The Local Search Mardi Gras

The online search marketing community recently awoke to the reality of local search. Collective minds raced. Innovators embraced altruistic ideas of how local search could operate.

The Web is now perceived as working within the confines of physical boundaries. Business owners’ expectations of the information superhighway could potentially be translated to the corner of Main and Maple streets.

Local search innovators quickly lined up, each with a unique, inventive twist to enable searchers to find local businesses.

Such innovation defined entirely new breeds of local search algorithms, targeting capabilities, ad cost models, and rich business displays. Combined with social networking, interactive mapping, legacy business data, reviews, and ratings, they created the Mardi Gras we call local search.

Innovators now stand with their gloves open, waiting to catch the ball as soon as it’s pitched. It’s only a matter of time before they capture elusive small business advertising budgets.

Or is it?

It’s a mistake to discuss local search without distinguishing innovation from adoption. The innovation that fuels local search hype operates far beyond the realities of small business adoption. This innovation leads to instability and fragmentation in a nascent segment of the Internet marketplace.

Local search innovation primarily takes the form of search segmentation. This is the process associated with companies creating pure local search utilities, distinct from their traditional offerings. Solutions include TrueLocal, Ingenio, and Insider Pages, as well as Google Local, Yahoo Local, and Amazon.com Yellow Pages.

Regardless of company or solution, any new search platform struggles to obtain users and advertisers. These platforms utilize unique algorithms and landing pages. User-generated content, proximity scoring, and ratings mix with ad inventory. It’s all very new and different. Don’t presume this kind of innovation will spur adoption among small businesses.

Despite the local search Mardi Gras, The Kelsey Group (TKG) estimates in 2004, only $162 million of the $670 million in total local digital ad sales came from search engine advertising. This meager $162 million has little to do with local search innovation. The remaining $508 million was attributed to interactive Yellow Pages campaigns.

YellowPages.com, now part of the RealPages.com/SMARTpages.com consortium, tells the story simply. It employs a unionized, feet-on-the-street sales force. These people spend face time explaining the benefits of augmenting print with simplified interactive ads.

These traditional Yellow Pages foot soldiers are the ones gaining the lion’s share of sales in the current local online ad marketplace.

Beyond the local search hype, potential small business advertisers are confused and overwhelmed. Most have fewer than nine employees. Most don’t advertise. According to TKG, those who do advertise have a $5,000 annual marketing budget. That’s $417 per month, half of which is currently allocated to traditional print Yellow Pages.

The local search inventories that small businesses currently buy are neither new nor innovative. Most are either guaranteed clicks from traditional Google or Yahoo search products, or category-driven and time-stamped rather than relevancy-ranked, fixed-fee Internet versions of the print Yellow Pages. These are the simplest kinds of local inventory sold by the most traditional sales process.

Looking beyond today’s market, TKG projects local digital advertising to soar to $5 billion by 2009. It estimates the search engines will sell $3.4 billion of that.

How much of this growth will be attributable to Google’s and Yahoo’s efforts to simplify search marketing products and deepen their relationships with traditional foot soldiers, instead of the innovation focus that currently enchants this marketplace?

Small business adoption is won in the trenches. In the pitch of that battle, the innovation sideshow continues. It’s a Mardi Gras, all fantasy and costume.

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