I’m bummed that I had to bow out of this year’s Where 2.0 conference; I had been slated to speak, and had a list of people to meet and sessions I wanted to hear. One of the most interesting sessions, moderated by Greg Sterling, was on the “monetization of maps and mashups“.

Following a blogger’s coverage of the session, I was really tweaked by one comment, roughly paraphrased by blogger John McKerrell, in attendance. From Skyhook, Jed Rice:

“When we started trying doing more local targeting and being able to insert a lat/lon.We had to flood adsense with a lot of local information to get any information from them at all. We had a click-through rate of 7/8/12% as if you can position ads around a relevant map you get a higher click-through. But there’s a problem that there isn’t enough ads to serve, requires a huge inventory to serve at such a granular level.”

This is a pretty important observation.

Experience is beginning to demonstrate that AdSense does not offer much hyper-local ad inventory.

digging deeper

Exchanging messages with Greg Sterling after the session, he also mentioned that one of the other panelist believes that the AdSense application is actually designed (purposefully? algorithmically?) to discourage hyper-local ad targeting. Presumably, this is because scaled local business participation has yet to show up.

It’s smarter business for Google to force advertisers “up the geo hierarchy” where they then have to compete at the MSA or town/city level. Competition drives higher keyword pricing, so up you go.

The paradox? Hyper-local targeting should pull a higher CPM, but if the competitive model is not engaged, the ad value is not realized.

supporting math

A few months back I blogged about the “implied math” of AdSense small business participation. An “industry insider” estimated that about 800,000 businesses actively participate in AdSense, and about 20% were at budgets lower than $10,000 per month. Well, we all know that this ~160,000 group of “low budget participants” probably represents a mix of small local businesses and not so small.

The conclusion? AdSense is just not there as a mechanism for hyper-local advertising. Not today. Not even close.

gaping hole or beautiful opening?

This has pretty material implications to those focused on hyper-local applications, map mash-up apps and local mobile businesses.

• I’d be careful not to place too much of your revenue bet on the AdSense model. You’ll probably be sadly disappointed with the monthly check. VC’s, caveat emptor!
• To the yellow pages industry - this becomes a seriously interesting opportunity. Contrast the penetration of millions of local advertisers in YP. This channel could be in the “right place, right time” position.
• Arguably, the print YP guys actually have deep pricing and sales experience with hyper-local ad value. In print terms, it’s about book scoping, and gaining more revenue from narrow, well focused distribution products.

Google and others undoubtedly have techniques up their sleeve to close this gap. But when you do the math and observe the live examples (as reported in this session) this gap will probably exist for some time.

Is anyone seeing anything that contradicts this viewpoint?

Posted by Perry on Wednesday, May 14th, 2008 at 12:45 pm.