Opening Keynote: Local Social 2011 – The Paradigm Shift Picks-up Speed. By Greg Sterling, Senior Analyst at Internet2Go/Opus Research, Principal at Sterling Market Intelligence, Contributing Editor at SEL. Greg starts with the The SoLoMo ‘Mandala’... Sacred image of the Social-Local-Mobile universe and a symbol of our collective search for beauty and wholeness in a world of chaos and disorder. Key Themes: - Hype-Local: Demand, Awareness Growing - Mobile Momentum Continues - Social Media, SMBs& the ‘Now What?’ Problem - Local Data Tsunami - Payments and Real-World Analytics - From Clicks to Transactions

1. The Local Paradigm Shift 2011:
„Big Trends‟ Edition
Greg Sterling
Opus Research/Sterling Market Intelligence
November 9, 2011

2. The SoLoMo „Mandala‟
Social Local Sacred image of the
Social-Local-Mobile
universe and a symbol of
our collective search for
beauty and wholeness in a
world of chaos and
disorder.
Mobile

3. The „Big Themes‟
• Hype-Local: Demand, Awareness Growing
• Mobile Momentum Continues
• Social Media, SMBs& the „Now What?‟ Problem
• Local Data Tsunami
• Payments and Real-World Analytics
• From Clicks to Transactions

4. Hype-Local: Demand,
Awareness Growing

5. A Rough Timeline
• Before 2000: Local was hot as part of internet-everything bubble
• Before 2000 – 2007: Local misunderstood, underappreciated
• After 2009: Mobile helps make local transparent and sexy
• Premium product: Local impressions/calls/clicks pay/command a
premium (e.g., Nexage, xAD, AT&Ti, etc.)
• Not just for SMBs anymore:
“86 percent of national marketers surveyed intend to look for
ways to better modify, adapt, and localize their marketing
content, messaging, and prospect engagement practices. Clearly,
localized marketing is becoming a critical area of strategic focus
and competitive advantage for brands.”
(Source: CMO Council study of brands/agencies October, 2011)

6. Brands: “What localized marketing channels
currently using?”
In-person events 57%
Social media 48%
Mobile, SMS, email 44%
Newspapers 41%
Portals, search engines 33%
Local mags 31%
YP/IYP 7%, daily deals 6%
Source: CMO Council October, 2011 (n=300 brands, agencies)

7. The Value of Local
• In US, annual retail sales are roughly 4T USD (2.48T GBP)
• 80%+ of online consumers use the internet to do product research
• E-commerce is 4.6% (95% purchases happen offline)
Source: US Census Bureau Q2 2011

8. Mobile Momentum Continues

9. Smartphone, Mobile Internet Growth
• By 2015 more mobile/wireless internet users
than fixed-line users – multiple predictions
• Between 30% and 40% (or so) of “EU5” have
smartphones
• UK smartphone penetration 40% (50% by Q1
2012)
• US smartphone penetration: 43%
• In US and UK roughly 7% of Internet traffic
coming from non-PC devices
• US mobile internet audience now 100M
users
Source: Morgan Stanley, 2010, IDC, 2011, Ofcom, comScore, Nielsen (2011)

10. Smartphones: 50%+ for Under 45
Feature phone Smartphone
Others:
43% • Pew: 42%
53%
62% • comScore: 37%
57%
47%
38%
Overall Smartphone (18- 44 yrs) Smartphone (25-34 yrs)
Source: Nielsen, Q3 2011

11. Smartphone Ownership: by Income
At least 53%
penetration for
those making over
$75K USD (54.2K
EUR)
Source: Pew Internet Project, July 2011

12. Mobile vs. PC Time Spent
Global mobile apps vs. web consumption, minutes per day
90
80
70
60
50
40
64 70 66 74 81 MINUTES
30 MINUTES MINUTES
20
MINUTES
43 MINUTES
MINUTES
10
0
June 2010 Dec 2010 June 2011
Desktop Web iPhone/iPod Touch
Sources: comScore, Alexa, Flurry Analytics

13. Android Users: Apps Trump Mobile Web
Mobie Web
33%
Mobile apps
67%
Average Android user (US) spends 56
minutes per day actively interacting with
the mobile web and apps
Source: Nielsen 8/11

