Take local newspapers. These businesses are closing down at a greater speed in this current recession for two reasons.
Firstly, their business models have been weak and the market oversupplied for some time. And the second is the internet.
Local newspapers come in two varieties, the free circulation ones and the paid for readership type.
The free circulation papers have relied entirely on advertising for their revenue. And this revenue comes from 4 key areas – selling property and related products, selling new cars, offering jobs and classified advertising (ie anything second hand).
It doesn't take an expert to spot that the first three sectors are dead for different reasons. Property isn't selling and developers aren't building – so there is next to nothing to offer. Cars aren't selling either, but the advertising budgets that remain are focused at a national level to stimulate national demand with attractive advertising – rather than offer local opportunities to purchase.
Why is this? Simply, in a recession people care about price and value more than convenience. The local showroom offers convenience it might not offer value, so customers head off onto the internet to source alternative offers.
Thirdly, there are very few jobs. Or at least, those jobs that are being offered are specialist jobs and not typical admin, telesales or retail – the bedrock of local newspaper job advert sales.
Again, jobs are also moving online but in a different form. For instance, more and more jobs are being offered (or advertised) directly amongst existing circles of networks – and this has been made possible by business social networking sites such as LinkedIn.
The barrier to receiving or offering a job on LinkedIn comes down to two aspects – geographical location and language.
Of these two, language is the most rigid, in that if the job requires fluent French and you only speak English, then you don't get the job – no matter how clever or smart you are. However, for the right job, you'd move anywhere in the UK, right? And possibly abroad?
In a similar way, someone hunting for a second car in Bracknell might be willing to buy via ebay from a seller in Newcastle – but he won't buy from a Calais seller, even though it is closer.
Again, let's ask why? The answer is clearly language, but also in this case, the car will be equipped wrongly with left hand drive instead of right hand drive.
What this tells us is that language is the rigid barrier to products and services and many of those products are services are designed at a national level. Therefore more and more of the products that were sold locally are now sold nationally.
So, the trouble of local newspapers is that their attempts to go online have failed because they have attempted to keep their websites focus on 'local' whereas once a customer is online he wants the maximum feasible choose – and that makes the web national at least, and international in some cases.
For this reason, ebay.co.uk beats local newspapers for classifieds because it is national, not least because you pay once for national coverage and not repeatedly for each local newspaper edition.
So, the strength of a local newspaper – its local distribution network – is lost the moment it goes online because of the nature of its traditional business model.
You might argue that local newspapers still perform a service that customers want in covering the results of local football games (say). And it is true that this is a service that people want, but the point is that as soon as you put it online, you might as well cover all local football events across the English speaking geography. That means the UK and Ireland to start with, but could equally include any English speaking country.
Therefore, the internet destroys the local advantage in all these respects.
However, there is still one thing that happens at a local level that will never happen at a national level and therefore will seek localised advertising opportunities. These are events.
For instance, if I want to know which English country houses are opening their gardens for public visits this spring, I will look locally.
I may be willing to travel an hour from my home or even two – for something special – but most events will be advertised and consumed in a local area.
Therefore, local newspapers need to become What's On guides to the local area and close down their 'me-too' attempts to sell second hand cars online. They will not defeat ebay.
Sadly, to date, the internet strategy of most local newspapers has weakened the one thing they have in their favour – the local franchise. But, there are alternative internet strategies that do leverage this advantage. In the next few years, those local newspapers that survive will be the ones that successfully develop What's On guides and move them onto the web plus similar strategies.