We’ve been hearing for quite some time about the coming online gold rush driven by local advertising. Borrell Associates, for example, forecasts local online advertising to grow by 48% in 2008. For projections like these to prove true, however, those local advertisers need some encouragement. According to this story in the Wall Street Journal, newspapers seem to be doing an especially poor job of it. An awful lot of small businesses have discovered the value of online advertising, particularly paid search, but a lot more haven’t. It’s the second group that can use the encouragement, but the thought of visiting all of those small advertisers to make a personal pitch is daunting. As a result, as the WSJ article notes, most newspapers initially “focused on selling ads to bigger advertisers who were already buying space in their print products.” Now, facing the possibility of losing the local advertising market to national internet companies, newspapers are scrambling to figure out how to sell the local guys on online ads.

Meanwhile Google, in position to be the king of local advertising through its AdWords, AdSense, and mapping products, has also been thinking about how to reach more local advertisers. They’ve come up with a nifty plan called “The Google Online Marketing Challenge.”

Student teams will receive US$200 of free online advertising with Google AdWords and then work with local businesses to devise effective online marketing campaigns. You will outline a strategy, run your campaign, assess your results and provide the business with recommendations to further develop their online marketing. Teams submit their reports and are judged by a panel of independent academics from all over the world.

You have to admire this marketing program run under the guise of educational service to our nation’s youth. The teams, from Azerbaijan State Economic University to the University of California, Irvine, will fan out all over the globe running online ad campaigns for local advertisers using Google AdWords. Google gives up some AdWords revenue in return, they hope, for student and business owner converts to the power of online advertising.

The winning team will get “a chance to visit the Google Headquarters in Mountain View, California, and meet the team that created AdWords.” I think I’d rather meet the team that came up with this contest.

Through Micro Persuasion I saw that IBM is helping Sears launch a store in Second Life, and has already been working with Circuit City. Like everyone else writing online I applaud these retailers for opening stores in Second Life and expending some real effort to explore where the future of retailing might be headed. The real game, though, is Life 1.5 (if “First Life” is real life and Second Life is a virtual world, I guess shopping online leaves us with a foot in each - Life 1.5).

As commentators talk about the need for Second Life to get easier to use so more people can shop in virtual stores, I think developers should focus on creating virtual stores outside of Second Life. Sure, the framework already exists in Second Life to create these stores so it only makes sense to start there, but the real goal should be to create stores that any visitor to a company’s Web site can use. That would mean no download required, by the way. If I were Linden Lab I would be working on a standalone virtual store app that I could sell to retailers for their own Web sites.

Second Life might eventually become the online equivalent of Wichita, where companies go to test market their products before unleashing them on the world. Second Life stores could be integrated with a retailer’s online virtual store so that Second Life citizens could bump into their neighbor, who is not a Second Lifer, in Sears. Sears, meanwhile, could open sections of its store just for Second Lifers with special deals and products. It could have regional (real world geography) virtual stores as well.

Linden may very well be working on this right now, but it looks like opportunity to me. Not everyone wants to live a Second Life, but (almost) everyone wants to shop in an easy to enter virtual store.

From the New York Times today comes the news that Wal-Mart will put it’s merchandising muscle behind energy efficient light bulbs known as compact fluorescent lamps (CFLs). These lights cost 8 times as much as traditional bulbs, but save consumers $30 over the life of the bulb.

The article relates a trip made to the Mt. Washington Observatory in New Hampshire by H. Lee Scott, Wal-Mart’s CEO. At the summit, Scott apparently discussed global warming with Steve Hamburg, an environmental studies professor at Brown and Fred Krupp, the president of Environmental Defense and asked the two what Wal-Mart could do to combat global warming. Hamburg made a convincing case for CFLs. This story seems, if not apocryphal, at least planned for later media consumption.

Two things seem clear about Wal-Mart’s push of CFLs - Firstly, Wal-Mart wants to create a “good citizen” image for itself, and secondly, these bulbs would not receive the attention they are if Wal-Mart could not claim they will save consumers money. Given the media’s portrayal of Wal-Mart, shoring up its image has to be a priority and showing environmental concern is always a handy arrow in the PR quiver. “Green” products, however, don’t become successful in the mass market based on “greenness” alone - they need to have other benefits. In the case of CFLs, that benefit is total cost of ownership. As the article points out, selling a higher cost product to consumers based on the notion that total cost of ownership is cheaper, has always been an uphill battle. Add to that hill the fact that CFLs have some offsetting disadvantages (turn-on delay, mercury, and an odd shape) and this will be an initiative worth watching.

We may have finally reached the point where consumers, while not willing to pay a premium for green products, are willing to invest some time to understand how they can save money (and conserve energy) by paying more up front. If Wal-Mart is successful with CFLs, however, we still won’t know if that is good news for green products or for more complex value propositions.

As an aside, Wal-Mart is trying to turn “its sales campaign into a broader cultural movement.” (This is the image burnishing part.) One idea it is entertaining “is to create a Web site that would track sales of compact fluorescent bulbs at major retailers like Walgreen’s and Target. The result would be a real-time map, with data collected by a third party, showing how much Americans have saved by using the energy-efficient bulbs.” I can’t imagine why I would ever look at such a Web site.