14. Usage Concentrated in Top 10 Apps
Allocation of time spent among apps
Top 10
11 to 20
39% 21 to 30
43%
31 to 40
41 to 50
All others
3% 4% 8%
3%
This is Android data but the pattern also holds for
iPhone users
Source: Nielsen 6/11

15. Mobile Impressions Already Massive
If there were
advertisers
sufficient to fill all
the mobile app
"inventory" the
value of that
inventory would
exceed of online
display advertising.
Source: Flurry Analytics September, 2011

16. Tablets a 4th Screen, Mobile-PC Hybrid
• Total tablets “in the market” as of end of Q3: 46 million (not counting
eReaders)
• 40 million iPads (sold); 6 million Android tablets (shipped) – 95% of
tablet traffic coming from iPad
• T-commerce: 48% of US tablet owners made a purchase in past
month (October, 2011)
15%
iPads
Android
85%
Source:Company statements, comScore Q3 2011

17. Tablets Cannibalizing PC Usage
Since you started using a tablet, has your
desktop/laptop usage decreased?
77%
28% of respondents said that the tablet is
their primary computer
23%
Yes No
Source: Google-AdMob, March 2011

18. Mobile/Tablet Access „Primary‟ for Many
• Pew Internet Project (July 2011):
- 87% use internet on their phones
- 68% of smartphone owners go online daily
- 25%“mostly” use their phones to access internet
• Google-AdMob: 40% of iPhone/iPod Touch owners
(n=7,300) go online more often on their mobile devices
than via PC (2009)
• Mobile will be a primary access method for a
substantial segment of the population within 3-5 years

19. Siri Mainstreams the „Voice Interface‟
Siri is to voice commands and “voice
search” what the iPhone was to
smartphones in 2007: a breakthrough
experience that forces competitors to
respond
“Voice is the new touch”
--Dylan or Simon

20. Deals/Offers Preferred Mobile Ads
How would you prefer to receive
 Deals/coupons preferred
coupons on your mobile?
form of mobile advertising
 In store coupon searching Text message (push) 25%
common use case on
smartphones (smartphones) Email 18%
 50% of survey respondents
Text to receive (pull) 17%
have made a special trip to a
store after receiving a mobile
coupon App 13%
QR code 10%
Check-in 8%
Source: InsightExpress Q2 2011, Luth Research (Q2 2011), Opus Research 2010

21. Social Media, SMBs&
the „Now What?‟ Problem

23. What Is „Social Media‟?
• Consumers talking to each other online
• Consumers talking about companies, products
and brands
• User-generated content
• Online word of mouth
• Coming up: Search vs. Social, Can Social
Media Be Outsourced?

24. Mobile Inherently Social
• Facebook has 350 millionactive
mobile users globally
• Twitter has100 million active mobile
users and “46% of active users make
mobile a regular part of their Twitter
experience”
• Overall comScore says US mobile-
social networking audience just over
70 million
• 40 million US mobile users access
social networks (including blogs) daily
Source: Company statements, comScore Q3 2011

25. Facebook Dominates Mobile Time Spent
Top UK Mobile Sites by Time Spent
(millions of minutes)
2523
702
373
240
127 109 79 64 57 48
25
Source: GSMA UK, 12/10

26. Current SMB Marketing Methods
Other surveys have shown
social media usage by
SMBs at 70% (varies by
category)
Source: AMEX 2/11 (n=400 US small businesses who did some form of online marketing)

27. Study: 58% on Either FB or Twitter
Source:Palore July 2011

28. Mixed Experience with Social for SMBs
• 66% of SMBs said they updated Facebook at least weekly
• 63% of SMBs feel it has helped make customers more loyal
• 56% feel it has taken up more time than they expected
• 25% of SMBs estimate their investment in social media has
made a profit while 15% estimate they have lost money; the
remainder (46%) feel they broke even.
• Often social media has fallen short of expectations (36%)
vs. exceeded expectations (9%)
Source: Network Solutions, 2011 (n=500 US small businesses)

29. Confronting the „Now What?‟ Problem
• Business owners or surrogates set up accounts
• They often don‟t know what to do after that
• How to measure ROI, how to think about social
• They lack education, best practices advice
• Range of third parties now trying to help
• But how much of social media can be outsourced?

