Two companies, two methods, one goal: Dominate local search

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Newspapers must keep marketers like Colleen Donahugh of Ace Hardware convinced of the power of actual newsprint while simultaneously pushing her online. After all, she spends half of the 4,800-store hardware chain's budget running weekly circulars in 220 markets.

And for now, keeping Ms. Donahugh happy means putting her circulars online for practically nothing. She would love "to decrease what we spend on circulars," but she doesn't expect online spending to supplant print spending anytime soon, if ever.

After all, spending on her favorite "minuscule" compared to her print budget or the retailer's national broadcast budget of $30 million. And she spends just as much at the likes of Yahoo and Google, promoting the Ace Hardware site purchasing keywords.

"We have to get our feet wet and make sure we are still in the game and that we are in the places where consumers are going to look," she said.

Two online players are trying to become the place consumers turn to before they head out the door to buy., backed by old-media players (the triumvirate of Gannett, Knight Ridder, Tribune) and independent venture-capital-backed are approaching the local-ad market by testing drastically different business and marketing models.


Both are essentially trying, albeit rather clumsily, to translate the traditional print circular into online information that's searchable with local information as the hook to the consumer. The potential is huge, analysts believe.

"Local searching is growing faster than overall Web searching, and it corresponds directly to broadband adoption," said Greg Sterling, an analyst covering interactive local media for research firm the Kelsey Group. "The reach of the Internet as a medium for local content is now equal to or greater than any traditional local medium, like phone books or newspapers."

Broadband access grew 34% in 2004, according to the Federal Communications Commission, and as of May, 59% of active online users had high-speed connections at home, according to Nielsen/NetRatings. Total U.S. consumer spending in 2004 was $7.7 trillion, according to U.S. government estimates. At least 80% of that-$6.16 trillion-is spent in local markets. Plus, small and medium-sized businesses spend more than $25 billion each year on local advertising.

Dave Hamel, chief marketing officer at, admits garnering retail participation is the biggest challenge to his business model. The reason is that not all retailers distribute their circulars through newspapers. Consider that Wal-Mart, the nation's biggest retailer, is notably absent because it has a policy of not advertising in newspapers. But, he added, the site has come a long way since launching in 1999.

Back then, they were flying newspapers in from all over the country to convert content online in a cumbersome system that relied on manual input of the data. Today, more than 200 retailers, from national players like Albertson's to the local camera shop in Brooklyn send data feeds on sales and prices directly to the company.

Even so, Mr. Hamel admits it's going to take the strength of the 10,000-strong advertising sales force has with backers Tribune, Gannett and Knight Ridder to get more retailers on board.

"Everybody is trying to get into the local space, but you have to walk door-to-door and call on every little retailer that ever existed and the manpower that that takes is a pretty hard thing to start up," he said. "We have to get more content, more and more retailers and better search tools."'s race to market is antithetical to that of

As an aggregator of data, relies on Web-crawling technology. Instead of focusing on getting retailers to send data, the site, launched in 2003 by former executives in the retail pricing software industry, doesn't even have to knock on a single retailer's door. "We are focusing instead on the consumer side," said Andy Moss, founder-CEO, who is a mathematician and computer scientist by training.


To please the consumer side, has launched tools like "watch lists." Always shopping for boneless chicken breast or Bounty? gives the consumer a foolproof way to find out, via an e-mail alert, what retailer within your ZIP code has the best sale.

"We see the opportunity in building targeted advertising for branded manufacturers," he said. " is viewing it as a way to bring circulars online. We see it as a way to tell people when to buy something. We have no interest in saving newspapers. It's not part of our concern to stop the loss of circulars."

The Internet has become the preferred venue for comparing prices and doing product research. Consumers routinely shop online and buy offline. According to Forrester Research, 62% of U.S. online consumers prefer to buy offline. But in a study done by Dieringer Research Group for ShopLocal, 39% of U.S. consumers made a local purchase after conducting research online. And, for big, considered purchases, this finding is even more pronounced. The Kelsey Group found that for purchases that cost more than $500, some 34% of survey respondents started product research online, but 90% transacted offline.

Jeffrey Grau, a senior analyst at research firm eMarketer, said the competitive threat for sites like and isn't the battle against one another-although they both have a long way to go in gaining more comprehensive retailer participation.

After pointing to Google as the king of search, he said it's just a matter of time until Google owns the space. "Right now, they've got local-search options on the screen, but it's more of an electronic yellow pages," Mr. Grau said. "It doesn't show you sales or products. But if anyone can take this to the next level and allow you to compare and get all the data that's needed, it's Google."

Tom Finke, VP-development, Tribune Interactive, said sees Google and Yahoo as partners, since the Tribune, Gannett and Knight-Ridder are spending big on keyword searches on those top engines to drive consumers to

"That's the strange thing about the Internet, competitors are also partners," he said.

And although Mr. Finke said the likes of Google and Yahoo reign on the national level, old media and old-media-backed sites such as have the home-field advantage, as he pointed to the success of sites such as, and

"Google and Yahoo are never going to have the relationships and credibility with advertisers we have," he said. "We can also bundle this with our print products and they can't."

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