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Location Based Services and Hyperlocal Info: Business Models

Posted on May 31, 2007

After reading the last post I put together on this subject you may have found yourself wondering how companies could make any money with LBS and Hyperlocal info based products. I have been thinking of the same thing and here are a handful of ideas that came to mind.

Advertising:

I know, I know… that’s a given and it can be pretty unstable so relying on it as the companies sole source of revenue may not be a perfect solution. However, I think that advertising is only a piece of the puzzle and that it cane work together with the other models I’ll talk about in a minute.

Anyhow, back to advertising. There are a couple components to advertising in hyperlocal content based sites in my mind and if used together they have the potential to work well.

First, you have the basic ad model where you can do deals across all of your content with national advertisers like McDonalds who simply want to be everywhere.

However, you can get interesting with these ad buys by having the ad that comes up dynamically pull in the location of the closest McDonalds (to stay with the example) to the user. This type of advertising would also be a great match for companies like Coldwell Banker. Since they know the users are looking at info and news on a very specific area they can market their agents and properties in that area to the user.

Second, you have the ability to offer a self-serve system that will allow local businesses like pizza places to advertise only in their area. I know people have thought of this and that it does have some issues (i.e. the local pizza joint isn’t thinking about internet ads) but I think you can allow the self-serve system to build via word of mouth and think of it, at least in the beginning, as a nice incremental revenue stream.

Content Resyndication Marketplace:

This is simply what it says - a marketplace to allow for content resyndication. Since the big guys (i.e. papers like the Chicago Tribune) want more distribution of their news you could possibly work with them to include their news headlines into the specific local areas that make sense. The Tribune may then be willing to pay you $0.10 per click on their headlines since they know the make $0.20 per visitor to their site.

It is basically an arbitrage situation that provides a revenue stream to the hyperlocal/LBS business, provides top content to the hyperlocal/LBS business and drives more pageviews to the big news organizations. Seems like a win win to me. (The genesis of this idea came from the talented Mr. Rick Klau.)

Licensing/White Label Solution:

Working on the thesis that hyperlocal content will be a big part of the news business going forward I arrived at the conclusion that a hyperlocal content company could provide an “out-of-the-box” (aka white label) solution to companies like the Tribune that will instantly give them a wealth of hyperlocal data and content.

The hyperlocal info company could get paid in a few different ways for this type of service including:

- Monthly/yearly fees
- Ad revenue share (company sells, Tribune sells or a combo of both)
- Combo of the two models

I am sure there are many other ideas to monetize these types of businesses (like booking fees, convenience fees, etc. that would work well with LBS companies) as well but these were a few that came to mind quickly. There is definitely a future here and I can’t wait to see the space emerge in a big way.