30. Google+ Complicates Life – and Like

31. Consumers „Like‟ Deals
• In North America, 45% of respondents
said they Liked a brand to get a deal.
• 33% of respondents said they wanted
to “show support” for the brand or
celebrity.
• 9% wanted to be among the first to
receive news from the brand or
celebrity.
• Nearly 60% of social media users visit
social networks to receive coupons or
promotions; 23% do so weekly
Source: Nielsen October 2011, Nielsen/NM Incite global consumer survey

32. The (Local) Data Tsunami
• Crowd sourced
• Merchant created
• Social media
• Reviews/tips/ratings
• Delivered everywhere via
APIs

33. Mobile Payments & „Real-
World Analytics‟

34. Mobile Payments Era Begins
It‟s real and becoming intensely
competitive:
Google, PayPal, Intuit, mobile
carriers, Amex, Visa, MasterCard
, Square, among others
In many instances payments and
offers/incentives/loyalty cards are tied
together
Eventually online ads and offline
purchases will be connected for a
“closed loop”

35. Real World Analytics
Many companies trying to
connect online and offline
data/purchase behavior
Check-ins and other methods
being used by Euclid to track
in-store presence
Lots of mobile promotional
efforts (e.g., offers) to get
people into stores
Eventually much closer
visibility on which ads
delivered in-store visits, even
purchases

36. From Clicks to Transactions

37. Deals Introduce Transactions to Local
• Traditional “lead-gen” has always existed at the local
level in certain verticals (cars, jobs, real estate)
• Pay per call has existed in pockets (now increasingly)
• Deals introduces a “transactional” model to SMBs with
potentially profound results for local advertising market
• Deals more tangible for SMBs vs. “advertising”
• Movement from a speculative advertising model to a
more concrete “pay per customer” model

38. SMBs Like Idea of Buying Customers
How would you prefer to be billed for new customers?
Pay per store visit 16.5%
A percentage of a
sale, generated by an online 27.3%
marketing program
Paid-search clicks (e.g.
15.3%
Google sponsored listings)
Telephone calls to your
16.6%
business
Other 24.4%
Source: Opus Research 2/11 n=7,510 US small businesses

39. But Would They Do It Again?
Yes 48%
On average just over 50%
of deals turn out to be
profitable, while 25% to
No 14% 30% lose money.
-- Rice University, June
2011 n=324 daily deal
merchants
Not sure 37%
0% 10% 20% 30% 40% 50% 60%
Source question for this chart: If you've participated in a Deals program, will you do so again? Respondents = 159
Source: Borrell Associates, September 2011

40. Diversion of Ad Spending to Deals
Have you diverted marketing dollars away from other types of advertising in
order to offer coupons/deals?
80%
68%
70%
60%
50%
40%
30%
19%
20% 14%
10%
0%
No Yes I haven't offered coupons
for my business
Source: Borrell Associates, September 2011

41. Impact on Traditional Media
Percentage spending decrease among surveyed
businesses using deals to promote themselves:
 Yellow Pages: - 27.5%
 Print advertising: - 21.6%
 Direct mail: -17.6%
 TV: -14.7%
 Local radio: -13.7%
Source: Rice University, June 2011 n=324 businesses that conducted a daily deal promotion between August 2009 and March 2011

42. RedBeacon Exemplifies Transactional Model
• 35% of merchant
responses coming from
mobile (in 2 mos).
• App is feature rich and
allows for video and audio
to be uploaded
• In app scheduling
• Calls, chat, multiple
communication tools
• RedBeacon: mobile could
become primary way that
consumers and service
businesses interact
• Biz model is commission

43. From Publisher to „eMarketplace‟ Platform
In summer 2011 Yell announced a “Emarketplace platform:” Yell says it
change of strategy: will “establish the first local
eMarketplace platform for consumers
From publisher to platform: Yell and SMEs to connect and transact
says it will move from being a locally (local ecommerce, coalition
publisher/provider of advertising loyalty programs, concierge
services a publisher of “digital services).”
services” (marketing services, co-
branded affinity cards, payment
services, business
operations, government access
services).

44. To FollowContact Me Me
Follow or or Contact
Greg Sterling
greg.sterling@gmail.com
Twitter.com/gsterling