quite interesting and wanted to write a longer post to share my thoughts. In it, Jim suggests 4 ways that local publishers can compete with the likes of Groupon and Living Social in the local deals space. While I agree with all of his suggestions, including leveraging existing email lists and content, I think it is worthwhile to highlight one of the inherent flaws of local media companies and explain why it will lead them to fail in this space, in my opinion.
At their core, local media companies are just that: local. As such, even the largest do not have national coverage in any one business line. For example, just look at Hearst where I work. In our newspaper group, our largest markets are Houston, San Francisco, Seattle (only a website now), San Antonio and Albany, NY. Not exactly a national footprint now is it? Unfortunately, on the web, scale is hugely important and having a national brand, strategy and footprint is critical to success. This relentless national focus is a significant reason why Monster.com, CareerBuilder, Craigslist and eBay were able to obliterate classified revenue at newspapers and why the likes of Groupon and Living Social will suck even more local ad dollars from existing media players.
As Jim points out in his post, local players like WaPo, NYT and Hearst are partnering with existing players in the daily deals space, but we’ve all seen this game play out before. Sooner or later, users interested in local deals will circumvent the media partner and go directly to the local deal provider. The poster child for this phenomenon is the migration to Google.com for search when Yahoo! integrated Google as their search provider back in the day.
In order for existing local companies to really compete in the daily deal space, something larger needs to be done that includes launching an independent, new brand focused on just daily deals (I would suggest buying a smaller player to get to market more quickly). To get national scale, these companies would then need either to partner with one another (ala Classified Ventures) or leverage all of the local assets in an single company. In the case of Hearst, this would mean promoting the local deals product across all of our newspaper, TV station and yellow page properties (including online) and leveraging their sales forces to source the initial deals.
Neither the partner nor internal cooperation plan that I reference above are things that I think would be easily accomplished, especially in a world where local media companies are struggling with so many challenges in their existing print business lines. As such, I think the flow of local ad dollars out of existing media players will only increase leaving them even further damaged by the creative destruction of the Internet.
