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The biggest hurdle facing local online advertising, as Mark Potts and others have framed the problem, is the challenge of keeping rates low enough to attract advertisers pursuing small audiences -- but high enough to generate sufficient return.

This particular slice of the news revenue picture is becoming all the more contested as competition heats up at the local level, with AOL, Yahoo and others entering the market along with established news organizations and community-based initiatives.

Partly because margins are so small on the revenue side, controlling costs is becoming ever more critical.

screengrab/PlaceLocal.com PlaceLocal's ad-builder form

And that's what makes PlaceLocal from PaperG -- along with other initiatives in this sector -- especially interesting: the potential to slash costs of production and sales by automating the ad-building process and saving time and money for advertisers and publisher alike.

McClatchy, the nation's third largest newspaper publisher, is among more than 30 clients that have signed on to use PlaceLocal -- not just to cut costs but to change the way its newspapers match up potential advertisers with small chunks of their audiences.

Chris Hendricks, the McClatchy vice president for interactive, says he's hoping the product will help the company's newspapers "speed up the sales cycle" by enabling ad reps to create ads for customers quickly and easily -- and that it will lead to contract renewals that won't require as many return visits by the reps.

Coinciding with a New York Times piece about PlaceLocal a couple of weeks ago, PaperG quietly enabled all comers to plug in their local restaurants, Yoga studios -- or anything else -- and produce a demo ad with the PlaceLocal app.

You can enter the name and ZIP code of your corner saloon here, and get a sense of how PlaceLocal works. Within a few minutes, the application has searched the Web for the merchant's existing "Web assets" -- photos, information about hours of operation and testimonials posted to such sites as Yelp. The program then assembles the data in formats matching specs of the Internet Advertising Bureau, ready for any publisher to plug into a page.

(By way of example -- and with no involvement of the merchants themselves -- I plugged in the name of a once-legendary newsie bar in Detroit and an old friend's funeral home in Connecticut. The mock-ups inserted below appear smaller than they would in an actual ad.)

screengrab/PlaceLocal.com Mocked-up ad for a newsie bar in Detroit

PlaceLocal is no magic wand. Sometimes it pulls the wrong photos from the Web. Not every customer review it finds is suitable for inclusion in an ad.

Big questions remain unresolved as well: Will self-serve ad production really catch on? How effectively will self-serve applications incorporate deal-based pitches with coupons and other sales incentives? Will publishers be able to generate a big enough volume in local online advertising to make low rates sustainable? Perhaps most importantly, will enough consumers respond to these ads to support the advertisers' investment?

Victor Wong, the 23-year-old Yale drop-out who heads PaperG, said in a telephone interview last week that he and his colleagues are carefully watching the experimentation to see what's working and how the product might develop.

So are publishers and advertisers.

Looking for a way to promote her new business of cello and voice lessons, Gaby Benalil of Albuquerque concluded that it would cost too much to advertise on the local TV station, KOAT-TV. As she told the Times last month, she discovered that she could spend just $200 to build her own PlaceLocal ad that would run on the station's website for six weeks.

screengrab/PlaceLocal Gaby Benalil says this ad prompted 10 calls and six new students for her music lessons.

I followed up with Benalil last week and she shared the results displayed on her PlaceLocal dashboard: Her ad was displayed a total of 46,253 times, resulting in 53 click-throughs to her site, a rate slightly below the 0.2 to 0.3 percent click-through rates regarded as reasonable performance levels these days.

But she said more than 10 people who clicked on her ad followed up with a phone call. A half-dozen of them signed up for a program of summer lessons. Benalil described herself as "very satisfied with the results," especially the hand-holding PaperG representatives provided by phone as she created her ad.

Wong said a number of advertisers have created ads for themselves without benefit of a publisher to display them. In those cases, PaperG matches them up with a local partner -- if one exists -- or links them to an ad exchange that will display the ad up to a spending limit set by the advertiser.

Increasingly, PaperG and other vendors are discovering that small advertisers prefer to buy advertising for a set time period and budget rather than on a cost-per-thousand basis, a metric of sales that many small business owners still find confusing.

screengrab/PlaceLocal.com Mocked-up ad for a funeral home in Connecticut

The first of the McClatchy papers to roll out the product will be the Miami Herald, where Raul Lopez, general manager of MiamiHerald.com, describes PlaceLocal as "a really good door-opener."

He likes the automated ad-building, even if -- at least initially -- his ad reps will be doing the work as opposed to the advertisers. "The fact that you can walk in with a live ad that has pulled in elements from the Web takes me back to the days of spec ads in print," he told me in a telephone chat last week. "It gives you a much better chance to establish a good relationship with the customer."

Getting the advertisers themselves to do the work remains another challenge. As Herald exec Elissa Vanaver points out, self-serve ad creation is not a concept fully embraced by many small business owners thus far.

PlaceLocal searches Web for info, photos related to advertiser

I'm betting that will change over time. As advertisers discover the ways social media can help grow their customer base, they're likely to get more comfortable with the approach of PlaceLocal, including customer testimonials.

Bad service and faulty products will get under-performing merchants just what they deserve from customer reviews. But outfits that are satisfying their clientele will rely on existing customers to help find new ones. And like Gaby Benalil in Albuquerque, they'll get more comfortable investing the time required to build their own ads.

Count on the crowd -- Ken Doctor calls it "commerical crowdsourcing" -- to change advertising every bit as much as users are shaping the future of news.