Although Yahoo (NASDAQ:YHOO) has not been able to catch up with the overall online advertising growth, this has not deterred the company from experimenting with growth areas. In the online advertising market, local marketing is one of the upcoming trends and has attracted players like Google (NASDAQ:GOOG), AOL (NYSE:AOL) and Facebook in addition to Yahoo. Here we will analyze the growth prospects of this trend and how it could benefit Yahoo in particular. We currently maintain $17.88 price estimate for Yahoo stock, which is about 6% above market price.
Local Marketing Trend Heating Up
Local marketing allows users look for the best local deals, news and events in their area. Yahoo announced the launch of Local Offers program recently and is partnering with websites like Groupon, LivingSocial, Gilt City, and others to provide a wide selection of local deals and coupons from nearby restaurants and other local retailers. This is a strategy from Yahoo to attract more users to its site, and has currently around 620 million users visiting its site per month.
(Chart created by using Trefis' app)
Google, Facebook and AOL are not far behind. For example, Google has partnered with businesses that advertise special deals to the users of Google’s search engine. Similarly, Facebook recently announced an initiative called "Deals" that allows merchants to make offerings through mobile devices to Facebook users who are near the merchant’s location. AOL’s Patch is a similar service and is already present in more than 300 cities across the U.S.
Groupon and LivingSocial, the Pioneers of This Trend
The business model that Groupon has adopted is that it partners with businesses to offer consumers incredible savings on products and services. Local marketing create a win-win situation for both the consumers and the businesses. Consumers benefit from the highly discounted deals while businesses benefit from a more focused and inexpensive advertising, and at the same time they increase their customer base. However, the barriers to entry in this market are low, and players like Google, Yahoo, AOL and Facebook have jumped to tap into the growing local marketing phenomenon.
Disclosure: No position